10-K

UNITED STATES

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 January 1, 2006

Commission file number 1-12068

Metaldyne Corporation

(Formerly known as MascoTech, Inc.)

(Exact name of registrant as specified in its charter)

Delaware	38-2513957
(State of Incorporation)	(I.R.S. Employer Identification No.)
47659 Halyard Drive, Plymouth, Michigan	48170-2429
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: 734-207-6200

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

Title of each class	Name of each exchange on which registered
Common Stock, $1.00 par Value	None

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o  No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o  No x

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 x  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o  No x

There is currently no public market for the registrant’s common stock.

Number of shares outstanding of the registrant’s Common Stock at March 15, 2006: 42,844,760, par value $1.00 per share.

Portions of the registrant’s definitive Proxy Statement to be filed for its 2006 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS

ITEM		Page
PART I
1.	Business	4
1A.	Risk Factors	13
1B.	Unresolved Staff Comments	23
2.	Properties	23
3.	Legal Proceedings	24
4.	Submission of Matters to a Vote of Security Holders	24
4 A.	Executive Officers of the Registrant	25
PART II
5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	26
6.	Selected Financial Data	26
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
7A.	Quantitative and Qualitative Disclosures about Market Risk	58
8.	Financial Statements and Supplementary Data	59
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	113
9 A.	Controls and Procedures	113
9 B.	Other Information	114
PART III
10.	Directors and Executive Officers of the Registrant	115
11.	Executive Compensation	115
12.	Security Ownership of Certain Beneficial Owners and Management	115
13.	Certain Relationships and Related Transactions	115
14.	Principal Accounting Fees and Services	115
PART IV.
15.	Exhibits, Financial Statement Schedule	116
Signatures		120
FINANCIAL STATEMENT SCHEDULE
Metaldyne Corporation Financial Statement Schedule		121

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PART I

Caution Concerning Forward Looking Statements and Certain Risks Related to Our Business and Our Company—Safe Harbor Statements

This report contains statements reflecting the Company’s views about its future performance, its financial condition, its markets and many other matters that constitute “forward-looking statements.” These views involve risks and uncertainties that are difficult to predict and may cause the Company’s actual results and/or expectations about various matters to differ significantly from those discussed in such forward-looking statements. All statements, other than statements of historical fact included in this annual report, regarding our strategy, future operations, financial condition, expected results and costs, new business, estimated revenues and losses, prospects and plans are forward-looking statements. When used in this annual report, the words “will,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. You should not place undue reliance on these forward-looking statements. All forward-looking statements speak only as of the date of this annual report and we undertake no obligation to update such information. Readers should consider that various factors may affect whether actual results and experience correspond with our forward-looking statements and that many of these factors also represent risks attendant to owning securities in the Company, including the following:

Risks and uncertainties that could cause actual results to vary materially from those anticipated in the forward-looking statements included in this Form 10-K report (“Report”) include general economic conditions in the markets in which we operate and industry-based factors such as:

·Dependence on automotive industry and industry cyclicality;

·Customer concentration;

·Ability to finance capital requirements;

·Failure to recover increased raw material costs;

·Increases in costs due to our supply base;

·Our industries are highly competitive;

·Liquidity arrangements;

·Changing technology;

·Challenges of strategic opportunities;

·Dependence on key personnel and relationships;

·Labor stoppages affecting OEMs;

·Outsourcing trends;

·International sales;

·Product liability and warranty claims;

·Environmental matters;

·Control by principal stockholder;

·Terms of stockholder agreement;

·Leverage; ability to service debt;

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·Substantial restrictions and covenants; and

·Implementation of control improvements.

In addition, factors more specific to us could cause actual results to vary materially from those anticipated in the forward-looking statements included in this Report such as substantial leverage, substantial capital requirement limitations imposed by our debt instruments, our ability to identify attractive strategic acquisition opportunities and to successfully integrate acquired businesses including actions we have identified as providing cost-saving opportunities.

We disclose important factors that could cause our actual results to differ materially from our expectations under Item 1A, “Risk Factors,” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Report. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. When we indicate that an event, condition or circumstance could or would have an adverse effect on us, we mean to include effects upon our business, financial and other conditions, results of operations and ability to make payments on the notes.

There are few published independent sources for data related to the markets for many of our products. To the extent information is otherwise not obtained or derived from independent sources, we have expressed our belief based on our own internal analyses and estimates of our and our competitors’ products and capabilities. We note that many of the industries in which we compete are characterized by competition among a small number of large suppliers. Industry publications and surveys and forecasts that we have used generally state that the information contained therein has been obtained from sources believed to be reliable. We have not independently verified any of the data from third-party sources nor have we ascertained the underlying assumptions or bases for any such information. In general, when we say we are a “leader” or a “leading” manufacturer or make similar statements about ourselves, we are expressing our belief that we formulated principally from our estimates and experiences in, and knowledge of, the markets in which we compete. In some cases, we possess independent data to support our position, but that data may not be sufficient in isolation for us to reach the conclusions that we have reached without our knowledge of our markets and businesses.

Item 1.Business.

Metaldyne Corporation (“Metaldyne” or “the Company”) is a leading global manufacturer of highly engineered metal components for the global light vehicle market. Our products include metal-formed and precision-engineered components and modular systems used in the transmissions, engines and chassis of vehicles. We serve approximately 200 automotive and industrial customers and our top ten customers represented approximately 70% of total 2005 sales from continuing operations. On December 1, 2005 we entered into a definitive agreement to sell our North American Forging Operations (“North American Forging” or “Forging Operations”). As a result, the results of operations for the Forging Operations for the current and prior periods have been reported as discontinued operations. In addition the assets and liabilities of the Forging Operations have been reclassified as held for sale in the audited consolidated balance sheet included herein. For purposes of this Report, all discussions will address our continuing operations unless the context otherwise requires.

Our products are sold primarily to both North American and international light vehicle original equipment manufacturers, or OEMs, and Tier I component assemblers and provide content for  approximately 93% of the top 40 NAFTA light vehicles produced in 2005. Tier I component assemblers are direct suppliers to OEMs of integrated modules, such as a complete engine assembly or drivetrain assembly. Our metal forming processes include cold, warm and hot forging, forged and conventional powder metal, tubular fabrications and precision-aluminum die castings. In addition, we perform design, engineering, machining, finishing and assembly functions. At January 1, 2006, we had over 7,000 employees from our continuing operations and more than 30 owned or leased manufacturing facilities worldwide.

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In North America, we believe that we have leading market shares in several of our products. We believe we are the largest independent forming company, the second largest independent “machining and assembly” supplier, and one of the largest powder metal manufacturers for light vehicle applications. We believe our scale and combined capabilities represent a significant competitive advantage over our competitors, many of which are smaller and do not have the ability to combine metal forming with machining and sub-assembly capabilities. Our customers include BMW, DaimlerChrysler, Dana, Delphi, Ford, General Motors, Honda, Hyundai, International Truck and Engine, Nissan, Renault, Toyota, TRW and Visteon.

For the year ended January 1, 2006, we market our products into two principal segments: Chassis and Powertrain segments. In January 2005, we reorganized to streamline our operations and cost structure. Our operations were consolidated into two segments: Chassis segment and the Powertrain segment. The Chassis segment consists of our former Chassis operations plus a portion of our former Driveline operations, while the Powertrain segment consists of our former Engine operations combined with the remainder of the former Driveline operations. The prior years’ amounts have been restated to reflect these changes for comparison purposes.

Chassis Segment.   Chassis is a leading supplier of components, modules and systems used in a variety of engineered chassis applications, including wheel-ends, axle shaft, knuckles and mini-corner assemblies. This segment utilizes a variety of processes including hot, warm and cold forging, and machining and assembly. We apply full-service integrated machining and assembly capabilities to an array of chassis components.

Powertrain Segment.Powertrain is a leading manufacturer of a broad range of engine components, modules and systems, including sintered metal, powder metal, hydraulic controls, precision shafts, forged and tubular fabricated products used for a variety of applications. These applications include balance shaft modules and front cover assemblies. We apply integrated program management to a broad range of engine and transmission applications.

Recent Developments

Divestiture—On March 10, 2006, we completed the divestiture of our Forging Operations. The Forging Operations, which were part of the Chassis segment, generated approximately $358 million of revenue in 2005 and included plants located in Royal Oak, Michigan; Fraser, Michigan; Troy, Michigan; Detroit, Michigan; Minerva, Ohio; Canal Fulton, Ohio and Ft. Wayne, Indiana. In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” all revenue and expenses of the Forging Operations have been removed from the respective audited consolidated income statement line items and reported separately as discontinued operations. In addition, assets and liabilities of the Forging Operations have been removed from the respective audited consolidated balance sheet line items and reclassified separately as assets and liabilities held for sale. Cash flows generated by the Forging Operations have been removed from the respective audited consolidated cash flow line items and have been separately reported as cash flows from discontinued operations. Refer to Note 20, Discontinued Operations, and Note 31, Subsequent Events, to our audited consolidated financial statements.

Debt Structure—We also entered into an amended and restated credit agreement on February 3, 2006, which provides us with more favorable terms and additional funding on our revolving credit and term loan facilities. Refer to Note 31, Subsequent Events, to our audited consolidated financial statements.

On December 20, 2005, we entered into a delayed senior secured loan facility to finance in part the purchase of specified machinery and equipment. This senior secured loan facility provides for term loans totaling $20 million, of which $10.5 million was drawn as of January 1, 2006 and the remainder of which is available until June 30, 2006 to finance in part the purchase of additional specified machinery and equipment.

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New Accounts Receivable Securitization Facility—In July 2005, our wholly owned special purpose subsidiary, MRFC, Inc. (“MRFC”) executed a new accounts receivable financing facility with General Electric Capital Corporation (“GECC”). The new facility provided more favorable terms including increased program availability up to approximately $175 million. This facility matures July 8, 2010.

Market Opportunities and Growth Strategies

In order to reduce costs and consolidate volume with full scale suppliers, we believe OEMs and Tier I suppliers will continue to seek to outsource the design, manufacture and assembly of fully integrated, modular assemblies of metal parts in engine, transmission and chassis. We believe that the following favorable market factors have driven and will continue to drive the domestic OEM’s desire to continue outsourcing:

·in many cases, full-scale suppliers have lower production costs than OEMs and are able to provide significant cost reduction opportunities;

·OEMs are consolidating their supply base among global, full service suppliers capable of meeting the OEM’s needs uniformly across their geographic production base; and

·emissions, fuel economy and customer preferences are driving the design of a new generation of components for engine, transmission and chassis applications to increase efficiency and performance and to reduce weight.

Our strategy is to take advantage of our leading market position in the manufacture of highly engineered metal components to (i) expand our leadership as a supplier of high-quality, low-cost metal formed components, and (ii) become one of the leading suppliers of high-quality low-cost metal formed assemblies and modules, to the global light vehicle industry. Key elements of our strategy include the following:

·Focus on Full-Service, Integrated Supply Opportunities. By offering a full complement of metal solutions, we believe we provide OEMs with “one-stop” shopping to optimize weight, cost, stress, durability, fatigue resistance and other metal component attributes of products. We believe that our capabilities in engineering, design, machining and assembly position us to capture a greater share of the “value chain” and deliver to customers finished assemblies and modules rather than independent parts. Currently, OEMs satisfy a significant portion of their metal forming and assembly requirements with in-house production and assembly of purchased components. We believe that, as OEMs seek to outsource the design and manufacture of parts, they will choose suppliers with expertise in multiple metal processing technologies and the ability to design, engineer and assemble components rather than supply independent parts. We believe that it is widely accepted within our industry that OEM’s and Tier 1 suppliers will continue to seek to outsource the design, manufacture and assembly of metal parts in engine, transmission and chassis. For example, the principal purpose of our recent acquisition of the New Castle, Indiana facility from DaimlerChrysler was to allow DaimlerChrysler to outsource to us items previously manufactured in-house. We intend to enhance our strengths in forged steel, powder metal and precision-aluminum die cast components by adding additional engineering design and machining and assembly capabilities.

·Increase Content per Vehicle. We are aggressively pursuing new business opportunities to supply a large portion of value-added content utilizing our integrated capabilities. These opportunities can result in significant increases in content per vehicle on related programs. For example, where we used to produce and sell a knuckle for approximately $24 per unit, we now have been awarded a knuckle assembly for approximately $37 per unit on the future model of this same vehicle.

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In 2005, our content per vehicle in North America was approximately $115 and we expect to materially increase our content per vehicle as a result of new business awards that we are pursuing. Prior to our acquisitions of Simpson Industries in late 2000 and GMTI in early 2001, we primarily marketed single components, such as individual gears or shafts. As a result of these acquisitions and significant additional investment in our engineering and design groups, we have enhanced our capabilities in process technology which allows us to make entire sub assemblies and modules that may, for example, be composed of many component gears or shafts. We have been actively marketing these increased capabilities over the last several years and have been successful in increasing our content on future Powertrain and Chassis platforms.

·Leverage Our Engineering, Design and Information Technology Capabilities. We believe that in order to effectively develop total metal component and assembly solutions, research, development and design elements must be integrated with product fabrication, machining, finishing and assembly. We believe that our scale and product line relative to most of our competitors enable us to efficiently invest in engineering, design and information capabilities. For example, we designed and developed a front engine module that integrates multiple components into one fully tested end item that increased the products’ performance and durability while reducing noise/vibration effects and overall system costs.

·Pursue Strategic Combinations and Global Expansion Opportunities. We plan to continue to evaluate acquisition opportunities that strategically expand our metal and process capabilities and contribute to our geographic diversity and market share. Our ability to execute this strategy may be limited by restrictions within our credit agreement.

Operating Segments

The following table sets forth for the three years ended January 1, 2006, January 2, 2005 and December 28, 2003, the net sales, operating profit and Adjusted EBITDA from continuing operations, and net assets for the two years ended January 1, 2006 and January 2, 2005, including assets held for sale for our operating segments.

	Net Sales (In thousands)
	2005		2004		2003
Chassis	$	1,000,712	$	861,936	$	370,052
Powertrain	886,227		833,235		806,410
Total sales	$	1,886,939	$	1,695,171	$	1,176,462

	Operating Profit (In thousands)
	2005			2004			2003
Chassis	$	16,537		$	33,513		$	19,254
Powertrain	55,196			46,369			26,639
Automotive/centralized resources (“Corporate”)	(24,176		)	(48,341		)	(39,678		)
Total operating profit	$	47,557		$	31,541		$	6,215

	Adjusted EBITDA(1) (In thousands)
	2005			2004			2003
Chassis	$	68,206		$	78,377		$	42,004
Powertrain	106,518			103,075			79,535
Automotive/centralized resources (“Corporate”)	(13,359		)	(35,926		)	(28,303		)
Total Adjusted EBITDA	$	161,365		$	145,526		$	93,236

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	Total Assets (In thousands)
	2005		2004
Chassis	$	707,784	$	810,621
Powertrain	763,112		723,733
Corporate	259,427		356,205
Assets held for sale	116,612		304,205
Total	$	1,846,935	$	2,194,764

(1)See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a complete reconciliation of Adjusted EBITDA to net loss. Adjusted EBITDA is defined as income (loss) from continuing operations and before interest, taxes, depreciation, amortization, asset impairments, non-cash losses on sale-leaseback of property and equipment and non-cash restricted stock award expense. In evaluating Adjusted EBITDA, our management deems it important to consider the quality of our underlying earnings by separately identifying certain costs undertaken to improve our results, such as costs related to consolidating facilities and businesses in an effort to eliminate duplicative costs or achieve efficiencies, costs related to integrating acquisitions and restructuring costs related to expense reduction efforts. Although our consolidation, restructuring and integration efforts are continuing, our management analyzes these costs to evaluate underlying business performance. Caution must be exercised in analyzing these items as they include substantially (but not necessarily entirely) cash costs and there can be no assurance that we will ultimately realize the benefits of these efforts. Moreover, even if the anticipated benefits are realized, they may be offset by other business performance or general economic issues.

Our two segments seek to provide innovative, cost-effective solutions by using a range of metals and processes. By having a range of metals and processes, we are not committed to a single solution and we are able to optimize the range of functionality, durability, quality, cost and weight for our customers. Various metals and processes that we utilize are described below:

Forging. Although our North American Forging operations were divested on March 10, 2006 (see Note 31, Subsequent Events, to the audited consolidated financial statements), we still retain an integrated forging and machining operation in our European operations. This business is part of our Chassis segment. Our European operations offer expertise in all forging processes, including hot, warm and cold forging. We have state-of-the-art machines that forge concentric parts using the full range of carbon and alloy steels into finished shapes at rates from 40 to 120 pieces per minute. Hot forging processes deliver high-volume products, including transmission and transfer case components such as gear blanks and bearing races, as well as wheel-end components such as wheel hubs and spindles. For parts requiring a higher degree of precision than hot forging, we offer complete warm forging capabilities. Warm forging is ideal for producing complex shapes with desirable grain flow, refined surface finishes and tighter dimensional controls. Some examples of current production include net-formed differential side gear and pinions, CV-Joint races and “spiders” and differential stem pinions. Warm forging eliminates the need for heat treat normalizing, allowing near-net to net-shaped components to be produced without a structural change in the raw material. We are capable of processing 200 million precision cold forged parts annually using low carbon through medium carbon and alloy steels. Examples of precision cold forged components produced with near-net and net tolerances include transmissions, turbine shafts and transfer case shafts with internal and external splines. Our cold forging processes yield products that deliver near-net and net tolerances to minimize additional machining, yet offer enhanced physical properties and a refined surface finish.

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Powder Metal.   These operations are part of our Powertrain segment. We manufacture a wide range of both forged powder metal and conventional, processed, powder metal products for the transportation industry. In addition, we believe we have an 80% share of the NAFTA market for forged powder metal engine connecting rods, and we manufacture a full range of conventionally sintered powder metal components, including engine bearing caps, transfer case sprockets, rocker arm fulcrums and torque converter hubs. Certain forged and casted steel processes are being replaced by powder metal technology because of its superior performance, lighter weight and value. By offering tight tolerances plus net and near-net capabilities, our powder metal components can significantly reduce the need for machining.

Tubular Fabrications.   This operation is part of our Powertrain segment. We supply high quality tubular products for exhaust, engine and fuel systems. Our extensive engineering and manufacturing technologies include CNC bending, laser cutting and robotic welding. These capabilities enable us to fabricate a wide range of tubular products, including exhaust manifolds, downpipes, crossover pipes, turbo exhaust tubes, fluid lines and specialty tubular products. The advantages of our tubular fabrications are found in the use of stainless steel versus cast iron, which allow for reductions in weight and heat absorption, while enhancing performance and durability.

Machining and Assembly.   We have machining and assembly operations in both of our segments. We design and manufacture precision-engineered components and modular systems for passenger and sport utility vehicles, light- and heavy-duty trucks and diesel engines. We believe that we provide cost effective, quality assured assemblies and modules that allow the customer to build engines and vehicles faster and more efficiently.

·Chassis Segment. We produce wheel spindles, steering knuckles and hub assemblies, all of which are key components affecting the smoothness of a driver’s ride and the handling and safety of an automobile. We apply full-service integrated machining and assembly capabilities to metal-based components to provide the customer with value-added complete components, assemblies and modules.

·Powertrain Segment. We design and manufacture torsional crankshaft dampers, which reduce and eliminate engine and drivetrain noise and vibration. We design, machine and assemble a variety of products including transfer case assemblies, gear machining and assemblies, transmission modules and differential cases. We produce integrated front engine cover assemblies that combine items such as the oil and water pumps. This integrated solution provides OEMs with a simplified process by which to attach the water and oil pumps to the front engine cover subsystem thereby lowering the assembly costs. Modular engine products include oil pumps, balance shaft modules, front engine modular assemblies and water pumps, all of which impact engine durability, reliability and life expectancy.

Customers

In 2005, approximately 60% of our sales from continuing operations were direct to OEMs. Sales to various divisions and subsidiaries of DaimlerChrysler Corporation, Ford Motor Company and General Motor Corporation accounted for a significant portion of our net sales from continuing operations, summarized below. The Company’s acquisition of the New Castle manufacturing operations on December 31, 2003 resulted in a significant increase in sales to DaimlerChrysler in 2004, and subsequently resulted in a decrease as a percentage of total sales to Ford and General Motors. Except for these sales, no

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material portion of our business is dependent upon any one customer, although we are generally subject to those risks inherent in having a focus on automotive products.

	2005				2004				2003
	$		%		$		%		$		%
Customer	(In millions)
DaimlerChrysler Corporation	$	488	25.8	%	$	436	25.7	%	$	102	8.7	%
Ford Motor Company	228		12.1	%	228		13.4	%	236		20.1	%
General Motors Corporation	122		6.5	%	130		7.7	%	139		11.8	%
Total sales to largest customers	838		44.4	%	794		46.8	%	477		40.6	%
Other net sales	1,049		55.6	%	901		53.2	%	699		59.4	%
Total net sales	$	1,887	100.0	%	$	1,695	100.0	%	$	1,176	100.0	%

We typically pursue new business opportunities that feature long-term, high-volume commitments to produce highly engineered components with extensive machining and assembly requirements that are ready for installation when they reach our customers’ production lines. We work closely with our customers to facilitate meaningful communication that helps our engineers identify product needs and anticipate design development. We distribute and sell our products principally to domestic and transplant OEMs and Tier 1 suppliers in North America, Europe and Asia through our own sales force. In connection with our December 2003 acquisition of New Castle, we entered into a multi-year supply agreement with DaimlerChrysler that provides us with pricing protection on products as of the date of acquisition, and special rights on bidding for additional new business with DaimlerChrysler.

New Business

From January 2003 through December 2005, we received approximately 120 new business awards that support future product programs beginning from 2003 through 2009. The awards extend for up to 10 years, and include metal-formed components, assemblies and modules for OEMs and Tier I customers’ chassis, driveline and engine applications. Based on the sales forecast for our customers, as of January 1, 2006, our forecasted cumulative revenue through 2009 is approximately $528 million of awarded programs and approximately $151 million of programs we have identified as highly probable of being awarded but for which we have not yet received a firm purchase order.

Materials and Supply Arrangements

Raw materials and other supplies used in our operations are normally available from a variety of competing suppliers. The primary goods and materials that we procure are iron castings, secondary and processed aluminum, powder metal, forgings, bearings and other components.

We are sensitive to price movements in our raw material supply base and have secured various supply contracts for certain of our major raw material purchases, the majority of which are tied to commodity indexes. Contracts are established based upon an estimated usage amount for the term of the agreement and do not contain volume commitments. We expect 2006 purchases of iron castings to approximate $150 million, steel to approximate $65 million and purchases of aluminum and powder metal (principally Sintered Division) to approximate $100 million and $50 million, respectively.

The automotive industry has historically experienced cost savings from year-over-year decreases in material costs and increased operational efficiency. These cost savings are necessary to enable us, and our competitors, to offer price reductions to our customers and thereby remain competitive with the market. In a typical year, such as 2003, the materials cost savings and operational efficiency savings are offset by customer price reductions so that automotive suppliers maintain consistent operating margins period over period. In 2004 and 2005, however, we incurred increases in our steel costs that we were not able to offset

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elsewhere with increased productivity or increased end prices from our customers. The effect of commodities and other price increases had an approximate $22 million and $7 million negative impact on our 2005 and 2004 profitability, respectively. We describe the anticipated impact under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook.”

Competition

The major domestic and foreign markets for our products are highly competitive. Although a number of companies of varying size compete with us, no single competitor is in substantial competition with respect to more than a few of our product lines and services. We compete primarily on the basis of product engineering, performance, technology, price and quality of service. Our major U.S. competitors in North America among the Powertrain segment’s products include Eagle Picher, Hillsdale Automotive Division, GKN, Freudenberg-NOK, Palsis, Stackpole, Tesma, Faurecia, Linamar, Visteon, Delphi, American Axle, Benteler and internal “metal-forming” operations at DaimlerChrysler, Ford, General Motors and Toyota. Among our Chassis segment’s products, we compete with a variety of independent suppliers, including Eagle Picher, Hayes Lemmerz, Hillsdale Automotive Division, SMW, TRW and internal “metal-forming” operations at DaimlerChrysler, Ford and General Motors. We may also compete with some of our Tier I customers on occasion in seeking to supply the OEMs. In addition, there are several foreign companies, including Palsis, Mitec, MagnaSteyr and Brockhaus that have niche businesses supplying foreign OEMs. We believe that OEMs are likely to continue to reduce their number of suppliers and develop long term, closer relationships with their remaining suppliers. For many of our products, competitors include suppliers in other parts of the world that enjoy economic advantages such as lower labor costs, lower health care costs and, in some cases, various government subsidies.

Employees and Labor Relations

As of January 1, 2006, we employed over 8,000 people, of which approximately 52% were unionized. Excluding our discontinued operations (North American Forging), we employed over 7,000 people, of which approximately 50% were unionized. We do not have national agreements in place with any union, and our facilities are represented by a variety of different union organizations. At such date, approximately 28% of our employees were located outside the U.S. Employee relations have generally been satisfactory.

Our labor contracts expire on dates between June 2006 and March 2011. From time to time, unions such as the United Auto Workers and United Steelworkers of America have sought or may seek to organize at our various facilities. We cannot predict the impact of any further unionization of our workplace.

Variability of Business

Sales are mildly seasonal, reflecting the OEM industry standard two-week production shutdown in July and one-week production shutdown in December. In addition, our OEM customers tend to incur lower production rates in the third quarter as model changes enter production. As a result, our third and fourth quarter results reflect these shutdowns and lower production rates.

Our products are typically sourced exclusively by us and future production schedules largely depend on the underlying vehicle builds. However, as our production schedule is dictated by weekly production release schedules from our customers and inventory is generally kept at low levels, production backlog orders are generally immaterial.

Environmental, Health and Safety Matters

Our operations are subject to federal, state, local and foreign laws and regulations pertaining to pollution and protection of the environment, health and safety, governing among other things, emissions to

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air, discharge to waters and the generation, handling, storage, treatment and disposal of waste and other materials, and remediation of contaminated sites. Some of our subsidiaries have been named as potentially responsible parties under the Federal Superfund law or similar state laws at several sites requiring cleanup based on disposal of wastes they generated. These laws generally impose liability for costs to investigate and remediate contamination without regard to fault and under certain circumstances liability may be joint and several resulting in one responsible party being held responsible for the entire obligation. Liability may also include damages to natural resources. Our businesses have incurred and likely will continue to incur expenses to investigate and clean up existing and former company-owned or leased property, including those properties made the subject of sale-leaseback transactions since late 2000 for which we have provided environmental indemnities to the lessor. We may acquire facilities with both known and unknown environmental conditions. Although we may be entitled to indemnification from the seller or other responsible party for costs incurred as a result of such conditions, we cannot assure you that such indemnity will be satisfied. We may also be held accountable for liabilities associated with former and current properties of our former TriMas businesses, which include two California sites in respect of which TriMas’ subsidiaries have entered into consent decrees with many other co-defendants. We are entitled to indemnification by TriMas for such matters, but there can be no assurance that this indemnity will be satisfied.

We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safety laws and regulations, many of which provide for substantial fines and criminal sanctions for violations. Based on information presently known to us and accrued environmental reserves, we do not expect environmental costs or contingencies to have a material adverse effect on us. The operation of manufacturing plants entails risks in these areas, however, and there can be no assurance that we will not incur material costs or liabilities in the future which could adversely affect us. Potential material expenditures could be required in the future. For example, we may be required to comply with evolving environmental and health and safety laws, regulations or requirements that may be adopted or imposed in the future or to address newly discovered information or conditions that require a response.

Patents and Trademarks

We hold a number of U.S. and foreign patents, patent applications, licenses and trademarks. We have, and will continue to dedicate, technical resources toward the further development of our products and processes in order to maintain our competitive position in the transportation, industrial and commercial markets that we serve. We continue to invest in the design, development and testing of proprietary technologies that we believe will set our products apart from those of our competitors. Many of our patents cover products that relate to noise reduction (NVH), improved efficiency (increased fuel economy) and lower warranty costs for our customers driven primarily by machining technology that provides leading edge specification tolerances and thus decreases product defects caused by parts not meeting specifications. We consider our patents, patent applications, licenses, trademarks and trade names to be valuable, but do not believe that there is any reasonable likelihood of a loss of such rights that would have a material adverse effect on our operating segments or on us. However, we are often required to license certain intellectual property rights to our customers in order to obtain business and new program awards.

International Operations

In addition to the United States, we have a global presence with operations in Brazil, Canada, the Czech Republic, France, Germany, India, Italy, Mexico, South Korea, Spain and the United Kingdom. An important element of our strategy is to be able to provide our customers with global capabilities and solutions that can be utilized across their entire geographic production base. Products manufactured outside of the United States include Powertrain and Chassis products. Powertrain products include

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isolation pulleys, viscous dampers, powder metal connecting rods, valve bodies and transmission modules. Chassis products include various wheel end products such as machined knuckles.

The following table presents our revenues from continuing operations for each of the years ended January 1, 2006, January 2, 2005 and December 28, 2003, and total assets and long lived assets (defined as equity investments and receivables in affiliates, net fixed assets, intangible and other assets and excess of cost over net assets of acquired companies) at each year ended January 1, 2006 and January 2, 2005 by geographic area, attributed to each subsidiary’s continent of domicile. Revenue and net assets from no single foreign country were material to the consolidated revenues and net assets of the Company.

	2005										2004									2003
			Total		Long Lived			Net					Total		Long Lived			Net
	Sales		Assets		Assets			Assets			Sales		Assets		Assets			Assets		Sales
	(In thousands)
United States	$	1,386,325	$	1,329,141		$	1,037,571	$	(168,661	)	$	1,271,047	$	1,641,285		$	1,115,665	$	130,321	$	823,188
Europe	$	352,651	$	386,643		$	330,318	$	276,813		$	334,777	$	435,496		$	364,266	$	313,918	$	287,211
Other North America	107,281		90,454			71,187		80,036			71,929		85,690			62,576		70,917		58,171
Other foreign	40,682		40,697			$	22,738	31,135			$	17,418	32,293			23,447		26,804		7,892
Total foreign	$	500,614	$	517,794		$	424,243	$	387,984		$	424,124	$	553,479		$	450,289	$	411,639	$	353,274

As part of our business strategy, we intend to expand our international operations through internal growth and acquisitions. Sales outside the United States, particularly sales to emerging markets, are subject to various risks including governmental embargoes or foreign trade restrictions such as antidumping duties, changes in U.S. and foreign governmental regulations, the difficulty of enforcing agreements and collecting receivables through certain foreign local systems, foreign customers may have longer payment cycles than customers in the U.S., more expansive legal rights of foreign unions, tariffs and other trade barriers, the potential for nationalization of enterprises, foreign exchange risk and other political, economic and social instability.

Equity Investments and Receivables from Affiliates

We have a fully diluted interest of approximately 24% in the common stock of TriMas Corporation (“TriMas”). A discussion of certain terms of the stock purchase agreement providing for the TriMas divestiture and our shareholders agreement with Heartland and the other investors relating to our continuing interest in TriMas is included in Note 6, Equity Investments and Receivables from Affiliates, and Note 30, Related Party Transactions, to the audited consolidated balance sheets at January 1, 2006 and January 2, 2005.

Access to Company Information

We make available, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports through our website, www.metaldyne.com. This information is available as soon as reasonably practicable after such material is electronically filed with the U.S. Securities and Exchange Commission.

Item 1A.Risk Factors.

·The industries in which we operate depend upon general economic conditions and are highly cyclical.

Our financial performance depends, in large part, on conditions in the cyclical markets that we serve, such as the automotive and light-duty truck industries, and on the U.S. and global economies generally. Our sales to OEMs and Tier I and Tier II suppliers in the automotive and light-and heavy-duty truck

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industries accounted for virtually all of our net sales in 2005. Tier II suppliers are direct suppliers to Tier I suppliers of integrated modules, such as engine and suspension modules and brake corner modules. Demand for new vehicles fluctuates in response to overall economic conditions and is particularly sensitive to changes in interest rate levels, consumer confidence and fuel costs. In our largest market, the North American automotive market, reported results from our customers in 2005 reflected higher selling prices than in 2004. However, raw material costs have also been higher resulting in higher sales but lower margins in 2005. There can be no assurance that we will continue to offset such margin pressures in the future.

To the extent our production volumes have been positively impacted by OEM new vehicle sales incentives, such at 0% financing and cash rebates, these sales incentives may not be sustained or may cease to favorably impact our sales. For example, 2005 sales for one of our three largest customers declined approximately 6% from prior year results. Throughout the summer of 2005, this customer sold new vehicles at below dealer cost, creating increased demand for new vehicle sales. However, these sale incentives have been discontinued, resulting in a decline in new vehicle sales. Any sustained weakening in our sales volume with any of our three largest customers could have a material adverse effect on us. In addition, the recent decline in consumer confidence throughout the U.S. and much of the world continues to create uncertainty in our markets. Any sustained weakness in demand or continued downturn or uncertainty in the economy generally would have a material adverse effect on us.

Our sales are also impacted by retail inventory levels and our customers’ production schedules. In the current environment, we cannot predict future automotive production rates and inventory levels and the sustainability of any general economic recovery. In addition, we have experienced historical sales declines during OEMs’ scheduled shutdowns, which usually occur during the third calendar quarter. Continued uncertainty and other unexpected fluctuations may have a material adverse effect upon us.

·Our base of customers is concentrated and the loss of business from a major customer, the discontinuance of particular vehicle models or a change in auto consumer preferences or regulations could materially adversely affect us.

Because of the relative importance of our largest customers to us and the high degree of concentration of OEMs in the North American automotive industry, our business is exposed to a high degree of risk related to customer concentration. While direct sales to our three largest OEM customers accounted for a large portion of our net sales from continuing operations in 2005, our customers include Tier I and Tier II suppliers, such as Delphi, Dana and Visteon, that serve the large OEMs. Accordingly, while DaimlerChrysler, Ford and General Motors directly accounted for approximately 25.8%, 12.1% and 6.5%, respectively, of our net sales from continuing operations in 2005, we have a material indirect exposure to these and other OEMs due to our significant Tier I and Tier II supplier base. Several of our OEM customers have recently announced plans to further consolidate their number of suppliers. A loss of significant business from, or adverse performance by, any of these OEM customers or our significant Tier I and Tier II suppliers serving these OEM customers would be harmful to us and make it more difficult for us to meet our debt obligations. Delphi and Dana recently filed for protection under Chapter 11 of the U.S. bankruptcy code. Should other of our customers take similar action, we could be adversely affected. Further deterioration of the market share held by the three largest domestic automakers could also impact our revenues. Production cuts at these OEMs could also adversely impact our sales to Tier I and Tier II suppliers. The contracts we have entered into with most of our customers provide for supplying the customers’ annual requirements against a blanket purchase order for certain vehicle models, rather than for manufacturing a specific quantity of products. Most of these purchase orders are terminable at will by the customers. Therefore, the loss of a contract or a significant decrease in demand for certain key models or group of related models sold by any of our major customers could have a material adverse effect on us.

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In addition, our sales are influenced by customer preferences and regulatory changes. A significant portion of our sales have been derived from products used in sports utility vehicles, or SUVs, and light trucks, which have been favorable due to their high metal content. Until recently, these vehicles had experienced positive sales trends for several years. There can be no assurance that sales of these vehicles will not continue to decline. In addition, government regulations, including those related to fuel economy, could impact vehicle content and volume and, accordingly, have a material adverse impact on us.

·We may not be able to manage our business as we might otherwise because of our high degree of leverage.

We have debt that is substantial in relation to our stockholders’ equity and we expect to incur further debt in the future to finance acquisitions. As of January 1, 2006, we had approximately $862 million of outstanding debt. The degree to which we are leveraged will have important consequences, including the following:

·our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, business development efforts or general corporate purposes may be impaired;

·a substantial portion of our cash flow from operations will be dedicated to the payment of interest and principal on our indebtedness, thereby reducing the funds available to us for other purposes, including our obligations to pay rent in respect of our significant operating leases;

·our operations are restricted by our debt instruments, which contain material financial and operating covenants, and those restrictions will limit, among other things, our ability to borrow money in the future for working capital, capital expenditures, acquisitions, rent expense or other purposes;

·indebtedness under our credit facility and the financing cost associated with our accounts receivable securitization facility are at variable rates of interest, which makes us vulnerable to increases in interest rates;

·our leverage may place us at a competitive disadvantage as compared with our less leveraged competitors;

·our substantial degree of leverage will make us more vulnerable in the event of a downturn in general economic conditions or in any of our businesses; and

·our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate may be limited.

Our ability to service our debt and other obligations will depend on our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, many of which are beyond our control. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

·Restrictions in our credit facility and other debt limit our ability to take certain actions.

Our credit facility, the indentures governing our 11% senior subordinated notes due 2012, our 10% senior notes due 2013 and our 10% senior subordinated notes due 2014 contain covenants that restrict our ability to:

·pay dividends or redeem or repurchase capital stock;

·incur additional indebtedness and grant liens;

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·make acquisitions and joint venture investments;

·sell assets; and

·make capital expenditures.

Our credit facility also requires us to comply with financial covenants relating to, among other things, interest coverage and leverage. While we have unutilized capacity under our revolving credit facility and accounts receivable securitization facility as of January 1, 2006, our ability to utilize this liquidity depends upon compliance with financial covenants. Our financial covenants have recently been adjusted in connection with a bank amendment entered into in February 2006. In addition, our accounts receivable securitization facility contains certain covenants similar to those in our credit facility and includes requirements regarding the purchase and sale of receivables. We cannot assure you, however, that we will be able to satisfy any of these covenants in the future or that we will be able to pursue our new business strategies within the constraints of these or our revised covenants. If we cannot comply with the covenants in our debt instruments, we will be in default and unable to access required liquidity from our revolving credit and accounts receivable securitization facilities and unable to make payments in respect of our indebtedness. In addition, our accounts receivable securitization facility contains concentration limits with respect to the percentage of receivables we can sell from a particular customer. If one or more of our customers were to merge with or be acquired by another of our customers, the amount of receivables of the surviving customer that we could sell may not be increased, resulting in a net lowering of the total amount of the receivables we could sell. If the total amount of receivables we could sell were decreased, we could be materially adversely affected. Further, the concentration limits are based on the credit ratings of such particular customer. While we will implement credit hedging strategies to offset this risk, if one or more of our customers were to become insolvent or have its credit ratings downgraded and consequently the amount of receivables of such customer that we could sell were decreased, our business could be materially adversely affected. For example, on May 5, 2005, Standard & Poor’s lowered its credit rating of General Motors Corporation and Ford Motor Company, two of our largest customers. Due to our new accounts receivable securitization facility entered into on April 29, 2005, these rating downgrades did not have a material impact on our borrowing capacity. On November 1, 2005, Moody’s lowered its credit rating of General Motors, one of our largest customers, resulting in a decrease of our borrowing capacity under our accounts receivable securitization facility by approximately $3 million. In addition, Delphi and Dana, two of our customers, became insolvent in October 2005 and March 2006, respectively. Any further insolvencies or rating downgrades of our largest customers may limit our borrowing capacity on our accounts receivable securitization facility, which could materially adversely affect our business.

Our ability to comply with our covenants may be affected by events beyond our control, including prevailing economic, financial and industry conditions. The breach of our covenants could result in an event of default under our credit facility, the indenture governing the 11% senior subordinated notes due 2012, the indenture governing the senior notes due 2013 or other indebtedness, which could cause an event of default under our accounts receivable securitization facility and all or a portion of our lease financing. Such breach would permit the lenders to declare all amounts borrowed thereunder to be due and payable, together with accrued interest, and the commitments of the lenders to make further extensions of credit under our credit facility could be terminated. In addition, such breach may cause a termination of our accounts receivable securitization facility and of our various sale-leaseback facilities. If we were unable to secure a waiver from our lenders or repay our credit facility indebtedness, our secured lenders could proceed against their collateral and our lessors could prevent us from using our valuable facilities and equipment that are under lease. We do not presently expect that alternative sources of financing will be available to us under these circumstances or available on attractive terms. We may incur other indebtedness in the future that may contain financial or other covenants more restrictive than those

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applicable to the credit facility, the indentures governing our 11% senior subordinated notes due 2012, the indenture governing our 10% senior notes due 2013 and the 10% senior subordinated notes due 2014.

·If we are unable to meet future capital requirements, our business may be adversely affected.

We operate in a capital intensive industry. We have made substantial capital investments from 2001 through 2005 to, among other things, maintain and upgrade our facilities and enhance our production processes. This level of capital expenditures was needed to:

·increase production capacity;

·develop new programs and technology;

·improve productivity;

·satisfy customer requirements; and

·upgrade selected facilities to meet competitive requirements.

We have capital expenditures of approximately $112 million from continuing operations in 2005 and expect to make approximately $70 million in 2006. In addition, as we expand our book of business, we may have to incur other significant expenditures to prepare for and manufacture these products. We believe that we will be able to fund these expenditures through cash flow from operations, borrowing under our credit facility and sales of receivables under our receivables facility or other satisfactory arrangements. Our credit facility contains limitations which could affect our ability to fund our capital expenditures and other needs. We cannot assure you that we will have adequate funds to make all capital expenditures, when required, or that the amount of future capital expenditures will not be materially in excess of our anticipated expenditures. If we are unable to make necessary capital expenditures, our business will be adversely affected. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

·Increases in our raw material or energy costs or difficulties within our supplier base could negatively affect our financial health.

Generally, our raw materials requirements are obtainable from various sources and in the desired quantities. While we currently maintain alternative sources for raw materials, our businesses are subject to the risk of price fluctuations and periodic delays in the delivery of certain raw materials and component parts. In particular, we have been adversely impacted by steel costs. Beginning in 2004, there have been significant increases in the global prices of steel, which have had and may continue to have an impact on our business. While the rise in material costs, especially steel, continues to impact our financial results, we have been able to offset most of this increase through negotiated or contractual price recovery from our customers, cost reductions, a decrease in our annual productivity, price reductions given to our customers, scrap sales and steel resourcing efforts. Our ability to fully execute this recovery on a going forward basis is not guaranteed. Although certain raw material costs such as steel have started to decrease in 2005, there is no guarantee that these decreases will continue. Any continued fluctuation in the price of availability of steel could have a material adverse impact on our business.

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In addition, certain of our suppliers have suffered financial distress, which may materially adversely impact us as well in terms of the potential for interrupted supply, unfavorable payment terms and/or high prices. Specifically, four of our largest suppliers declared bankruptcy since 2004, and we have been forced to renegotiate the terms of certain of our contracts with these suppliers. The additional effects on us from these and other bankruptcies is unknown, but they could result in us paying higher prices, having less favorable payment terms and/or having interrupted supply of parts. See “Business—Materials and Supply Arrangements.” In addition, a failure by our suppliers to continue to supply us with certain raw materials or component parts on commercially reasonable terms, or at all, would have a material adverse effect on us. Our energy costs are a substantial element of our cost structure. To the extent there are energy supply disruptions or material fluctuations in energy costs, our margins could be materially adversely impacted.

·Continuing trends among our customers will increase competitive pressures in our business.

The markets for our products are highly competitive. Our competitors include driveline component manufacturing facilities of existing OEMs, as well as independent domestic and international suppliers. Certain competitors of our businesses are large companies that have greater financial resources than us. At times, we may be in a position of competing with some of our own customers, such as other Tier I suppliers, which could have adverse consequences. We believe that the principal competitive factors for all of our businesses are product quality and conformity to customer specifications, design and engineering capabilities, product development, timeliness of delivery and price. Virtually all of our customers have policies of seeking price reductions each year. As a result, we have been forced to reduce prices in the initial bidding process, during the terms of contractual arrangements and upon contract renewals. Moreover, certain of our customers have required that we relocate production to countries with lower production costs in order to provide them with additional price reductions. The pressure to provide price reductions has been substantial and is likely to continue. In addition, our competitors may develop products that are superior to our products or may adapt more quickly than us to new technologies or evolving customer requirements. Continuing trends by our customers in many of our markets to limit their number of outside vendors have resulted in increased competition as many manufacturers and distributors have reduced prices to compete more effectively. In addition, financial and operating difficulties experienced by our major customers may result in further pricing pressure. We expect competitive pressures in our markets to remain strong. Such pressures arise from existing competitors, other companies that may enter our existing or future markets and, in certain cases, our customers, which may decide to internalize production of certain items sold by us. There can be no assurance that we will be able to compete successfully with our existing competitors or with new competitors. Failure to compete successfully could have a material adverse effect on us.

·We rely upon a number of arrangements for our liquidity, which, if limited, could materially and adversely affect our ability to meet our commercial and financial obligations and to grow our business.

We have substantial on- and off-balance sheet obligations and significant commercial and financial obligations as well as capital requirements to meet our new business commitments. To meet these obligations and commitments we rely upon a variety of sources of liquidity, particularly our revolving credit facility and our accounts receivable facility. Our liquidity may be adversely affected depending on the timing of such obligations and commitments. The availability of funds under our revolving credit facility and our accounts receivable facility depends upon a number of factors, including covenant compliance, customer concentration, the total amount of receivables available for sale and the nature of our receivables. Our receivables available for sale during the year are impacted by the volume and timing of vehicle production, which includes a shutdown in our North American customer for approximately two weeks in July and one week in December and reduced production in  July and August for certain European customers. An adverse change in our liquidity may not only impair our ability to meet our commercial commitments and objectives, but may make it difficult for us to meet our obligations in respect of debt and lease obligations.

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·We may selectively pursue strategic opportunities like acquisitions, joint ventures and divestitures but we may not be able to successfully do so or realize the intended benefits of such transactions.

We continually evaluate potential acquisitions and joint ventures. There can be no assurance that suitable acquisition candidates may be identified and acquired in the future, that the financing or necessary consents for any such acquisitions will be available on satisfactory terms or that we will be able to accomplish our strategic objectives in making any such acquisition. Acquisitions are often undertaken to improve the operating results of either or both of the acquirer and the acquired company, and we cannot assure you that we will be successful in this regard or that the expenses that we may incur to implement cost savings plans will not be excessive relative to the anticipated benefits. We will encounter various risks if we acquire other companies, including the possible inability to integrate successfully an acquired business into our operations and unanticipated problems or liabilities, whether or not known at the time of acquisition, some or all of which could materially and adversely affect us. We could incur additional indebtedness in connection with our acquisition strategy and increase our leverage. We may acquire companies and operations in geographic markets in which we do not currently operate. Acquisitions outside of North America will present unique structuring, integration, legal operating and cultural challenges and difficulties and will increase our exposure to risks generally attendant to international operations.

In addition, we may from time to time dispose of assets or businesses that no longer match with our strategy for financial reasons.

·Our products are subject to changing technology, which could place us at a competitive disadvantage relative to alternative products introduced by competitors.

We believe that our customers rigorously evaluate their suppliers on the basis of product quality, price competitiveness, technical expertise and development capability, new product innovation, reliability and timeliness of delivery, product design capability, manufacturing expertise, operational flexibility, customer service and overall management. Our success will depend on our ability to continue to meet our customers’ changing specifications with respect to these criteria. We may, therefore, require significant ongoing and recurring additional capital expenditures and investment in research and development, manufacturing and other areas to remain competitive. We cannot assure you that we will be able to achieve the technological advances or introduce new products that may be necessary to remain competitive within our business. In addition, any decreasing demand by our customers in favor of plastics could have a material adverse effect. Further, we cannot assure you that any technology development by us can be adequately protected such that we can maintain a sustainable competitive advantage.

·We depend on the services of key individuals and relationships, the loss of which would materially harm us.

Our success will depend, in part, on the efforts of our executive officers and other key employees. In addition, our future success will depend on, among other factors, our ability to attract and retain other qualified personnel. The loss of the services of any of our key employees or the failure to attract or retain employees could have a material adverse effect on us.

·We may be subject to work stoppages at our facilities or those of our principal customers, which could seriously impact the profitability of our business.

As of January 1, 2006, approximately 50% of our continuing operations work force was unionized. We do not have national agreements in place with any union, and our facilities are represented by a variety of different union organizations. If our unionized workers were to engage in a strike, work stoppage or other slowdown in the future, we could experience a significant disruption of our operations, which could have a material adverse effect on us. In addition, if a greater percentage of our work force becomes unionized, our business and financial results could be materially adversely affected. We currently have two facilities

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with union contracts expiring within the next twelve months. The remaining union facilities have contracts which expire in 2007 and 2008. See “Business—Employees and Labor Relations.”

Many of our direct or indirect customers have unionized work forces. Strikes, work stoppages or slowdowns experienced by automotive OEMs or their suppliers could result in slowdowns or closures of assembly plants where our products are included in assembled vehicles. UAW contracts with our three largest customers were renegotiated in 2003 for a term of four years to expire in 2007. In addition, organizations responsible for shipping our customers’ products may be impacted by occasional strikes staged by the Teamsters Union. Any interruption in the delivery of our customers’ products would reduce demand for our products and could have a material adverse effect on us.

·Our pension plans are currently underfunded and we may have to make cash payments to the plans, reducing the cash available for liquidity.

We sponsor defined benefit pension plans covering certain active and retired employees in the United States, Canada and Europe that are underfunded and will require future cash payments. Additionally, if the performance of the assets in our pension plans does not meet our expectations, or if other actuarial assumptions are modified, our required contributions may be higher than we expect. If our cash flow from operations is insufficient to fund our pension liability, we may be forced to reduce or delay capital expenditures, seek additional capital or seek to restructure or refinance our indebtedness.

On January 2, 2005, our projected benefit obligation, or PBO, exceeded the fair value of plan assets by $121.2 million. During 2005, we made contributions, including employee contributions and benefit payments made directly by Metaldyne, of $22.3 million to the defined benefit plans. The underfunded status at January 1, 2006 was $120.8 million. Our pension expense was $6.0 million and $4.2 million for 2005 and 2004, respectively. For 2006 we expect pension expense to be $8.6 million. See Note 26, Employee Benefit Plans, to the audited consolidated financial statements.

·Our strategy may not succeed if anticipated outsourcing fails to occur due to union considerations.

Because of economic benefits inherent in outsourcing to suppliers and the costs associated with reversing a decision to purchase products from an outside supplier, automotive OEMs’ commitment to purchasing modules from outside suppliers, particularly on a “just-in-time” basis, are expected to increase. However, under the contracts currently in effect in the United States and Canada between each of

DaimlerChrysler, Ford and General Motors with the UAW and the Canadian Auto Workers, or CAW, in order for any of such automotive OEMs to obtain components from external sources that it currently produces, it must first notify the UAW or the CAW of such intention. If the UAW or the CAW objects to the proposed outsourcing, some agreement will have to be reached between the UAW or the CAW and the automotive OEM. Factors that will normally be taken into account by the UAW, the CAW and the automotive OEM include:

·whether the proposed new supplier is technologically more advanced than the automotive OEM;

·whether the new supplier is unionized;

·whether cost benefits exist; and

·whether the automotive OEM will be able to reassign union members whose jobs are being displaced to other jobs within the same factories.

In the event our predictions concerning such industry trends are not accurate or automotive OEMs are unable to outsource to us, it may have a material adverse effect on us.

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·A growing portion of our revenue may be derived from international sources, which exposes us to certain risks.

Approximately 27% of our sales in 2005 were derived from sales from continuing operations by our subsidiaries located outside of the United States. As part of our business strategy, we intend to expand our international operations through internal growth and acquisitions. For example, we recently announced plans to expand our manufacturing locations in both China and South Korea. In addition, the disposition of our non-core North American Forging business will effectively increase the percentage of sales derived from our subsidiaries located outside of the United States. Significant market share has shifted to foreign OEMs in the SUV and light truck platforms where we derive a significant portion of our sales. Sales outside of the United States, particularly sales to emerging markets, are subject to other various risks which are not present in sales within U.S. markets, including governmental embargoes or foreign trade restrictions such as antidumping duties, changes in U.S. and foreign governmental regulations, the difficulty of enforcing agreements and collecting receivables through certain foreign local systems, foreign customers may have longer payment cycles than customers in the U.S. more expansive legal rights of foreign unions, tariffs and other trade barriers, taxes, the potential for nationalization of enterprises, foreign exchange risk and other political, economic and social instability. In addition, there are tax inefficiencies in repatriating cash flow from non-U.S. subsidiaries. To the extent such repatriation is necessary for us to meet our debt service or other obligations, this will adversely affect us.

·We may incur material losses and costs as a result of product liability and warranty claims that may be brought against us.

We may incur material losses and costs as a result of product liability and warranty claims that may be brought against us in the event that the use of our current and formerly manufactured or sold products results, or is alleged to result, in bodily injury and /or property damage or fails to meet our customer specifications. We may experience material product liability losses in the future or may incur significant costs to defend such claims. Our product liability insurance coverage may not be adequate for any liabilities that may ultimately be incurred or may not continue to be available on terms acceptable to us. In addition, if any of our products are or are alleged to be defective we may be required to participate in a government-required or manufacturer-instituted recall involving such products. In the automotive industry, each vehicle manufacturer has its own policy regarding product recalls and other product liability actions relating to its suppliers. However, as suppliers become more integrally involved in the vehicle design process and assume more of the vehicle assembly functions, vehicle manufacturers are increasingly looking to their suppliers for contribution when faced with product liability claims. A successful claim brought against us in excess of our available insurance coverage or a requirement to participate in a product recall may have a materially adverse effect on our business. In the ordinary course of our business, contractual disputes over warranties can also arise. In the past five years or more, we have not been required to make any material payments in respect of warranty claims. In addition, claims may be asserted against us with respect to former businesses disposed of by us, whether or not we are legally responsible or entitled to contractual indemnification. For example, in June 2002, we divested our controlling interest in TriMas. Certain of TriMas’ subsidiaries have historical contingent and other liabilities, including liabilities associated with their former manufacture of asbestos containing gaskets, for which we are indemnified. In the event of financial difficulty at one of our former businesses or otherwise, claims may be made against us and, to the extent arising from a TriMas business, TriMas may not be in a position to meet its indemnification obligations.

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·Our business may be materially and adversely affected by compliance obligations and liabilities under environmental laws and regulations.

We are subject to numerous and frequently changing federal, state, local and foreign environmental, and health and safety, laws and regulations that:

·affect ongoing operations and may increase capital costs and operating expenses in order to maintain compliance with such requirements, and

·impose liability relating to contamination at our facilities, and at other locations such as former facilities, facilities where we have sent wastes for treatment or disposal, and other properties to which we (or a company or business for which we are responsible) are linked. Such liability may include, for example, investigation and clean-up of the contamination, personal injury and property damage caused by the contamination, and damages to natural resources. Some of these liabilities may be imposed without regard to fault, and may also be joint and several (which can result in a liable party being held responsible for the entire obligation, even where other parties are also liable).

We are legally or contractually responsible or alleged to be responsible for the investigation and remediation of contamination at various sites, and for personal injury or property damages, if any, associated with such contamination. Our subsidiaries have been named as potentially responsible parties under the Federal Superfund law or similar state laws in several sites requiring cleanup related to disposal of wastes generated by them. These laws generally impose liability for costs to investigate and remediate contamination without regard to fault and under certain circumstances liability may be joint and several resulting in one responsible party being held responsible for the entire obligation. Liability may also include damages to natural resources. Our businesses have incurred and likely will continue to incur expenses to investigate and clean up existing and former company-owned or leased property. Additional sites may be identified at which we are a potentially responsible party under the federal Superfund law or similar state laws. We cannot assure you that these or other liabilities will not have a material adverse effect upon us. See “Business—Environmental Matters.”

·We are controlled by Heartland, whose interests in our business may be different than ours.

Heartland and its affiliates are able to control our affairs in all cases, except for certain actions specified in a shareholders agreement among Heartland, Credit Suisse First Boston Equity Partners, L.P. together with its affiliated funds, or CSFB Private Equity, Masco Corporation, Richard Manoogian and their various affiliates and certain other investors. Under the shareholders agreement, holders of approximately 96% of our outstanding shares of common stock have agreed to vote their shares for directors representing a majority of our board that have been designated by Heartland. You should consider that the interests of Heartland, as well as our other owners, will likely differ from yours in material respects. See Note 30, Related Party Transactions, to the audited consolidated financial statements.

·Provisions of the shareholders agreement impose significant operating and financial restriction on our business.

Under the shareholders agreement referred to above, specified actions require the approval of representatives of CSFB Private Equity, until such time as we consummate a public common stock offering for at least $100 million in gross proceeds to us. Such actions include certain acquisitions by us, the selection of a chief executive officer, certain debt restructurings and any liquidation or dissolution of us. You should consider that we and our stockholders may be unable to agree with CSFB Private Equity on the implementation of such fundamental transactions and other matters. This sort of disagreement may materially and adversely affect us. In addition, directors designated by Heartland could block actions even if other directors deem them advisable.

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We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 1B.Unresolved Staff Comments.

Not Applicable.

Item 2.Properties.

Our principal manufacturing facilities range in size from approximately 10,000 square feet to 1,000,000 square feet, approximately half of which are owned by us. The leases for our manufacturing facilities have initial terms that expire from 2004 through 2023 and are all renewable, at our option, for various terms, provided that we are not in default thereunder. Substantially all of our owned U.S. real properties are subject to liens under our credit facility. Our executive and business unit headquarter offices are located in various buildings in Plymouth, Michigan and are leased under separate leases that expire at various dates through 2020. Our buildings, machinery and equipment have been generally well maintained, are in good operating condition and are adequate for current production requirements.

Since December 2000, we have entered into a number of sale-leaseback transactions with respect to 15 real properties in the United States. Pursuant to the terms of each sale-leaseback transaction, we transferred title of the real property locations to a purchaser and, in turn, entered into separate leases with the purchasers having various lease terms. With respect to the purchaser of all except for four of these properties, the renewal option must be exercised with respect to all, and not less than all, of the property locations. As to the other four properties, which include our Plymouth, Michigan headquarters, each renewal option may be exercised separately. Rental payments are due monthly. All of the foregoing leases are being accounted for as operating leases. As a result of the Livonia Fittings business disposition to TriMas, we are subleasing our Livonia, Michigan facility to TriMas. We anticipate sublease payments will equal our cash obligations in respect of such facility but we will remain responsible for payments to the lessor. We have not recognized any liability for the obligation associated with this sublease and a failure by TriMas to meet its obligations would adversely impact us. See Note 13, Leases, to our audited consolidated financial statements.

Since December 2000, we have entered into a number of sale-leaseback arrangements with respect to equipment located at various of our manufacturing facilities. The term of each lease ranges from 3.5 years to 8.5 years with rental payments due monthly. In some cases, we have options to renew our leases once for two years and, in other cases, we have three renewal option periods of one year each. Upon expiration of the term or any applicable renewal term of each lease, we have the option to purchase the equipment for its fair value at the time of the expiration of the lease. The equipment sale-leaseback transactions with GECC, Merrill Lynch Capital, Key Bank, Renaissance Capital Alliance and GMAC have been accounted for as operating leases.

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The following list sets forth the location of our principal owned and leased manufacturing facilities (except where noted as otherwise) and identifies the principal operating segment utilizing such facilities. We have identified the operating segments for which we conduct business at these facilities as follows: (1) Chassis and (2) Powertrain. North American Forging facilities are presented as discontinued operations at January 1, 2006 and are identified with (3).

North America
Georgia	Rome* (subleased to a third party)
Illinois	Niles*(2)
Indiana	Bluffton(2), Fort Wayne(3), Fremont*(2), New Castle(1) and North Vernon*(2)
Michigan	Detroit(3), Farmington Hills(1), Fraser*(3), Green Oak Township*(2), Hamburg(2), Litchfield(2), Middleville*(2), Royal Oak(3), Troy(3) and Warren*(2)
North Carolina	Greenville(1) and Greensboro*(1)
Ohio	Canal Fulton*(3), Edon*(1), Minerva*(3), Solon*(2) and Twinsburg*(2)
Pennsylvania	Ridgway(2) and St. Mary’s(2)
Foreign
Brazil	Indaiatuba*(2)
Canada	Thamesville(2)
China	Shanghai (Sales Location)*(1,2)
Czech Republic	Oslavany(1)
United Kingdom	Halifax(2)
France	Lyon(2)
Germany	Dieburg(2), Nuremberg(1) and Zell am Harmersbach(1)
India	Jamshedpur**(2)
Italy	Poggio Rusco(1)
Japan	Yokohama (Sales Location)*(1,2)
Mexico	Iztapalapa(1) and Ramos Arizpe(2)
South Korea	Pyongtaek(2)
Spain	Barcelona(1)(2) and Valencia(2)

*Denotes a leased facility.

**Denotes a facility representing a joint venture.

Item 3.Legal Proceedings.

There are no material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we are a party, or of which any of our property is subject.

Item 4.Submission of Matters to a Vote of Security Holders.

Not applicable.

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Item 4A.Executive Officers of the Registrant (Pursuant to Instruction 3 to Item 401(b) of Regulation S-K).

The following table sets forth certain information regarding our current directors and executive officers.

Name	Age		Position
Timothy D. Leuliette	55	President and Chief Executive Officer and Chairman of the Board of Directors
Jeffrey M. Stafeil	36	Executive Vice President and Chief Financial Officer
Thomas V. Chambers	62	President, Powertrain Group
Joseph Nowak	55	President, Chassis Group
Thomas A. Amato	42	Executive Vice President Commercial Operations
Logan G. Robinson	56	Executive Vice President, General Counsel and Government Relations

Timothy D. Leuliette.   Mr. Leuliette was elected as one of our directors in November 2000 and currently serves as our Chairman of the Board and President and Chief Executive Officer. Mr. Leuliette was elected chairman of the Board effective April 1, 2002 and became our President and Chief Executive Officer on January 1, 2001. In 1996, Mr. Leuliette joined Penske Corporation as their President and Chief Operating Officer to address operational and strategic issues. From 1991 to 1996, he served as President and Chief Executive officer of ITT Automotive. He also serves on a number of corporate and charitable boards, including Collins & Aikman and TriMas Corporation. He is a former senior managing director of Heartland Industrial Partners, and also served as a director of The Federal Reserve Bank of Chicago, Detroit Branch.

Jeffrey M. Stafeil.   Mr. Stafeil has served as our Executive Vice President and Chief Financial Officer since July 2003 and previously served as our Vice President and Corporate Controller from February 2001 to July 2003. From 1998 to 2000, he was a consultant with Booz, Allen & Hamilton. Mr. Stafeil is a former senior managing director of Heartland Industrial Partners and has also held a variety of positions with Peterson Consulting, Mobil Corporation and Ernst & Young LLP.

Thomas V. Chambers.   Mr. Chambers joined the Company in August 2004 and is currently the President of our Powertrain Group. Prior to joining us, he served as the President of Piston Automotive from January 2000 to December 2003. Prior to that, Mr. Chambers served as the Managing Director of Operations, Americas at GKN Driveline from November 1998 to December 2000. In addition, Mr. Chambers also served in a variety of positions at ITT Automotive and General Motors and has over 40 years of experience in all phases of product development and manufacturing.

Joseph Nowak.   Mr. Nowak has served as the President of our Chassis Group since November 2001. After joining MascoTech in 1991, he served as MascoTech’s Vice President of Operations, President of Industrial Components, and President and General Manager Tubular Products. Mr. Nowak has over 25 years of manufacturing experience in automotive and industrial markets, and has held positions with Kelsey-Hayes/Varity and Ford Motor Company.

Thomas A. Amato.   Mr. Amato has served as our Executive Vice President Commercial Operations since January 2005 and previously served as our Vice President, Corporate Development from September 2001 to January 2005. After joining Masco Corporation in May 1994 and being assigned to MascoTech as its Manager of Business Development, he transferred to MascoTech in 1996 and became its Director of Corporate Development. In May 2001, Mr. Amato became the Vice President, Corporate Development of TriMas Corporation, which at the time was our wholly owned subsidiary. He is responsible for all of our merger, acquisition, alliance, divestiture, and joint venture activities. Mr. Amato served on the board of directors of NC-M Chassis Systems, LLC, a joint venture between DaimlerChrysler and Metaldyne, and also served on the board of Innovative Coatings Technologies, LLC.

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Logan G. Robinson.   Mr. Robinson has served as our General Counsel since March 2006. Prior to joining us, he served as Vice President and General Counsel at Delphi Corporation since December 1998. Prior to that, Mr. Robinson was of counsel at Dickenson Wright PLLC from April 1998 to December 1998, and served as Senior Vice President, Secretary and General Counsel for ITT Automotive, Inc. from February 1996 to April 1998. From April 1987 to February 1996, he was a lawyer for Chrysler Corporation serving, among other positions, as Vice President and General Counsel for Chrysler International Corporation, a subsidiary of Chrysler Corporation, and Managing Director of Chrysler Austria GmbH. He has also held legal positions with TRW Inc., Coudert Brothers and Wender, Murase & White.

PART II

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

No trading market for the Company’s common stock exists. We did not pay dividends in 2005 or 2004 on our common stock and it is current policy to retain earnings to repay debt and finance our operations and acquisition strategies. In addition, our credit facility restricts the payment of dividends on common stock. See the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” included in Item 7 of this report and Note 12, Long-Term Debt, to the audited consolidated financial statements, included in Item 8 of this report.

On March 15, 2006, there were approximately 630 holders of record of our common stock.

The table below sets forth information as of January 1, 2006 with respect to compensation plans under which Metaldyne Corporation equity securities are authorized for issuance:

	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in Column A)
Plan Category	Column A		Column B			Column C
Equity compensation plans approved by security holders		2,983,850		$	9.59		1,976,150

Item 6.Selected Financial Data.

The following table sets forth summary consolidated financial information of the Company, for the years and dates indicated.

	2005			2004			2003			2002			2001
	(In thousands except per share amounts)
Net sales	$	1,886,939		$	1,695,171		$	1,176,462		$	1,429,871		$	1,745,663
Loss from continuing operations	$	(109,797	)	$	(25,555	)	$	(83,691	)	$	(103,121	)	$	(70,533	)
Net loss	$	(261,907	)	$	(27,994	)	$	(75,339	)	$	(64,760	)	$	(42,780	)
Loss per share	$	(6.11	)	$	(0.65	)	$	(1.98	)	$	(1.73	)	$	(1.14	)
Dividends declared per common share	—			—			—			—			—
At January 1, 2006, January 2, 2005, December 28, 2003, December 29, 2002 and December 31, 2001:
Total assets	$	1,846,935		$	2,194,764		$	2,011,857		$	2,017,990		$	2,946,760
Long-term debt, net(a)	$	850,739		$	847,853		$	758,958		$	661,141		$	1,351,750
Redeemable preferred stock	$	171,928		$	149,191		$	73,984		$	64,507		$	55,149

(a)See Note 12, Long-Term Debt, to the audited consolidated financial statements (net of current portion).

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Results in 2005 include the impact from the divestiture of our North American Forging business and the resulting $140.5 million loss on discontinued operations, net of tax.

Since 2004, results include the New Castle facility acquired December 31, 2003.

Results in 2004 include the Bedford Heights, Ohio and Rome, Georgia facilities through the February 1, 2004 asset sale pursuant to which substantially all of the business associated with two of the aluminum die casting facilities in our former Driveline segment was sold to Lester PDC, Ltd. These facilities had 2003 combined sales of approximately $62 million and an operating loss of approximately $14 million. In November 2004, Lester PDC discontinued operations at the Bedford Heights facility and, as a result, we assumed production of some of the products at the Bedford Heights facility that were subject to the terminated supply agreement.

Results in 2003 include the Fittings division through May 9, 2003, at which time it was sold to TriMas for $22.6 million plus the assumption of an operating lease.

Results in 2002 reflect a net loss of $64.8 million, which includes the cumulative effect of a change in recognition and measurement of goodwill impairment related to TriMas. A loss of $28.1 million was recorded before this change in accounting principle.

As more fully described in Note 6 Equity Investments and Receivables in Affiliates to the audited consolidated financial statements, we sold TriMas common stock to Heartland and other investors on June 6, 2002. TriMas is included in our financial results through the date of this transaction. Effective June 6, 2002, we account for our investment in TriMas under the equity method of accounting. Our present ownership interest in TriMas is 24%.

Results in 2001 include the retroactive adoption of purchase accounting for our acquisition by Heartland and its co-investors.

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

Executive Summary

We are a leading global manufacturer of highly engineered metal components for the global light vehicle market with 2005 sales of approximately $1.9 billion. We operate two segments focused on the global light vehicle market. The Chassis and Powertrain segments manufacture, design, engineer and assemble metal-formed and precision-engineered components and modular systems used in the transmissions, engines and chassis of vehicles. We serve approximately 200 automotive and industrial customers and our top ten customers represent approximately 70% of total 2005 sales. Prior to November 2000, we were a public company. Since we were acquired in November 2000 by a private investor group, we have actively pursued opportunities for internal growth and strategic acquisitions that were unavailable to us when the majority of our shares were publicly traded. Since November 2000, we have completed four acquisitions—Simpson in December 2000, GMTI effective January 2001, Dana Corporation’s Greensboro, NC operation in May 2003, and DaimlerChrysler’s New Castle operation at the beginning of our fiscal 2004. Each of these acquisitions has added to the full service, integrated metal supply capabilities of our automotive operations. Additionally, we split off our non-automotive operations, divesting our former TriMas subsidiary in June 2002, our Fittings operation in April 2003 and two aluminum die casting facilities within our former Driveline segment in February 2004. On March 10, 2006, we completed the divestiture of our Forging Operations. In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” all revenue and expenses of the Forging Operations have been removed from the respective audited consolidated income statement line items and reported separately as discontinued operations. In addition, assets and liabilities of the Forging Operations have

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been removed from the respective audited consolidated balance sheet line items and reclassified separately as assets and liabilities held for sale. Cash flows generated by the Forging Operations have been removed from the respective audited consolidated cash flow line items and have been separately reported as cash flows from discontinued operations. Refer to Note 20, Discontinued Operations, and Note 31, Subsequent Events, to our audited consolidated financial statements.

In each of the last three years we have experienced significant net losses. Our net losses for 2005, 2004 and 2003 were $261.9 million, $28.0 million and $75.3 million, respectively. Our 2005 losses were impacted by the following:

·4.3% decline in production from our three largest customers;

·  approximately $141 million loss on discontinued operations related to the sale of our North American Forging business;

·  approximately $8 million loss from discontinued operations;

·  approximately $3 million loss from a cumulative effect of change in accounting principle;

·  approximately $76 million increase in the valuation allowance of deferred tax assets; and

·  approximately $22 million loss on fixed assets and idle leased assets.

The 2004 losses were impacted by the following:

·2.6% decline in production from our three largest customers;

·  approximately $20 million net negative impact from material cost increases;

·  approximately $18 million in fees and expenses related to our Independent Investigation; and

·$7.6 million non-cash loss on the disposition of two manufacturing facilities.

The 2003 losses were impacted by the following:

·6.4% decrease in NAFTA production;

·$13 million in restructuring charges; and

·$4.9 million asset impairment associated with two plants with negative operating performance.

For additional discussion of these factors, see the “Results of Operations” discussion.

Key Factors Affecting our Reported Results

We operate in extremely competitive markets. Our customers select us based upon numerous factors including technology, quality and price as discussed under Item 1, Business - Competition. Supplier selection is generally finalized several years prior to the start of vehicle production and as a result, business that we win will generally not start production for two years or beyond. In addition, our results are heavily dependent on global vehicle production, and in particular the North American vehicle production of the Big 3 domestic manufacturers (DaimlerChrysler, Ford and General Motors). Our customers generally require that we offer annual productivity and efficiency related price decreases on products we sell them. Critical factors to be successful in this market include global low cost production facilities, leading service and parts quality, and differentiated product and process technology. Accordingly, we focus on managing our global manufacturing footprint in line with our customer needs and local market manufacturing cost differences, improving operating efficiency and production quality of our plants, fixing or eliminating unprofitable facilities and reducing our overall material costs. In addition, we spend considerable time and resources developing new technology and products to enhance performance and/or decrease cost of the

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products we sell to our customers. See “Results of Operations” for more details as to the factors that affect year over year performance.

As material costs continued to rise in 2005, the net material exposure was effectively mitigated. Material costs increased by $70 million but were offset by $48 million in price pass throughs to our customers, while the balance of our exposure was offset through scrap sales and cost reductions. Our ability to fully execute this recovery on a going forward basis is not guaranteed. Additionally, it appears that raw material costs will continue to be volatile in 2006 and although we have initiatives in place to offset potential increases, there is no guarantee that these efforts will be successful.

Our strategy is centered on growth through new business awards and acquisitions. As discussed in Item 1, Business, we have a significant new project backlog and have completed several acquisitions that we believe will enable us to better serve our customer base and provide enhanced returns for our stakeholders. In order to finance a large portion of this activity, we incurred significant new debt. As such, we have substantial leverage and are constrained by various covenant limitations (see “—Financial Covenants” for more details surrounding these covenants). As we continue to invest in the resources to produce our new business backlog and thus grow our business, a significant portion of our operating cash flow will be used to buy new capital equipment, expand production capacity and invest in new technology in addition to servicing principal and interest payments on our debt obligations. Therefore, we are focused on our cash generation ability (we monitor this internally through “Adjusted EBITDA.” See the discussion below in “Key Performance Indicators (Non GAAP Financial Measures)” for further explanation), and working capital and fixed asset efficiency to assess our ability to favorably finance our new business backlog.

Net sales for fiscal 2005 were $1,887 million versus $1,695 for fiscal 2004. The primary driver of the $192 million increase was approximately $192 million in new business resulting from product launches and ramp up of existing programs. Net sales for fiscal 2004 were $1,695 million versus $1,176 million for fiscal 2003. The primary source of the increase in our 2004 sales was our New Castle acquisition, which contributed approximately $446 million for the year.

Key Indicators of Performance (Non-GAAP Financial Measures)

In evaluating our business, our management considers Adjusted EBITDA as a key indicator of financial operating performance and as a measure of cash generating capability.

We define Adjusted EBITDA as income from continuing operations and before interest, taxes, depreciation, amortization, asset impairment, loss on disposition of manufacturing facilities, non-cash losses on sale-leaseback of property and equipment and non-cash restricted stock award expense. In evaluating Adjusted EBITDA, our management deems it important to consider the quality of our underlying earnings by separately identifying certain costs undertaken to improve our results, such as costs related to consolidating facilities and businesses in an effort to eliminate duplicative costs or achieve efficiencies, costs related to integrating acquisitions and restructuring costs related to expense reduction efforts. Although our consolidation, restructuring and integration efforts are continuing, our management analyzes these costs to evaluate underlying business performance. Caution must be exercised in analyzing these items as they include substantially (but not necessarily entirely) cash costs and there can be no assurance that we will ultimately realize the benefits of these efforts. Moreover, even if the anticipated benefits are realized, they may be offset by other business performance or general economic issues.

By selecting Adjusted EBITDA, management believes that it is the best indicator (together with a careful review of the aforementioned items) of our ability to service and/or incur indebtedness as we are a highly leveraged company. We use Adjusted EBITDA as a key performance measure because we believe it facilitates operating performance comparisons from period to period and company to company by backing

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out potential differences caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses), and the impact of purchase accounting and SFAS No. 142 (affecting depreciation and amortization expense). Because Adjusted EBITDA facilitates internal comparisons of our historical  operating performance on a more consistent basis, we also use Adjusted EBITDA for business planning purposes, to incent and compensate our management personnel, as a measure of segment performance, in measuring our performance relative to that of our competitors and in evaluating acquisition opportunities. In addition, we believe Adjusted EBITDA and similar measures are widely used by investors, securities analysts, rating agencies and other interested parties as a measure of financial performance and debt-service capabilities. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

·It does not reflect our cash expenditures for capital equipment or contractual commitments;

·Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash requirements for such replacements;

·It does not reflect changes in, or cash requirements for, our working capital needs;

·It does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness;

·It includes amounts resulting from matters we consider not to be indicative of underlying performance of our fundamental business operations, as discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations;” and

·Other companies, including companies in our industry, may calculate these measures differently than we do, limiting their usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally. We carefully review our operating profit margins (operating profit as a percentage of net sales) at a segment level, which are discussed in detail in our year-to-year comparison of operating results.

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The following is a reconciliation of our Adjusted EBITDA to net loss for the three years ended January 1, 2006, January 2, 2005 and December 28, 2003:

	2005			2004			2003
	(In thousands)
Net loss	$	(261,907	)	$	(27,994	)	$	(75,339	)
Income tax expense (benefit)	22,756			(35,557		)	(13,159		)
(Income) loss from discontinued operations, net of tax	8,301			2,439			(8,352		)
Loss on discontinued operations, net of tax	140,547			—			—
Cumulative effect of change in accounting principle, net of tax	3,262			—			—
Interest expense	89,650			81,818			75,283
Depreciation and amortization in operating profit	112,183			104,825			79,675
Non-cash stock award expense	—			563			3,088
Preferred stock dividends and accretion	22,737			19,900			—
Non-cash gain on maturity of interest rate arrangements	—			(6,575		)	—
Loss on disposition of manufacturing facilities	—			7,600			—
Asset impairment	—			—			4,868
Gain on disposition of TriMas and Saturn investments	—			(8,020		)	—
Equity (income) loss from affiliates, net	11,011			(1,451		)	20,712
Certain items within Other, Net(1)	12,825			7,978			6,460
Total Company Adjusted EBITDA from continuing operations	$	161,365		$	145,526		$	93,236

The following is a reconciliation of our Adjusted EBITDA to operating cash flow for the years ended January 1, 2006, January 2, 2005 and December 28, 2003:

	2005			2004			2003
	(in thousands)
Operating cash flow	$	101,424		$	79,139		$	99,243
Net proceeds of accounts receivable securitization facility	(20,116		)	(63,260		)	—
Change in working capital	(43,462		)	50,646			(44,290		)
Cash paid for interest	87,402			78,471			63,416
Cash paid (refunded) for income taxes, net	12,737			(8,342		)	(27,057		)
Change in long-term assets	2,829			133			(343		)
Change in long-term liabilities	13,283			(2,571		)	(687		)
Accounts receivable securitization fees	4,506			2,947			2,634
Foreign factoring fees	1,900			1,500			500
Acquisition/disposition activity	—			5,480			—
Other	862			1,383			(180		)
Total Company Adjusted EBITDA from continuing operations	$	161,365		$	145,526		$	93,236

Acquisition and disposition activity pertains to the working capital effects of the disposition of manufacturing facilities and the acquisition of New Castle.

(1)Reconciliation of Other Expense Included in the Consolidated Statement of Operations:

	2005			2004			2003
	(In thousands)
Items excluded from Adjusted EBITDA (amortization of financing fees and A/R securitization fees)	$	12,825		$	7,978		$	6,460
Items in Adjusted EBITDA (includes foreign currency, royalties and interest income)	(1,625		)	(997		)	610
Total other, net	$	11,200		$	6,981		$	7,070

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The following details certain items relating to our consolidation, restructuring and integration efforts and other charges not eliminated in determining Adjusted EBITDA, but that we would eliminate in evaluating the quality of our Adjusted EBITDA:

	2005			2004			2003
	(In thousands)
Restructuring charges	$	(3,288	)	$	(2,455	)	$	(12,744	)
Fixed asset disposal losses	(15,137		)	(2,275		)	(8,795		)
Loss on idle leased assets	(6,664		)	—			(2,675		)
Foreign currency gains (losses)	389			(940		)	(1,010		)
Postretirement medical curtailment gain and elimination of certain plan benefits	9,915			1,948			—
Independent investigation fees	—			(17,830		)	—

Functional and Divisional Realignments

On October 28, 2005, we announced the possible divestiture of our North American Forging business. We completed this divestiture on March 10, 2006, and in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the results of operations for North American Forging for the current and prior periods have been reported as discontinued operations. In addition, the assets and liabilities of North American Forging have been reclassified as held for sale in our audited consolidated balance sheet at January 1, 2006 and January 2, 2005.

During the first quarter of 2005, we reorganized and consolidated our operations into two segments:  the Chassis segment and the Powertrain segment. The Chassis segment consists of the former Chassis operations plus a portion of the former Driveline operations, while the Powertrain segment consists of the former Engine operations combined with the remainder of the former Driveline operations. The prior year amounts have been restated to reflect these changes for comparison purposes.

Results of Continuing Operations

2005 Versus 2004

The below results represent activity from our continuing operations for the years ended January 1, 2006 and January 2, 2005.

Net Sales.   Net Sales by segment and in total for the years ended January 1, 2006 and January 2, 2005 were:

	Year Ended			Year Ended
Segment	January 1, 2006			January 2, 2005
	(In thousands)
Chassis Segment		$	1,000,712		$	861,936
Powertrain Segment		886,227			833,235
Total Company		$	1,886,939		$	1,695,171

Net sales for fiscal 2005 were $1,887 million versus $1,695 million for fiscal 2004. The primary driver of the $192 million increase was approximately $192 million in new business resulting from product launches and ramp up of existing programs. The ramp up of several product lines in our Chassis segment contributed approximately $115 million of the revenue enhancement—primarily fueled by the Daimler Chrysler LX and WK platform sales. The Powertrain group contributed approximately $77 million in new

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business from new launches and ramp up of existing production that primarily consists of additions to our powder metal operations and our new facility in Korea. Price increases to reflect the rising costs of raw materials resulted in approximately $48 million increase in sales, but this was offset by approximately $52 million in lost business and price concessions given to our customers. The remaining difference in sales relate to a $4 million benefit in foreign exchange movements. It should be noted the volume additions discussed above were somewhat offset by the 4.3% decrease in North American vehicle production from our three largest customers (DaimlerChrysler, Ford and General Motors).

Gross Profit.   Gross profit by segment and in total for the years ended January 1, 2006 and January 2, 2005 were:

	Year Ended				Year Ended
Segment	January 1, 2006				January 2, 2005
	(In thousands)
Chassis Segment		$	60,213			$	76,678
Powertrain Segment		109,056				108,210
Corporate/centralized resources		(7,456		)		(16,793		)
Total Company		$	161,813			$	168,095

Our gross profit was $162 million or 8.6% of net sales for 2005 compared to $168 million or 9.9% of net sales for 2004. The decrease in margin is explained by several offsetting factors. 2005 gross margin was negatively affected by an increase in fixed asset losses of approximately $13 million, an increase in losses on idle leased assets of $7 million, an increase in depreciation and amortization expense of $7 million, and $8 million increase in lease expense associated with sale leaseback activities. Somewhat offsetting these amounts was a $5 million increase in postretirement medical curtailment gains and elimination of certain plan benefits, a reduction of approximately $1 million in restructuring expense as well as approximately $15 million from the increase in sales discussed above. In addition, we received no margin on the $48 million of additional sales related to the pass through of higher raw material expenses discussed above. The summation of the above adjustments explains the margin movement between 2005 and 2004.

Selling, General and Administrative.   Selling, general and administrative expense was $111 million or 5.9% of net sales for 2005, compared to $127 million or 7.5% of total net sales for 2004. The $16 million decrease from 2004 to 2005 is primarily related to approximately $18 million of expense associated with the independent investigation into certain accounting matters of previously issued financial statements (“Independent Investigation”) completed in 2004. These expenses relate to fees paid to our bank group for waivers, professional fees incurred relating to the Independent Investigation and severance expense for individuals terminated as a result of the Independent Investigation. In addition to this expense, 2005 benefited from approximately a $3 million increase in post retirement medical curtailment gains. Somewhat offsetting these items was an increase of approximately $1 million in restructuring expenses associated with headcount reduction efforts and approximately $1 million in expenses associated with preparation of future SOX Section 404 compliance efforts in 2005.

Depreciation and Amortization.   Depreciation and amortization expense by segment and in total for the years ended January 1, 2006 and January 2, 2005 was:

	Year Ended			Year Ended
Segment	January 1, 2006			January 2, 2005
	(In thousands)
Chassis Segment		$	51,669		$	44,864
Powertrain Segment		51,322			49,106
Corporate/centralized resources		9,192			10,855
Total Company		$	112,183		$	104,825

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The net increase in depreciation and amortization of approximately $7.4 million is principally explained by fact that last several years of capital spending has been in excess of our depreciation expense. Thus, the additional capital spending primarily accounts for the remaining increase in depreciation expense.

Fixed Asset Disposal Losses.   We incurred $15.1 million in fixed asset disposal losses in 2005 as well as a $6.7 million loss on idle leased assets, versus fixed asset disposal losses of $2.3 million in 2004. The 2005 loss represents approximately 3% of total property and equipment on our audited consolidated balance sheet. We completed fixed asset inventories in most of our operations in 2005, and, as a result, identified assets that had become idled or otherwise impaired beyond their current depreciated values. We also identified several assets under longer term lease schedules that were currently idled or impaired. Fixed asset losses are recorded as a component of cost of goods sold in our audited consolidated statement of operations.

Restructuring Charges.   We incurred approximately $3.3 million of restructuring costs in fiscal 2005 compared to $2.5 million incurred in fiscal 2004. The 2005 charge relates principally to two actions taken in the first and fourth quarters. In the first quarter of 2005 we incurred a $1.5 million charge relating to the consolidation of our operating groups from three into two (elimination of Driveline segment and consolidation into the Chassis and Powertrain segments). In the fourth quarter of 2005 we realigned our commercial functions including sales and purchasing by splitting them between our two operating groups: Chassis and Powertrain. As a result of both of the above actions, we eliminated numerous positions and anticipate that we will be able to reduce expenses in the future. Net restructuring activity for fiscal 2005 is as follows:

	Acquisition Related				2002 Additional Severance				2003 Additional Severance				2004 Additional Severance				2005 Additional Severance
	Severance				And Other				And Other				And Other				And Other
	Costs				Exit Costs				Exit Costs				Exit Costs				Exit Costs				Total
	(In thousands)
Balance at January 2, 2005		$	675			$	(13	)		$	2,757			$	445			$	—		$	3,864
Charges to expense		—				13				(240		)		(12		)		3,527			3,288
Cash payments		(12		)		—				(2,436		)		(354		)		(2,529		)	(5,331		)
Other adjustments		(218		)		—				8				(52		)		99			(163		)
Balance at January 1, 2006		$	445			$	—			$	89			$	27			$	1,097		$	1,658

Disposition of Manufacturing Facilities.In connection with our sale of the two aluminum die casting facilities in our Powertrain segment discussed above, we incurred a $7.6 million loss for fiscal 2004. This loss represents a book value of approximately $12 million in fixed assets and deferred financing fees offset by the $4.1 million in cash consideration paid by Lester PDC for the assets. See Note 19, Disposition of Businesses, to the audited consolidated financial statements included herein for additional discussion.

Operating Profit.   Operating profit was $47.6 million for 2005 compared to $31.5 million in 2004. The $16.1 million increase in operating profit is the result of the $6.3 million decrease in gross profit, the $15.5 million decrease in selling general and administrative expenses, the $7.6 million loss on disposition of manufacturing facilities recorded in 2004 and the increase of approximately $0.8 million in restructuring charges year over year. The elements of each of these variations are discussed in greater detail above.

	Year Ended				Year Ended
Segment	January 1, 2006				January 2, 2005
	(In thousands)
Chassis Segment		$	16,537			$	33,513
Powertrain Segment		55,196				46,369
Corporate/centralized resources		(24,176		)		(48,341		)
Total Company		$	47,557			$	31,541

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Adjusted EBITDA.   Management reviews our segment operating results based upon the Adjusted EBITDA definition as discussed in the “Key Indicators of Performance (Non-GAAP Financial Measures)” section. Accordingly, we have separately presented such amounts in the table below. Adjusted EBITDA increased to $161.4 million in 2005 from $145.5 million in 2004. The primary drivers of this increase are explained above in the operating profit discussion and will be further detailed in the segment detail that follows. Additionally, in the “Segment Information” below provides a reconciliation between Adjusted EBITDA and operating profit.

	Year Ended				Year Ended
Segment	January 1, 2006				January 2, 2005
	(In thousands)
Chassis Segment		$	68,206			$	78,377
Powertrain Segment		106,518				103,075
Corporate/centralized resources		(13,359		)		(35,926		)
Total Company		$	161,365			$	145,526
Memo: Fixed asset losses included in the calculation of both operating profit and Adjusted EBITDA		$	15,137			$	2,275
Memo: Loss on idle leased assets included in the calculation of both operating profit and Adjusted EBITDA		$	6,664			$	—
Memo: Other, net (income) expense included in the calculation of Adjusted EBITDA		$	(1,625	)		$	(997	)

Interest Expense.   Interest expense increased by $7.8 million due to higher average debt levels as well as increased borrowing rates in 2005 compared to 2004. This increase is principally due to an approximate $6.1 million increase in interest on our term loan resulting from increases in our borrowing rates, which averaged approximately 1.78% higher on our senior debt facilities in 2005 compared to 2004. The remaining difference is due to an increase in interest arising from higher debt balances resulting from increased usage of our revolving credit facilities as well as the 1.78% average interest rate increase noted above.

Gain on the Maturity of Interest Rate Arrangements.   In the first quarter of 2004, we recorded a $6.6 million non-cash gain on the maturity of certain interest rate arrangements which is reflected as a “non-cash gain on maturity of interest rate arrangements” in our audited consolidated statement of operations. See the “Liquidity and Capital Resources” section below for additional discussion of our capital structure.

Equity Income (Loss) from Affiliates, Net.   Equity income (loss) from affiliates, net decreased from income of $1.5 million in 2004 to a loss of $11.0 million in 2005 due to the operating results of our equity affiliates.

Gain on the Sale of Investments in Saturn and TriMas.   In 2004, we recognized a net gain of $8.0 million on the sale of our interest in Saturn Electronics, which was sold in December 2004, and a gain on the sale of a portion of our investment in TriMas to Masco Corporation which was sold in November 2004. Our equity earnings (loss) from affiliates reflect the change in ownership percentages based upon the date of the sales of the investments. See Note 6, Equity Investments and Receivables in Affiliates, to the audited consolidated financial statements for additional discussion of the sale of both the Saturn and TriMas investment amounts.

Other, Net.   Other, net increased by $4.2 million to a loss of $11.2 million in 2005 compared to a loss of $7.0 million in 2004. This increase is due to an increase in accounts receivable securitization financing costs of $1.6 million in 2005 compared to 2004 due to slightly higher usage and fees on the accounts receivable securitization facility.

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Preferred Stock Dividends.   Preferred stock dividends (including accretion of $1.1 million in 2005 and 2004) were $22.7 million in 2005 as compared to $19.9 million in 2004. This increase is due to the compounded interest on dividends not yet remitted to the shareholders. Preferred stock dividends are included in “other expense, net” on our audited consolidated statement of operations.

Taxes.The provision for income taxes for 2005 was an expense of $22.8 million as compared to a benefit of $35.6 million for 2004. The primary reason for our effective tax rate being different from the statutory rate of 35% is due to recording an increase in the valuation allowance against net deferred tax assets of our domestic operations in the amount of $45.9 million and non-deductible preferred stock dividends of $7.6 million (compared to $6.6 million in 2004). The valuation allowance recorded of $75.6 million is comprised of (i) $45.9 million for continuing operations; (ii) $1.6 million for discontinued operations and (iii) $28.1 million for loss on discontinued operations. Due to uncertainties related to our ability to utilize our deferred tax assets, which consist primarily of net operating losses, it was management’s decision to record an increase in the valuation allowance against our domestic operation’s net deferred tax assets. In the event that deferred tax assets are realizable in the future in excess of the net recorded valuation allowance, an adjustment to the deferred tax asset will increase the tax benefit in the period such determination is made.

A benefit has been recognized on the loss of $172.8 million of discontinued operations in the amount of $32.3 million, which includes a valuation allowance of $28.1 million. The loss is recorded net of tax on the audited consolidated income statement and is not reflected in the income tax rate reconciliation for continuing operations.

A benefit for income taxes of $1.8 million has also been recorded on the $5.1 million loss on the adoption of FIN No. 47, “Accounting for Conditional Asset Retirement Obligations.” This amount of $3.3 million is recorded, net of taxes of $1.8 million, as a cumulative effect of change in accounting principle for the year ended January 1, 2006. See Note 21, Cumulative Effect of Change in Accounting Principle, to our audited consolidated financial statements for additional discussion.

Loss from Discontinued Operations.   The loss from discontinued operations increased $5.9 million from a loss of $2.4 million in 2004 to a loss of $8.3 million in 2005. See Note 20, Discontinued Operations, to our audited consolidated financial statements for additional discussion.

Loss on Discontinued Operations.   We recorded a loss of $140.5 million (net of tax of $32.3 million) related to the pending sale of the Forging Operations in 2005. See Note 20, Discontinued Operations, to our audited consolidated financial statements for additional discussion.

Cumulative Effect of Change in Accounting Principle.   We recorded a loss of $3.3 million (net of tax of $1.8 million) related to the adoption of FIN No. 47, “Accounting for the Conditional Asset Retirement Obligations” in 2005. See Note 21, Cumulative Effect of Change in Accounting Principle, to our audited consolidated financial statements.

Segment Information

Chassis Segment.   Sales for our Chassis segment increased to $1,000.7 million in 2005 as compared to $861.9 million in 2004. The primary driver of the approximate $138.8 million increase in sales is a $115 million increase in volume primarily associated with the LX and WK DaimlerChrylser vehicle platforms. Additionally, sales were increased in 2005 by approximately $25 million relating to the pass through of certain increased costs to procure raw materials and $13 million related to the movement of a facility from our Powertrain group to the Chassis group. Slightly offsetting these amounts was an approximate $14 million decrease in sales relating to lost or declining business and customer price concessions. Operating profit decreased by $17 million primarily due to an approximate $11 million increase in fixed asset losses, a $1 million increase in losses on idle leased assets and a $6.8 million increase in depreciation and

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amortization expense. The remaining increase in operating profit is explained by the increase in sales noted above. Adjusted EBITDA decreased by approximately $10.2 million in 2005 compared to 2004 dueto the aforementioned $11 million increase in fixed asset losses and the $1 million increase in losses on idle leased assets.

	Year Ended			Year Ended
Chassis Segment	January 1, 2006			January 2, 2005
	(In thousands)
Sales		$	1,000,712		$	861,936
Operating profit		$	16,537		$	33,513
Depreciation and amortization		51,669			44,864
Adjusted EBITDA		$	68,206		$	78,377
Memo: Additional amounts included in calculation of both operating profit and Adjusted EBITDA:
Restructuring charges		$	342		$	1,386
Fixed asset (gains) losses		10,989			(1,670		)
Loss on idle leased assets		1,307			—
Foreign currency losses		191			70

Powertrain Segment.   Sales for our Powertrain segment were $886.2 million in 2005 as compared to $833.2 million in 2004. The $53.0 million increase primarily reflects $77 million in additional volume from new product launches primarily in our powder metal operations and our new facility in Korea. In addition 2005 sales were benefited by approximately $23 million in pass through of higher raw material expenses to our customers and approximately $3 million in foreign exchange gains. Somewhat offsetting these increases were approximately $37 million of customer price concessions and lost or declining business, which includes the effect of the 4.3% decline in North American vehicles production from our three largest customers, as well as approximately $13 million relating to the movement of a facility to our Chassis group. Operating profit increased by $8.8 million due primarily to the increased volume noted above, but was offset somewhat by an approximate $1 million increase in fixed asset losses and a $5 million increase in losses on idle leased assets. Adjusted EBITDA increased by approximately $3.4 million in 2005 compared to 2004 due to the aforementioned reasons (offset by the $1 million increase in fixed asset losses and $5 million increase in losses on idle leased assets in 2005).

	Year Ended				Year Ended
Powertrain Segment	January 1, 2006				January 2, 2005
	(In thousands)
Sales		$	886,227			$	833,235
Operating profit		$	55,196			$	46,369
Depreciation and amortization		51,322				49,106
Loss on disposition of manufacturing facilities		$	—			$	7,600
Adjusted EBITDA		$	106,518			$	103,075
Memo: Additional amounts included in calculation of both operating profit and Adjusted EBITDA:
Restructuring charges		$	334			$	241
Fixed asset losses		3,260				2,735
Loss on idle leased assets		5,357				—
Foreign currency (gains) losses		(1,199		)		870

Corporate/Centralized Resources.   Adjusted EBITDA for Corporate/Centralized Resources was a loss of $13.4 million in 2005 versus a loss of $35.9 million in 2004. We incurred approximately $18 million of

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expenses associated with our Independent Investigation in 2004, but 2005 expenses were also benefited by approximately $8 million increase in post retirement curtailment gains and elimination of certain plan benefits. After adjusting for these expenses, corporate expenses increased by approximately $4 million. The increase is primarily explained by approximately $1.8 million of additional restructuring expense and $1 million of incremental expense associated with our SOX 404 implementation efforts. Operating profit increased by $24.2 million due to the factors discussed above, as well as a $1.7 million decline in depreciation and amortization.

	Year Ended				Year Ended
Corporate/Centralized Resources	January 1, 2006				January 2, 2005
	(In thousands)
Operating profit		$	(24,176	)		$	(48,341	)
Depreciation and amortization		9,192				10,855
Stock award expense		—				563
Other, net		1,625				997
Adjusted EBITDA		$	(13,359	)		$	(35,926	)
Memo: Additional amounts included in calculation of both operating profit and Adjusted EBITDA:
Restructuring charges		$	2,612			$	828
Fixed asset losses		888				1,210
Foreign currency gains		619				—
Independent investigation fees		—				17,830

2004 Versus 2003

The below results represent activity from our continuing operations for the years ended January 2, 2005 and December 28, 2003.

Net Sales.   Net Sales by segment and in total for the years ended January 2, 2005 and December 28, 2003 were:

	Year Ended			Year Ended
Segment	January 2, 2005			December 28, 2003
	(In thousands)
Chassis Segment		$	861,936		$	370,052
Powertrain Segment		833,235			806,410
Total Company		$	1,695,171		$	1,176,462

Net sales from continuing operations for fiscal 2004 were $1,695.2 million versus $1,176.5 million for fiscal 2003. The primary driver of the increase in our 2004 sales was our New Castle acquisition, which contributed approximately $446 million for the year. In addition, we had approximately $108 million in additional volume related to new product launches and ramp up of existing programs and a $29 million benefit from foreign exchange movements. There was also a net $5 million benefit to sales as the price increases to our customers related to increased material prices were not entirely offset by our productivity related price discounts offered to our customers. However, these increases were partially offset by approximately $60 million related to the divestiture of two aluminum die casting facilities within our Powertrain segment, a reduction of approximately $6 million related to the divestiture of our Fittings business in May 2003 and a 2.6% decrease in North American vehicle production from our three largest customers (DaimlerChrysler, Ford and General Motors).

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Gross Profit.   Gross profit by segment and in total for the years ended January 2, 2005 and December 28, 2003 were:

	Year Ended				Year Ended
Segment	January 2, 2005				December 28, 2003
	(In thousands)
Chassis Segment		$	76,678			$	51,144
Powertrain Segment		108,210				93,200
Corporate/centralized resources		(16,793		)		(11,648		)
Total Company		$	168,095			$	132,696

Our gross profit was $168.1 million or 9.9% of net sales for 2004 compared to $132.7 million or 11.3% of net sales for 2003. The increase of $35.4 million was primarily due to the $21 million contributed from the New Castle acquisition. In addition to the New Castle acquisition, we also benefited from an approximate $9 million reduction in fixed asset losses, an approximate $13 million increase from our Powertrain operations driven primarily by additional sales volume and a $5 million benefit in foreign exchange fluctuations. Partially offsetting these increases was a $3 million one-time payment made to one of our customers relating to a new business award. This item is explained in the segment discussion that follows. In addition to these factors, we have also experienced net raw material cost increases (net of price increases associated with the recovery of material costs to our customers) across our Chassis and Powertrain operations of approximately $7 million.

Selling, General and Administrative.   Selling, general and administrative expense was $126.5 million or 7.5% of net sales for 2004, compared to $108.9 million or 9.3% of total net sales for 2003. The $17.6 million increase from 2003 to 2004 is primarily related to approximately $18 million of expense associated with the Independent Investigation. These expenses relate to fees paid to our bank group for waivers, professional fees and severance expense for individuals terminated as a result of the Independent Investigation. Selling, general and administrative expenses also benefited by an approximate $1.5 million pension curtailment gain related to the disposition of two manufacturing facilities discussed earlier and an approximate $0.5 million postretirement curtailment gain related to the elimination of benefits for salaried employees not grandfathered by having obtained age 50 with five years of service or 20 years of services as of January 1, 2003. The reduction in selling, general and administrative expenses as a percentage of net sales reflects the benefits from restructuring efforts initiated in 2003 and the fact that New Castle was able to integrate into our operation without significant additional administrative investment.

Depreciation and Amortization.   Depreciation and amortization expense by segment and in total for the years ended January 2, 2005 and December 28, 2003 was:

	Year Ended			Year Ended
Segment	January 2, 2005			December 28, 2003
	(In thousands)
Chassis Segment		$	44,864		$	22,310
Powertrain Segment		49,106			48,028
Corporate/centralized resources		10,855			9,337
Total Company		$	104,825		$	79,675

The net increase in depreciation and amortization of approximately $25.2 million is principally explained by the $18.6 million of depreciation and amortization expense associated with our New Castle acquisition. Additionally, for the past several years capital spending has been in excess of our depreciation expense. Thus, the additional capital spending primarily accounts for the remaining increase in depreciation expense.

Fixed Asset Disposal Losses.   We incurred $2.3 million in fixed asset disposal losses in 2004 compared to fixed asset disposal losses of $8.8 million and a loss on idle leased assets of $2.7 million in 2003. The

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2003 loss represents approximately 2% of total property and equipment on our audited consolidated balance sheet. We initiated fixed asset inventories in select operating units in 2003, and, as a result, identified assets that had become idled or otherwise impaired beyond their current depreciated values. We also identified several assets under longer term lease schedules that were currently idled or impaired. Fixed asset losses are recorded as a component of cost of goods sold in our audited consolidated statement of operations.

Restructuring Charges.   We incurred approximately $2.5 million of restructuring costs in fiscal 2004 compared to $12.7 million incurred in fiscal 2003. Of the 2004 charges, approximately $1.4 million relates to our Chassis segment, where the majority of the charge relates to the closure of a facility in Europe. An additional $0.8 million relates to costs to reduce headcount in our Corporate center with the remaining amounts relating to headcount reductions in our Powertrain segment. Net restructuring activity for fiscal 2004 is as follows:

	Acquisition Related				2002 Additional Severance				2003 Additional Severance				2004 Additional Severance
	Severance				And Other				And Other				And Other
	Costs				Exit Costs				Exit Costs				Exit Costs				Total
	(In thousands)
Balance at December 28, 2003		$	1,089			$	348			$	7,322			$	—		$	8,759
Charges to expense		—				—				—				2,455			2,455
Cash payments		(290		)		(361		)		(4,605		)		(2,010		)	(7,266		)
Other adjustments		(40		)		—				40				—			—
Reversal of unutilized amounts		(84		)		—				—				—			(84		)
Balance at January 2, 2005		$	675			$	(13	)		$	2,757			$	445		$	3,864

Asset Impairment.   In our fiscal 2003 analysis, we recorded a $4.9 million charge in our Powertrain segment associated with two plants with negative operating performance in our fiscal 2003 financial results in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.”  Subsequent to December 28, 2003, these two facilities were sold to an independent third party. The sales price to this third party was used to determine the fair market value of the facilities for the SFAS No. 144 impairment analysis.

Disposition of Manufacturing Facilities.   In connection with our sale of the two aluminum die casting facilities in our Powertrain segment discussed above, we incurred a $7.6 million loss for fiscal 2004. This loss represents a book value of approximately $12 million in fixed assets and deferred financing fees offset by the $4.1 million in cash consideration paid by Lester PDC for the assets. See Note 19, Disposition of Businesses to the audited consolidated financial statements for additional discussion.

Operating Profit.   Operating profit was $31.5 million for 2004 compared to $6.2 million in 2003. The $25.3 million increase in operating profit is the result of the $35.4 million increase in gross profit, the $17.6 million increase in selling, general and administrative expenses, the net change between the $7.6 million loss on disposition of manufacturing facilities recorded in 2004 and the $4.9 million asset impairment charge taken in 2003 and the reduction of approximately $10.3 million in restructuring charges year over year. The elements of each of these variations are discussed in greater detail above.

	Year Ended				Year Ended
Segment	January 2, 2005				December 28, 2003
	(In thousands)
Chassis Segment		$	33,513			$	19,254
Powertrain Segment		46,369				26,639
Corporate/centralized resources		(48,341		)		(39,678		)
Total Company		$	31,541			$	6,215

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Adjusted EBITDA.   Management reviews our segment operating results based upon the Adjusted EBITDA definition as discussed in the “Key Indicators of Performance (Non-GAAP Financial Measures)” section. Accordingly, we have separately presented such amounts in the table below. Adjusted EBITDA increased to $145.5 million in 2004 from $93.2 million in 2003. The primary drivers of this increase are explained above in the operating profit discussion and will be further detailed in the segment detail that follows. Additionally, in the “Segment Information” below provides a reconciliation between Adjusted EBITDA and operating profit.

	Year Ended				Year Ended
Segment	January 2, 2005				December 28, 2003
	(In thousands)
Chassis Segment		$	78,377			$	42,004
Powertrain Segment		103,075				79,535
Corporate/centralized resources		(35,926		)		(28,303		)
Total Company		$	145,526			$	93,236
Memo: Fixed asset losses included in the calculation of both operating profit and Adjusted EBITDA		$	2,275			$	8,795
Memo: Loss on idle leased assets included in the calculation of both operating profit and Adjusted EBITDA		—				2,675
Other, net (income) expense included in the calculation of Adjusted EBITDA		$	(997	)		$	610

Interest Expense.   Interest expense increased by $6.5 million due to higher average debt levels in 2004 compared to 2003. This increase is principally due to $3.2 million in interest arising from the 10% senior subordinated notes from our New Castle acquisition, the $13.2 million in interest arising from our 10% senior notes issued in October 2003 and approximately $7 million in interest arising from higher debt balances resulting from increased usage of our revolving credit and slightly increased borrowing rates on our senior debt facilities. These increases were offset by a decrease of $4.0 million in cash interest expense and $7.2 million of interest accretion related to the redemption of the $98.5 million outstanding balance on the 4.5% subordinated debentures that were paid off in December 2003 and $5.4 million in interest expense related to the maturity of our interest rate arrangements in February 2004.

Gain on the Maturity of Interest Rate Arrangements.   In the first quarter of 2004, we recorded a $6.6 million non-cash gain on the maturity of these interest rate arrangements which is reflected as a “non-cash gain on maturity of interest rate arrangements” in our audited consolidated statement of operations. See the “Liquidity and Capital Resources” section below for additional discussion of our capital structure.

Equity Income (Loss) from Affiliates, Net.   Equity income (loss) from affiliates, net increased from a loss of $20.7 million in 2003 to income of $1.5 million in 2004 due to the operating results of our equity affiliates.

Gain on the Sale of Investments in Saturn and TriMas.   In addition to the equity earnings, we recognized a net gain of $8.0 million on the sale of our interest in Saturn Electronics, which was sold in December 2004, and a gain on the sale of a portion of our investment in TriMas to Masco Corporation which was sold in November 2004. Our equity earnings (loss) from affiliates reflect the change in ownership percentages based upon the date of the sales of the investments. See Note 6, Equity Investments and Receivables from Affiliates to the audited consolidated financial statements for additional discussion of the sale of both the Saturn and TriMas investment amounts.

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Other, Net.   Other, net increased by $0.1 million to a loss of $7.0 million in 2004 compared to a loss of $7.1 million in 2003. In conjunction with our 2004 credit facility amendment, $1.2 million of the unamortized balance related to the 2003 credit facility amendment was expensed in 2004. This increase in Other, net was partially offset by a gain on the disposition of a joint venture in Korea during the second quarter of 2004.

Preferred Stock Dividends.   Preferred stock dividends (including accretion of $1.1 million in 2004) were $19.9 million in 2004 as compared to $9.3 million in 2003. This increase is due to the dividends on the $64.5 million of preferred stock issued in connection with the New Castle acquisition and compounded interest on preexisting preferred stock. Due to our adoption of SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” as of the first quarter of 2004, preferred stock dividends are included in “other expense, net” on our audited consolidated statement of operations beginning in 2004.

Taxes.The provision for income taxes for 2004 was a benefit of $35.6 million as compared to a benefit of $13.1 million for 2003. Our effective tax rate for 2004 was a benefit of 58% compared to a benefit of 14% for 2003. The increase in the effective tax rate to 58% results mostly from the inclusion of federal income tax refunds received in excess of prior recorded amounts, benefit recorded for a change in accrual for previously recorded tax contingencies and the taxation of income in foreign jurisdictions at rates lower than the U.S statutory rate.

Income (Loss) from Discontinued Operations.   The loss from discontinued operations increased $10.8 million from income in 2003 of $8.4 million to a loss of $2.4 million in 2004.

Segment Information

Chassis Segment.   Sales for our Chassis segment increased to $861.9 million in 2004 as compared to $370.1 million in 2003. The primary drivers of the approximate $492 million increase in sales is a $446 million contribution from the New Castle acquisition, additional volume from new product launches of approximately $35 million, an approximate $16 million benefit in foreign exchange fluctuations, and approximately $3 million in price increases (net of material cost recovery and productivity related price concessions to our customers) incurred in fiscal 2004 offset by a $6 million decrease due to the divestiture of our Fittings business in May 2003.

	Year Ended				Year Ended
Chassis Segment	January 2, 2005				December 28, 2003
	(In thousands)
Sales		$	861,936			$	370,052
Operating profit		$	33,513			$	19,254
Depreciation and amortization		44,864				22,310
Legacy stock award expense		—				440
Adjusted EBITDA		$	78,377			$	42,004
Memo: Additional amounts included in calculation of both operating profit and Adjusted EBITDA:
Restructuring charges		$	1,387			$	2,536
Fixed asset (gains) losses		(1,670		)		1,889
Loss on idle leased assets		—				225
Foreign currency losses		70				260

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Operating income increased by approximately $14.3 million due primarily to the $21 million contribution from the New Castle acquisition (results are net of approximately $10 million in operating leases used to finance the acquisition), an increase in fixed asset gains over the prior year by approximately $3.6 million and a reduction in restructuring charges from 2003 of approximately $1.1 million. In addition, other items reducing operating profit included an increase of approximately $4.0 million in depreciation and amortization relating to the Chassis entities other than New Castle, approximately $1.5 million from the divestiture of our Fittings operation, approximately $2 million in net raw material price increases, approximately $2 million in customer pricing concessions and approximately $1.7 million in additional lease expense associated with new sale leaseback transactions entered into in 2004. Adjusted EBITDA increased by approximately $36.4 million in 2004 compared to 2003 due to the aforementioned explanations.

Powertrain Segment.   Sales for our Powertrain segment were $833.2 million in 2004 as compared to $806.4 million in 2003. The $26.8 million increase primarily reflects $73 million in additional volume from new product launches and an approximate $13 million benefit related to foreign exchange movements. These increases were offset by approximately $60 million related to the divestiture of two aluminum die casting facilities. Operating profit increased primarily due to $15 million resulting from increased sales volume on new programs, a decrease in fixed asset losses of approximately $4.7 million in 2004 versus 2003, a $6.6 million improvement from the disposition of two aluminum die casting manufacturing facilities, a reduction in restructuring charges from 2003 of approximately $4.1 million and an approximate $1.3 million benefit related to foreign exchange movements. However, our Powertrain segment’s operating margins were negatively impacted by an increase in asset impairments recognized of $2.7 million, approximately $5 million in raw material cost increases (net of price increases associated with the recovery of material costs to our customers), a $3 million one-time payment made to one of our customers relating to new business award and incremental depreciation and amortization expense of $1.1 million. Adjusted EBITDA increased by approximately $23.5 million in 2004 compared to 2003 due to the aforementioned reasons.

	Year Ended			Year Ended
Powertrain Segment	January 2, 2005			December 28, 2003
	(In thousands)
Sales		$	833,235		$	806,410
Operating profit		$	46,369		$	26,639
Depreciation and amortization		49,106			48,028
Asset impairment		—			4,868
Loss on disposition of manufacturing facilities		7,600			—
Adjusted EBITDA		$	103,075		$	79,535
Memo: Additional amounts included in calculation of both operating profit and Adjusted EBITDA:
Restructuring charges		$	241		$	4,377
Fixed asset losses		2,735			7,409
Loss on idle leased assets		—			2,450
Foreign currency (gains) losses		870			(1,270		)

Corporate/Centralized Resources.   Adjusted EBITDA for Corporate/Centralized Resources was a loss of $35.9 million in 2004 versus a loss of $28.3 million in 2003. We incurred approximately $18 million of expenses associated with our Independent Investigation. After considering these expenses, corporate expenses decreased by approximately $10 million. The reduction is principally explained by a $5.0 million reduction in restructuring charges in 2004, pension and postretirement curtailment gains of approximately $2.0 million in 2004 and discussed further in Note 26, Employee Benefit Plans, a decrease in fixed asset losses of $1 million in 2004 and a decrease of $1.6 million in Other, Net. The remaining decrease in

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Corporate costs primarily relates to a reduction in overall expenses in part related to restructuring eventsinitiated in 2003. Operating profit decreased by $8.7 million, which is also explained in the factors described above and a $1.5 million increase in depreciation and amortization and a $2.1 million decrease in stock award expense.

	Year Ended				Year Ended
Corporate/Centralized Resources	January 2, 2005				December 28, 2003
	(In thousands)
Operating profit		$	(48,341	)		$	(39,678	)
Depreciation and amortization		10,855				9,337
Legacy stock award expense		563				2,648
Other, net		997				(610		)
Adjusted EBITDA		$	(35,926	)		$	(28,303	)
Memo: Additional amounts included in calculation of both operating profit and Adjusted EBITDA:
Restructuring charges		$	828			$	5,830
Fixed asset losses		1,210				2,172
Independent investigation fees		17,830				—

Liquidity and Capital Resources

Overview.   Our objective is to appropriately finance our business through a mix of long-term and short-term debt and to ensure that we have adequate access to liquidity. Our principal sources of liquidity are cash flow from operations, our revolving credit facility and our accounts receivable securitization facility and factoring agreements. As of January 1, 2006, we have unutilized capacity under our revolving credit facility that may be utilized for acquisitions, investments or capital expenditure needs. Our cash flows during the year are impacted by the volume and timing of vehicle production, which includes a shutdown by our North American customers for approximately two weeks in July and one week in December and reduced production in July and August for certain European customers. Management believes cash flow from operations and debt financing and refinancing from our accounts receivable securitization program will provide us with adequate sources of liquidity for the foreseeable future.

To facilitate the collection of funds from operating activities, we have sold receivables under our accounts receivable facility and have entered into accelerated payment collection programs with certain customers. Although the majority of the accelerated payment collection programs were discontinued as of or prior to January 2, 2005, at January 1, 2006 collection of approximately $20.3 million of accounts receivable was accelerated under the remaining programs. In addition to the above programs, we continue to collect approximately $12 million per month on an accelerated basis as a result of favorable payment terms that we negotiated with one of our customers, through an agreement that expires December 31, 2006. These payments are received on average 18 days after shipment of product to our customer. While the impact of the discontinuance of the accelerated collection programs may be partially offset by a greater utilization of our accounts receivable securitization facility, we continue to examine other alternative programs in the marketplace, as well as enhanced payment terms directly from our customers.

Our capital planning process is focused on ensuring that we use our cash flow generated from our operations in ways that enhance the value of our company. Historically, we have used our cash for a mix of activities focused on revenue growth, cost reduction and strengthening the balance sheet. In 2005, we used our cash primarily to service our debt obligations and to fund our capital expenditure requirements.

Liquidity.   At January 1, 2006 we had approximately $115 million of undrawn commitments, which consisted of $71.6 million and $43.4 million from our revolving credit facility and accounts receivable securitization facility, respectively. Availability under our accounts receivable securitization facility agreement at such date is based on a day earlier receivables report so it should be noted that, as is the case

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at each quarter end, receivables paid on the last day of the quarter will reduce availability on the next business day. The amount of this reduction was $28.7 million as of January 3, 2006. It should also be noted that January and July are typically periods in which the Company seasonally experiences lower availability. In addition, we had $3.7 million in cash on our audited consolidated balance sheet. Approximately $59.6 million and $83.4 million were outstanding on our revolving credit facility and accounts receivable securitization facility, respectively, at January 1, 2006. Our access to these two facilities is limited by certain covenant restrictions (see “Debt, Capitalization and Available Financing Sources” for further discussion on our debt covenants). At January 1, 2006, we were limited by these covenant restrictions and could thus draw only $70.4 million from these facilities of the $115 million total available in undrawn commitments.

At January 1, 2006, our maximum debt capacity (including amounts drawn under our accounts receivable securitization program) is computed by multiplying our leverage ratio covenant of 4.75 by our bank agreement defined EBITDA, or approximately $215.4 million. Thus, our total debt capacity at January 1, 2006 is approximately $1,023.1 million. Our actual debt plus the accounts receivable securitization at January 1, 2005 approximated $952.7 million, or approximately $70.4 million less than our total capacity. Thus, as discussed above, as of January 1, 2006, we had access to only $70.4 million of the total $115 million in undrawn commitments discussed above that we could have drawn from our revolving credit and accounts receivable securitization facilities.

It should be noted that our liquidity at quarter and year end tends to reflect peak availability due to our natural cash collection cycle. Liquidity in the middle of the month tends to represent our lowest level. Over the last fiscal year, our trough liquidity has generally ranged between $15 million and $60 million. See “Liquidity Arrangements,” “Leverage; Ability to Service Debt” and “Substantial Restrictions and Covenants” in Item 1A, Risk Factors. However, we have taken actions that have improved our trough liquidity in early 2006:  the sale of our North American Forging business, the net $25 million increase of our term loan facility and the February 3, 2006 amended and restated credit agreement. There can be no assurance that our liquidity will actually improve in the coming year as it may be adversely impacted by other factors, many of which are beyond our control, including those referred to below and elsewhere in this Form 10-K.

On February 3, 2006, we entered into an amended and restated credit agreement in which the covenant restrictions discussed above were significantly relaxed. The amendment and restatement affects the following principal changes, as well as updating and technical changes, to the existing credit agreement: (a) it adds an additional $50 million of term loans, of which $25 million was used to prepay the preexisting term loan; (b) it adjusts certain covenants to take account for the North American Forging divestiture and to provide the Company with additional covenant flexibility; and (c) it increases pricing on the existing revolving credit facility. We are required to use the proceeds from the divestiture of North American Forging to prepay (a) $25 million of the preexisting term loan and (b) to repurchase at least $45 million of assets currently under operating lease arrangements. At the time of this filing, we have repurchased approximately $48 million of assets under these operating leases with the proceeds from the North American Forging sale. Excess proceeds can be used to repurchase additional assets under operating lease arrangements and to increase our liquidity through repayment of outstanding obligations under our revolving credit and accounts receivable securitization facilities. In connection with the repurchase of these leased assets, the Company will complete a valuation to determine the fair value of the assets purchased. Based upon the results of this valuation, the Company expects to incur a loss associated with the buyback of the leased assets. On February 3, 2006, pursuant to the terms of the amended and restated credit agreement, we borrowed $50 million of additional term loans. All term loans mature on December 31, 2009. Based on the new covenants, the changes and modifications discussed above, the net $25 million additional term loan and the full collection of the outstanding accounts receivable from our North American Forging business, at January 1, 2006 our undrawn commitments would have increased to approximately $183 million. Thus, our available liquidity at this date would have approximated $183

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million, comprised of $143 million under our revolving credit facility and $40 million under our accounts receivable securitization facility. In addition to the above assumptions, this calculation assumes that the excess proceeds of the North American Forging sale and the term loan facility are used to pay down our revolving credit facility.

However, it should be noted that our working capital tends to be at its seasonal lowest point at the end of our fiscal year, which correspondingly means our liquidity is highest at year end assuming all other factors remain the same. Additionally, our accounts receivable securitization facility availability is based on several factors including the credit ratings of our customer base, the customer concentration levels in the accounts receivable securitization facility and the overall collection performance of our accounts. For example, the recent bankruptcy of Dana Corporation resulted in an immediate $6.9 million reduction in our accounts receivable securitization availability. Due to the general industry environment, the availability of this program has decreased in the first part of 2006 and could be expected to decrease further if the industry environment does not improve.

We have entered into agreements with international invoice factoring companies to sell customer accounts receivable of Metaldyne foreign locations in France, Germany, Spain, Czech Republic, United Kingdom and Mexico on a non-recourse basis. As of January 1, 2006, we had available approximately $61.7 million from these commitments, and approximately $50.4 million of receivables were sold under these programs.

TriMas Common Stock.   On November 12, 2004, we sold approximately 924,000 shares of TriMas stock to Masco Corporation for $23 per share, or a total of $21.3 million. The gain recognized on the sale of this stock to Masco was $2.9 million. The Company continues to own 4.8 million shares of TriMas stock, or approximately 24% of the total outstanding shares of TriMas. Masco Corporation owns approximately 6% of the Company’s outstanding shares.

Saturn Common Stock.   On December 22, 2004, we sold our 36% common equity investment in Saturn Electronics & Engineering, Inc. (“Saturn”) for gross consideration totaling $15 million. Pursuant to modified agreements with former holders of the Company’s common stock as of November 28, 2000, such holders received a portion of the net proceeds from this disposition of Saturn. Total consideration paid to the former stock holders was $2.4 million. The gain recognized on the disposition of Saturn was $5.1 million.

Debt, Capitalization and Available Financing Sources.   On December 20, 2005, we entered into a senior secured loan facility. This senior secured loan facility provides for term loans totaling $20 million, of which $10.5 million was drawn as of January 1, 2006 and the remainder of which is available until June 30, 2006 to finance in part the purchase of additional specified machinery and equipment. A commitment fee of 7.5% per annum on the unused portion of this loan will accrue through June 30, 2006. The senior secured loan facility matures December 31, 2009.

In December 2004, we obtained an amendment of our credit facility to, among other things, modify certain negative covenants. Under this amendment, the applicable interest rate spreads on our term loan obligations increased from 4.25% to 4.50% over the current London Interbank Offered Rate (“LIBOR”) and our leverage covenant was modified to be less restrictive. A commitment fee of 1% per annum is assessed on the unused portion of the revolving credit facility. Subsequent to the year ended January 1, 2006, on February 3, 2006, we entered into an amended and restated credit agreement as described in Note 31, Subsequent Events, to our audited consolidated financial statements. The amended and restated credit agreement provides us with more favorable terms and additional funding on our revolving credit and term loan facilities.

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On December 31, 2003, we issued $31.7 million of 10% senior subordinated notes due 2014 to DaimlerChrysler. These notes have a carrying amount of $27.5 million as of January 1, 2006. The notes were issued as part of the financing of the New Castle acquisition.

On October 20, 2003, we issued $150 million of 10% senior notes due 2013 in a private placement under Rule 144A and Regulation S of the Securities Act of 1933, as amended. As these notes were not registered within 210 days from the closing date, the annual interest rate increased by 1% until the registration statement was declared effective in November 2005. The net proceeds from this offering were used to redeem the balance of the $98.5 million aggregate principal amount of the outstanding 4.5% subordinated debentures that were due in December 2003, and to repay $46.6 million of term loan debt under our credit facility. As a result of this term loan repayment, our semi-annual principal installments on the term loan facility were decreased to $0.4 million with the remaining outstanding balance due December 31, 2009. In connection with this financing, we agreed with our banks to decrease our revolver facility from $250 million to $200 million.

In July 2003, we obtained an amendment to our credit facility to, among other things, permit the $150 million offering of 10% senior subordinated notes and the use of proceeds therefrom, modify certain negative and financial covenants and permit us to complete the acquisition of DaimlerChrysler’s common and preferred interest in the New Castle joint venture under certain conditions. Under this amendment, the applicable interest rate spreads on our term loan obligations increased from 2.75% to 4.25% over the current LIBOR.

The credit facility includes a term loan with $350.2 million outstanding and a revolving credit facility with a principal commitment of $200 million (prior to our October 2003 senior note offering, this facility was $250 million). The revolving credit facility matures on May 28, 2007 and the term loan facility matures on December 31, 2009. The obligations under the credit facility are collateralized by substantially all of our assets and of the assets of substantially all of our domestic subsidiaries and are guaranteed by substantially all of our domestic subsidiaries on a joint and several basis.

The following summarizes our outstanding debt as of January 1, 2006 and January 2, 2005:

	January 1, 2006				January 2, 2005
	(In thousands)
Senior credit facilities:
Term loan (8.58% variable interest at January 1, 2006)		$	350,193			$	351,077
Revolving credit facility (8.5% to 10.5% interest at January 1, 2006)		59,605				63,542
Total senior credit facility		409,798				414,619
Senior secured term loan credit facility, with interest payable quarterly, due 2009 (13.75% variable interest at January 1, 2006)		10,500				—-
11% senior subordinated notes, with interest payable semi-annually, due 2012		250,000				250,000
10% senior notes, with interest payable semi-annually, due 2013		150,000				150,000
10% senior subordinated notes, with interest payable semi-annually, due 2014 (face value $31.7 million)		27,469				27,179
Other debt (various interest rates; includes capital lease obligations)		9,612				18,102
Total		$	857,379			$	859,900
Less current maturities		(6,640		)		(12,047		)
Long-term debt		$	850,739			$	847,853

At January 1, 2006, we were contingently liable for standby letters of credit totaling $68.8 million issued on our behalf by financial institutions. These letters of credit are used for a variety of purposes, including meeting requirements to self-insure workers’ compensation claims.

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Our senior credit facility contains covenants and requirements affecting us and our subsidiaries, including a financial covenant requirement for an Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”) to cash interest expense coverage ratio to exceed 2.30 through April 2, 2006, 2.50 through July 2, 2006, 2.65 through October 1, 2006 and increasing to 2.75 through December 31, 2006; and a debt to EBTIDA ratio not to exceed 4.75 through April 2, 2006, decreasing to 4.50, 4.25 and 4.00 for the quarters ending July 2, 2006, October 1, 2006 and December 31, 2006, respectively. On February 3, 2006, we entered into an amended and restated credit agreement in which the covenant restrictions were significantly relaxed. The amended EBITDA to cash interest expense coverage ratio is now to exceed 2.20 through the year ended January 1, 2006 and 1.75 through the year ending December 31, 2006; and the amended debt to EBITDA leverage ratio is not to exceed 4.75 through the year ended January 1, 2006 and 5.25 through the year ending December 31, 2006. We were in compliance with the new financial covenants throughout the year. Based on our anticipated EBITDA performance, we anticipate being in covenant compliance over the next four quarters.

New Castle Acquisition.   We successfully completed our purchase of DaimlerChrysler’s common and preferred interests in NC-M Chassis Systems, LLC (“New Castle”) on December 31, 2003. We financed this acquisition with $118.8 million in cash, $31.7 million in aggregate principal amount of a new issue of 10% senior subordinated notes (fair value of $26.9 million as of December 31, 2003) and $64.5 million in aggregate liquidation preference Series A-1 preferred stock (fair value of $55.3 million as of December 31, 2003). The cash portion of the consideration was funded in part with the net cash proceeds of approximately $65 million from the sale to and subsequent leaseback of certain equipment from General Electric Capital Corporation, and the remainder was funded through the Company’s revolving credit facility.

Interest Rate Hedging Arrangements.   All of our interest rate protection arrangements matured in February 2004, and as a result of their maturity, a cumulative non-cash pre-tax gain of $6.6 million was recorded and is reflected as a gain on maturity of interest rate arrangements in our audited consolidated statement of operations for the year ended January 2, 2005. Prior to the expiration of these agreements, we recognized additional interest expense of $1.1 million in 2004. Prior to their maturity, $6.6 million was included in accumulated other comprehensive income related to these arrangements.

Foreign Currency Risk.We are subject to the risk of changes in foreign currency exchange rates due to our global operations. We manufacture and sell our products primarily in North America and Europe. As a result, our financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets in which we manufacture and distribute our products. Our operating results are primarily exposed to changes in exchange rates between the U.S. dollar and European currencies.

As currency exchange rates change, translation of the statements of operations of our international businesses into U.S. dollars affects year-over-year comparability of operating results. We do not hedge operating translation risks because cash flows from international operations are generally reinvested locally. Changes in foreign currency exchange rates are generally reported as a component of stockholders’ equity for our foreign subsidiaries reporting in local currencies and as a component of income for our foreign subsidiaries using the U.S. dollar as the functional currency. The portion of our accumulated other comprehensive income relating to cumulative translation adjustments was $(44) million in 2005 and $33 million in 2004, due to cumulative translation adjustments resulting primarily from changes in the U.S. dollar to the Euro.

As of January 1, 2006 and January 2, 2005, our net current assets (defined as total assets less total liabilities) subject to foreign currency translation risk were $987.4 million and $995.3 million, respectively. The potential decrease in net total assets from a hypothetical 10% adverse change in quoted foreign currency exchange rates would be $98.7 million and $99.5 million, respectively. The sensitivity analysis

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presented assumes a parallel shift in foreign currency exchange rates. Exchange rates rarely move in the same direction. This assumption may overstate the impact of changing exchange rates on individual assets and liabilities denominated in a foreign currency.

Interest Risk.   We generally manage our risks associated with interest rate movements through the use of a combination of variable and fixed rate debt. Approximately $423.1 million of our debt was variable rate debt at January 1, 2006. A hypothetical 25 bps adverse movement in the interest rate on variable rate debt would affect earnings on an annual basis by approximately $1.1 million. Approximately $438.6 million of our debt was fixed rate debt at January 1, 2006. A hypothetical 25 bps adverse movement in interest rates would result in a loss in the fair value of this fixed rate debt of approximately $7.9 million.

Off-Balance Sheet Arrangements

Our Receivables Facility.   On April 29, 2005, the Company and our newly formed wholly owned special purpose subsidiary, MRFC, Inc. (“MRFC”), entered into a new accounts receivable financing facility with General Electric Capital Corporation (“GECC”). Concurrent with entering into the new facility, our former accounts receivable financing facility with JPMorgan Chase Bank, N.A. was terminated. On July 8, 2005, the Company and MRFC amended and restated our existing accounts receivable financing facility with GECC. The terms of the facility that were amended and restated include (a) extending the maturity date to July 8, 2010, (b) favorable adjustments to certain default triggers, (c) increased program availability and (d) an increase to the applicable margin on LIBOR based drawings from 1.75% to 2.25%. The amendment and restatement also addressed various technical matters. The amended and restated facility represents the completion of the final step of the multi-step receivables facility modifications initiated on April 29, 2005.

We have entered into an arrangement to sell, on an ongoing basis, the trade accounts receivable of substantially all domestic business operations to MRFC. MRFC from time to time may sell an undivided fractional ownership interest in the pool of receivables up to approximately $175 million to a third party multi-seller receivables funding company. The net proceeds of sale are less than the face amount of accounts receivable sold by an amount that approximates the purchaser’s financing costs, which amounted to a total of $6.5 million and $2.9 million for the years ended January 1, 2006 and January 2, 2005, respectively, and is included in other expense, net in the Company’s audited consolidated statement of operations. Prior to April 29, 2005, the Company’s trade accounts receivable of substantially all domestic business operations were sold in connection with the former accounts receivable financing facility with JPMorgan Chase Bank, N.A. At January 1, 2006, the Company’s funding under the facility was $83.4 million with availability based upon qualified receivables of $126.8 million and $43.4 million available but not utilized at January 1, 2006. The interest rate was based on LIBOR plus 2.25% at January 1, 2006. In addition, we are required to pay a fee of 0.5% on the unused portion of the facility.

We have entered into agreements with international invoice factoring companies to sell customer accounts receivable of Metaldyne foreign locations in France, Germany, Spain, Czech Republic, United Kingdom and Mexico on a non-recourse basis. As of January 1, 2006 and January 2, 2005, we had available approximately $61.7 million and $63.5 million from these commitments, and approximately $50.4 million and $53.1 million of receivables were sold under these programs, respectively. We pay a commission to the factoring company plus interest from the date the receivables are sold to the date of customer payment. Commission expense related to these agreements is recorded in other expense, net on the Company’s audited consolidated statement of operations.

Certain Other Commitments.   We have other cash commitments not relating to debt as well, such as those in respect of leases and redeemable preferred stock.

Sale-Leaseback Arrangements.   We have engaged in a number of sale-leaseback transactions, including three transactions during 2005. In February 2005, we entered into a sale-leaseback transaction

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for machinery and equipment with a third party lessor, and received $11.4 million cash as part of this transaction. We entered into two additional sale-leaseback transactions for machinery and equipment with third party lessor in April 2005 and September 2005, and received $4.9 million and $5.2 million cash as part of these transactions, respectively. Each of these sale-leasebacks is accounted for as an operating lease with combined annual lease expense of approximately $4 million.

In December 2004, we entered into two sale-leaseback transactions for machinery and equipment with third party lessors. We received $11.8 million and $7.2 million cash as part of these two transactions, of which $7.3 million related to the Forging Operations. In June 2004, we entered into a sale-leaseback transaction for machinery and equipment whereby we received $7.5 million cash as part of this transaction. Each of these three sale-leasebacks is accounted for as an operating lease with combined annual lease expense of approximately $5 million. On December 31, 2003, we entered into a sale-leaseback with proceeds of approximately $4.5 million. This lease was accounted for as a capital lease and the present value of lease payments is therefore reflected in our debt balance. We also entered into a $65 million sale-leaseback on December 31, 2003, as part of our financing related to the purchase of New Castle. This lease for New Castle equipment is accounted for as an operating lease and the annual lease expense is approximately $10 million.

In March 2003, we entered into a sale-leaseback transaction with respect to certain manufacturing equipment for proceeds of approximately $8.5 million, of which $1.4 million related to the Forging Operations. In October 2003, we entered into a sale-leaseback transaction for machinery and equipment for additional proceeds of $8.5 million, of which $0.5 million related to the Forging Operations. In July 2003, we entered into an approximate $10 million operating lease associated with the acquisition of our Greensboro, North Carolina facility. The proceeds from this lease were used to finance a portion of the acquisition of this facility from Dana Corporation. All of these leases are accounted for as operating leases. The sale-leasebacks initiated in 2003 contribute an additional $3.8 million in annualized lease expense.

We continue to rely on sale-leaseback and other leasing opportunities as a source of cash to finance capital expenditures and for debt reduction and other uses. Our 2006 capital and operating lease commitments are approximately $59 million. (see “Contractual Cash Obligations” for a summary of our future commitments).

Redeemable Preferred Stock.   We have outstanding $180.9 million in aggregate liquidation value ($110.0 million aggregate carrying value as of January 1, 2006) of Series A, B and A-1 redeemable preferred stock in respect of which we have the option to pay cash dividends, subject to the terms of our debt instruments, at rates of 13%, 11.5% and 11%, respectively, per annum initially and to effect a mandatory redemption in December 2012, June 2013 and December 2013, respectively. The Series A cash dividends increase from 13% to 15% for periods after December 31, 2005. For periods that we do not pay cash dividends on the Series A and Series A-1 preferred stock, an additional 2% per annum of dividends is accrued. No cash dividends were paid in 2005, 2004 or 2003. At January 1, 2006, there were unpaid accrued dividends of $61.9 million, resulting in redeemable preferred stock of $171.9 million. In the event of a change in control or certain qualified equity offerings, we may be required to make an offer to repurchase our outstanding preferred stock. We may not be permitted to do so and may lack the financial resources to satisfy these obligations. Consequently, upon these events, it may become necessary to recapitalize our company or secure consents.

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TriMas Receivables.   We have recorded approximately $8.6 million as of January 1, 2006, consisting of receivables related to certain amounts from TriMas, $4.8 million of which is recorded in equity investments and receivables in affiliates in the Company’s audited consolidated balance sheet as of January 1, 2006. These amounts include TriMas’ obligations resulting from tax net operating losses created prior to the disposition of TriMas of approximately $2.2 million, pension obligations of approximately $4.2 million, and reimbursement due for cash payments made related to postretirement obligations and various invoices paid on TriMas’ behalf of approximately $1.4 million.

In 2005, TriMas agreed to indemnify us for the cost of certain postretirement benefit plans for retired employees of former operations attributed to TriMas. As a result, as of January 1, 2006, we recorded a $1.0 million receivable due from TriMas as reimbursement for amounts previously paid, a reduction of $4.0 million in our long-term liability for amounts expected to be paid in future periods, a $4.7 million reduction in equity investments in and receivables from affiliates and a reduction in cost of sales of $0.2 million.

Credit Rating.   Metaldyne is rated by Standard & Poor’s and Moody’s Ratings. As of January 1, 2006, we have long-term ratings from Standard & Poor’s and Moody’s of B/B3 on our senior credit facility, CCC+/Caa1 on our 10% senior notes due 2013 and CCC+/Caa2 on our 11% senior subordinated notes due 2012, respectively. Our goal is to decrease our total leverage and thus improve our credit ratings. In the event of a credit downgrade, we believe we would continue to have access to additional credit sources. However, our borrowing costs would further increase, our ability to access certain financial markets may become limited, the perception of the Company in the view of our customers, suppliers and security holders may worsen and as a result, we may be adversely affected.

Capital Expenditures.   Our capital expenditure program promotes our growth-oriented business strategy by investing in our core areas, where efficiencies and profitability can be enhanced. Capital expenditures for our continuing operations by product segment for the periods presented were:

	2005		2004		2003
	(In thousands)
Capital Expenditures:
Chassis	$	42,029	$	52,508	$	42,398
Powertrain	69,070		86,228		59,263
Corporate	648		1,538		14,620
Total	$	111,747	$	140,274	$	116,281

We anticipate that our capital expenditure requirements for fiscal 2006 will be approximately $70 million. The significant decline in expenditures is primarily driven by the completion of a several year initiative to expand our global reach across numerous technologies and product lines. Over this period, we believe we have invested significantly more capital than our competitors. In 2006, we anticipate that our investment will be lower than in recent years as many of our global initiatives have been completed. Further, we expect to benefit from many of the large expenditures made in 2003, 2004 and 2005 over the next several years. The $70 million does not include the required prepayment of at least $45 million of operating leases with the North American Forging divestiture proceeds. Our amended and restated credit agreement contains limitations on capital expenditure funding which affects the level of capital expenditures beginning in 2006.

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Contractual Cash Obligations

Under various agreements, we are obligated to make future cash payments in fixed amounts. These include payments under our long-term debt agreements, rent payments required under lease agreements and various severance obligations undertaken. The following table summarizes our fixed cash obligations over various future periods as of January 1, 2006.

		Payments Due by Periods
					Less Than						1-3				3-5			After
		Total			One Year						Years				Years			5 Years
		(In millions)
Long-term debt		$		522			$		29		$		117		$		376			$		—
Senior secured term loan credit facility		16					1				3				12					—
11% Senior subordinated notes due 2012		428					28				55				55					290
10% Senior notes due 2013		268					15				30				30					193
10% Senior subordinated notes due 2014		57					3				6				6					42
Other debt		4					4				—				—					—
Capital lease obligations		7					3				2				2					—
Operating lease obligations		343					56				104				75					108
Purchase obligations(1)		69					56				13				—					—
Redeemable preferred stock, including accrued dividends		458					23				56				74					305
Pension contributions (data available through 2010)		97					24				52				21					—
Contractual severance	2					2				—				—					—
Total contractual obligations(1)	$		2,271			$		244		$		438		$		651			$		938

(1)Total purchase obligations and contractual obligations exclude accounts payable and accrued liabilities.

Total contractual obligations at January 1, 2006 include interest expense and preferred stock dividend obligations based on the terms of each agreement or the rate as of January 1, 2006 for variable instruments.

At January 1, 2006, we were contingently liable for standby letters of credit totaling $68.8 million issued on our behalf by financial institutions. We are also contingently liable for future product warranty claims. We provide comprehensive warranties to our customers. As a result of these warranties, we may be responsible for costs associated with a product recall caused by a defect in a part that we manufacture. We continuously monitor potential warranty implications of new and current business to assess whether a liability should be recognized. The Company has experienced relatively nominal warranty costs and no significant warranty accrual is reflected in the January 1, 2006 and January 2, 2005 audited consolidated balance sheet.

Pension Plans and Post Employment Benefits

We sponsor defined benefit pension plans covering certain active and retired employees in the United States, Canada and Europe. On January 2, 2005, the projected benefit obligation (calculated using a 5.99% discount rate) exceeded the market value of plan assets by $121.2 million. During 2005, we made contributions, including employee contributions and benefit payments made directly by Metaldyne, of $22.3 million to the defined benefit plans. The underfunded status at January 1, 2006 is $120.8 million (assuming a 5.66% discount rate). Under SFAS No. 87, “Employers’ Accounting for Pensions,” Metaldyne is required annually on September 30 to re-measure the present value of projected pension obligations as compared to plan assets at market value. Although this mark-to-market adjustment is required, we

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maintain a long-term outlook for developing a pension-funding plan. In addition, we are in a period of very low interest rates, which results in a higher liability estimate.

	Underfunded
	Status
	(PBO Basis)
	(In thousands)
January 2, 2005		$	(121,242	)
Pension contributions		22,343
2005 asset returns		18,068
Impact of U.S. discount rate decrease by 25 basis points		(10,110		)
Interest and service cost		(20,800		)
Other		(9,016		)
January 1, 2006		$	(120,757	)

The discount rate that we utilize for determining future pension obligations is based on a review of long-term bonds, including published indices, which receive one of the two highest ratings given by recognized rating agencies. The discount rate determined on that basis decreased from 5.99% for 2004 to 5.66% for 2005. This 33 basis point decline in the discount rate had the effect of increasing the underfunded status of our U.S. pension plans by approximately $10.1 million.

For 2005, we have assumed a long-term asset rate of return on pension assets of 8.96%. We will utilize an 8.96% long-term asset rate of return assumption again in 2006. In developing the 8.96% expected long-term rate of return assumption, we evaluated input from our third party pension plan asset managers, including a review of asset class return expectations and long-term inflation assumptions. At January 1, 2006, our actual asset allocation was consistent with our asset allocation assumption.

Our pension expense was $6.0 million and $4.2 million for 2005 and 2004, respectively. For 2006, we expect pension expense to be $8.6 million. As required by accounting rules, our pension expense for 2006 is determined at the end of September 2005. However, for purposes of analysis, the following table highlights the sensitivity of our pension obligations and expense to changes in assumptions:

	Impact On
Change In Assumptions	Pension Expense				Impact On PBO
	(In millions)
25 bp decrease in discount rate		$	820			$	11,642
25 bp increase in discount rate		(846		)		(11,622		)
25 bp decrease in long-term return on assets		546				N/A
25 bp increase in long-term return on assets		(546		)		N/A

We expect to make contributions of approximately $23.7 million to the defined benefit pension plans for 2006. This amount assumes that the funding law applicable for 2005 is extended as proposed by Congress for the 2006 plan year. Absent this extension, we would expect to contribute an additional $2 million to the defined benefit pension plans for 2006.

On January 1, 2003, we replaced our existing combination of defined benefit plans and defined contribution plans for non-union employees with an age-weighted profit-sharing plan and a 401(k) plan. Defined benefit plan benefits no longer accrue after 2002 for these employees. This change affected approximately 1,200 employees. The profit-sharing component of the new plan is calculated using allocation rates that are integrated with Social Security and that increase with age. Our 2006 defined contribution (profit-sharing and 401(k) matching contribution) expense will be approximately $11.0 million.

On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act was signed into law. This law provides for a federal subsidy to sponsors of retiree health care benefit plans that

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provide a benefit that is at least actuarially equivalent to the benefit established by the law. The Company provides retiree drug benefits that exceed the value of the benefits that will be provided by Medicare Part D, and our eligible retirees generally pay a premium for this benefit that is less than the Part D premium. Therefore, we have concluded that these benefits are at least actuarially equivalent to the Part D program so that we will be eligible for the basic Medicare Part D subsidy. An application to obtain this subsidy has been submitted to Medicare and we expect to receive $0.2 million in 2006.

In the second quarter of 2004, a Financial Accounting Standards Board (FASB) Staff Position (FSP FAS 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug Improvement and Modernization Act of 2003”) was issued providing guidance on the accounting for the effects of the Act for employers that sponsor postretirement health care plans that provide prescription drug benefits. The FSP is effective for the first interim or annual period beginning after June 15, 2004. The federal subsidy reduced our postretirement benefit obligation by approximately $7.0 million; this savings is reflected in the balance at January 1, 2006. For 2005, we recognized a net reduction in postretirement expense of $0.9 million as a result of the subsidy.

In December 2004, we announced that we will discontinue retiree medical and life insurance coverage to our salaried and nonunion retirees and their beneficiaries effective January 1, 2006. This event has no impact on our 2004 annual results since the announcement occurred subsequent to the September 30, 2004 measurement date for postretirement benefits. We recorded a curtailment gain of $2.1 million for the year ended January 1, 2006 pursuant to this announcement, which is included in selling, general and administrative expenses in our audited consolidated statement of operations. Additionally, we recorded a benefit for net periodic benefit costs of $5.4 million, of which $1.1 million is included in selling, general and administrative expenses and $4.3 million is included in cost of sales in our audited consolidated statement of operations. Had we not made the changes noted above, our expense would have been approximately $4.5 million, or $9.9 million higher than actually recorded in 2005.

As a result of the discontinuation of retiree medical and life insurance coverage discussed above, we expect to receive an estimated cash savings of $1.0 million in 2006. We expect to make contributions of approximately $1.6 million to the postretirement medical and life insurance benefit plans for 2006.

As a condition of the sale of the Forging Operations, all defined benefit pension plan obligations relating to the Forging Operations’ employees will be retained by us. Postretirement medical and life insurance benefit obligations relating to the former Forging Operations’ employees will also be retained by us, with obligations related to the current employees transferred to the new owners. This transferred obligation was approximately $2.7 million as of January 1, 2006. Pension expense associated with the Forging Operations was $0.7 million, $0.6 million and $0.1 million for the years ended January 1, 2006, January 2, 2005 and December 28, 2003, respectively. Net postretirement expense (income) associated with the Forging Operations was $(2.7) million, $0.7 million and $0.9 million for the years ended January 1, 2006, January 2, 2005 and December 28, 2003, respectively.

Cash Flows

Operating activities—Cash flows provided by operations were $101.4 million for the year ended January 1, 2006 compared to $79.1 million for the year ended January 2, 2005 and $99.2 million for the year ended December 28, 2003. Adjusting for the usage of the accounts receivable securitization facility, this increase in operating cash flow from 2004 to 2005 is primarily due to a $94.1 million reduction in working capital offset by an increase in cash paid for interest and taxes of approximately $30 million. This increase in working capital is primarily explained by a reduction in accounts receivable resulting from a movement to cash in advance with one of our larger customers in Chapter 11 bankruptcy in the fourth quarter of 2005, collection of tooling receivables outstanding at December 2004 and an increased focus on collection efforts relating to outstanding items with our customers, and a decrease in inventories resulting from the reduction of supply issues related to raw materials. The decrease in operating cash flow from 2003 to 2004 is primarily due to an $81.0 million increase in investment in working capital (excluding the

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accounts receivable securitization facility). This increase in working capital is explained by the 33% increase in sales in 2004 (driven largely by the New Castle acquisition as accounts receivable was not acquired) and higher inventory levels (driven largely by the increase in raw material pricing combined with higher safety stock to compensate for the decrease in supply). In addition, a $20 million reduction in cash versus 2003 resulted from the receipt of tax refunds in 2004. Operating cash flows provided by discontinued operations was $13.4 million in 2005, $7.2 in 2004, and $31.9 million in 2003.

Investing activities—Cash flows used in investing activities were $93.4 million for the year ended January 1, 2006 compared to $230.2 million for the year ended January 2, 2005 and $98.8 million for the year ended December 28, 2003. Investing activities declined in 2005 due to lower capital expenditures and the impact of the acquisition of the New Castle facility in 2004. We acquired the remaining ownership of the New Castle facility in 2004 for approximately $204 million including fees and expenses (net of approximately $14 million in discounts on the $31.7 million subordinated debt and the $64.5 million preferred stock issued to fund the transaction). Offsetting the cost of the New Castle acquisition were proceeds from a sale-leaseback transaction of approximately $65 million on the acquired New Castle equipment. Proceeds from sale-leaseback transactions provided cash flows of $21.6 million in 2005, $19.2 million in 2004 (excluding the New Castle equipment) and $15.1 million in 2003. This was offset by cash flows used for discontinued operations of $11.2 million, $4.8 million and $12.5 million in 2005, 2004 and 2003, respectively.

Financing activities—Cash flows used in financing activities totaled $4.0 million for the year ended January 1, 2006, compared to cash flows provided of $137.0 million for the year ended January 2, 2005 and cash flows used of $5.7 million for the year ended December 28, 2003. In 2004, we borrowed an approximate $57 million from our revolving credit facility and issued $82.3 million fair value in new debt and preferred stock to acquire New Castle. Adjusting for the New Castle transaction in 2004, financing cash flows decreased approximately $2 million in 2005. We borrowed $10.5 million on our new term loan facility, which was offset by increased payments on other debt.

Outlook

Automotive vehicle production in 2006 is expected to be consistent with 2005 production levels in North America and approximately 3.5% higher than 2005 production levels in the global market. However, 2006 automotive vehicle production for the “Big 3” is expected to be approximately 2% below 2005 production levels. There are several factors that could alter this outlook, including a change in interest rates or an increase in vehicle incentives offered to consumers.

Our principal use of funds from operating activities and borrowings for the next several years are expected to fund interest and principal payments on our indebtedness, growth related capital expenditures and working capital increases, strategic acquisitions and lease expense. Our anticipated capital expenditures for 2006 are estimated to be approximately $70 million. Capital spending requirements over the last several years has been elevated due to our efforts to transition our business to new technologies, capabilities and geographies.

Management believes cash flow from operations and debt financing and refinancing from our accounts receivable securitization program will provide us with adequate sources of liquidity for the foreseeable future. On February 3, 2006, we entered into an amended and restated credit agreement that adjusted certain covenants to take account of the North American Forging divestiture and to provide additional covenant flexibility. It also added an additional $50 million term loan, of which $25 million was used to prepay the preexisting term loan. However, our sources of liquidity may be inadequate if we are unable to achieve operating targets in which we may need to seek additional covenant relief from our lending group. No assurance can be given that we will be successful in negotiating such relief. The interest expense coverage ratio in the amended and restated credit agreement increases to 2.00, 2.25 and 2.50, and the debt to EBITDA leverage ratio decreases to 5.00, 4.50 and 4.00 through the years ending 2007, 2008 and 2009, respectively. In addition, matters affecting the credit quality of our significant customers could

55

adversely impact the availability of our receivables arrangements and our liquidity. Any debt rating downgrades and/or insolvencies of our largest customers may have an adverse effect on our liquidity as it could adversely impact our ability to borrow under our accounts receivable securitization facility. For example, on November 1, 2005, Moody’s lowered its credit rating of General Motors, one of our largest customers, resulting in a decrease of our borrowing capacity under our accounts receivable securitization facility by approximately $3.0 million. We continue to explore other sources of liquidity, including additional debt, but existing debt instruments may limit our ability to incur additional debt, and we may be unable to secure equity or other financing.

Consistent with operating in the global vehicle industry, we anticipate significant competitive pressures and thus expect to face significant price reduction pressures from our customer base. In 2003 and 2004, though, we invested significantly in automation and underwent significant restructuring activities to help accommodate these pricing pressures. In addition, we face an environment of increased cost to procure certain raw materials utilized in our manufacturing processes such as steel, energy, molybdenum and nickel. Based on current prices, the agreements we currently have in place with our customers and cost reduction efforts in our business, we do not anticipate any negative incremental effect of material pricing on our 2006 profitability relative to 2005.

Critical Accounting Policies

The expenses and accrued liabilities or allowances related to certain policies are initially based on our best estimates at the time of original entry in our accounting records. Adjustments are recorded when our actual experience differs from the expected experience underlying the estimates. We make frequent comparisons of actual versus expected experience to mitigate the likelihood of material adjustments.

Goodwill.   Since our adoption of Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets” in 2002, we test goodwill for impairment on an annual basis, unless conditions exist which would require a more frequent evaluation. We tested goodwill for impairment as of January 1, 2006. In assessing the recoverability of goodwill, projections regarding estimated future cash flows and other factors are made to determine the fair value of the respective assets. We may be required to record impairment charges for goodwill if these estimates or related projections change in the future.

During 2005, 2004 and 2003, we determined that our goodwill was not impaired as fair values continue to exceed their carrying value. Fair value of our goodwill is determined based upon the discounted cash flows of the reporting units using a 9.5% discount. However, if the discount rate were to increase to approximately 15% or if anticipated operating profit were to decrease by approximately 15-20%, we would be required to perform further analysis of goodwill impairment in our Chassis Products and European Forging units. There is currently approximately $132 million and $81 million of goodwill in our Chassis Products and European Forging units, respectively.

Receivables and Revenue Recognition.   The Company recognizes revenue when there is evidence of a sale, the delivery has occurred or services have been rendered, the sales price is fixed or determinable and the collectibility of receivables is reasonably assured. Consequently, sales are generally recorded upon shipment of product to customers and transfer of title under standard commercial terms. Such pricing accruals are adjusted as they are settled with the Company’s customers. Material surcharge pass through arrangements with customers are recognized as revenue when an agreement is reached, delivery of the goods or services has occurred and the amount of the pass through is determinable.

Valuation of Long-Lived Assets.   Metaldyne periodically evaluates the carrying value of long-lived assets to be held and used including intangible assets, when events or circumstances warrant such a review. The carrying value of a long-lived asset to be held and used is considered impaired when the anticipated separately identifiable undiscounted cash flows from such an asset are less than the carrying value of the asset. In that event, a loss is recognized based on the amount by which the carrying value exceeds that fair

56

value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Impairment losses on long-lived assets that are held for sale are determined in a similar manner, except that fair values are reduced for the cost to dispose of the assets.

Pension and Postretirement Benefits Other Than Pensions.   The determination of our obligation and expense for our pension and postretirement benefits, such as retiree healthcare and life insurance, is dependent on our selection of certain assumptions used by actuaries in calculating such amounts. These assumptions are described in Note 26, Employee Benefit Plans, to the Company’s audited consolidated financial statements, which include, among others, discount rate, expected long-term rate of return on plan assets and rate of increase in compensation and health care costs. While we believe that our assumptions are appropriate, significant differences in our actual experience or assumptions may materially affect the amount of our pension and postretirement benefits other than pension obligation and our future expense. Our actual return on pension plan assets was 9.0%, 8.2% and 6.5% for the years ended January 1, 2006, January 2, 2005 and December 28, 2003, respectively. In comparison, our expected long-term return on pension plan assets was 8.96% for each of the years ended January 1, 2006, January 2, 2005 and December 28, 2003. The expected return on plan assets was established by analyzing the long-term returns for similar assets and, as such, no revisions have been made to adjust to actual performance of the plan assets.

The discount rate that we utilize for determining future pension obligations is based on a review of long-term bonds, including published indices, which receive one of the two highest ratings given by recognized rating agencies. The discount rate determined on that basis decreased from 5.99% for 2004 to 5.66% for 2005. This 33 basis point decline in the discount rate had the effect of increasing the underfunded status of our U.S. pension plans by approximately $10.1 million.

Valuation of Deferred Taxes.   In determining the provision for income taxes for financial statement purposes, we make certain estimates and judgments, which affect our evaluation of the carrying value of our deferred tax assets, as well as our calculation of certain tax liabilities. In accordance with SFAS No. 109, “Accounting for Income Taxes,” we evaluate the carrying value of our deferred tax assets on a quarterly basis. In completing this evaluation, we consider all available evidence. Such evidence includes historical results, expectations for future pretax operating income, the time period over which our temporary differences will reverse and the implementation of tax planning strategies.

During 2005, losses for the U.S. resulted in an increase in the carrying value of our deferred tax assets. In light of our recent operating performance in the U.S. and current industry conditions, we assessed, based upon all available evidence, whether it was more likely than not that we would realize our U.S. deferred tax assets. We concluded that it was no longer more likely than not that we would realize our U.S. deferred tax assets. As a result we recorded a tax charge of $75.6 million comprised of (i) $45.9 million for continuing operations; (ii) $1.6 million for discontinued operations; and (iii) $28.1 million for loss on discontinued operations. Although the tax charge did not result in current cash expenditures, it did negatively impact net income, assets and stockholders’ equity as of and for the year ended January 1, 2006.

Recently Issued Accounting Pronouncements Not Yet Adopted.

In November 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4,” to clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) should be recognized as current period charges, and that allocation of fixed production overheads to the costs of conversion be based on normal capacity of the production facilities. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Accordingly, we will adopt SFAS No. 151 for the fiscal year beginning January 2, 2006. We have evaluated this pronouncement and do not believe that it will have a significant impact on our results of operations or financial position.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment.” This Statement is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation” and supercedes

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APB No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123 (revised 2004) requires that the compensation cost relating to stock options and other share-based compensation transactions be recognized at fair value in financial statements. Due to the Company being a nonpublic entity as defined in SFAS No. 123 (revised 2004), this Statement is effective for us at the beginning of our fiscal year 2006. We will then be required to record any compensation expense using the fair value method in connection with option grants to employees after adoption. Management does not believe the adoption of this Statement will have a material impact on our results of operations or financial position, the adoption of which is subject to a pending outside valuation.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections: a replacement of APB Opinion No. 20 and FASB Statement No. 3.” This Statement requires retrospective application for voluntary changes in accounting principles and changes required by an accounting pronouncement that does not include specific transition provisions, unless it is impracticable to do so. Retrospective application results in the restatement of prior periods’ financial statements to reflect the change in accounting principle. APB Opinion No. 20 previously required that the impact of most voluntary changes in accounting principles be recognized in the period of the change as a cumulative effect of a change in accounting principle. The provisions of this Statement are to be applied prospectively to accounting changes made in fiscal years beginning after December 15, 2005. We will adopt the provisions of this Statement prospectively to accounting changes made after January 1, 2006.

Fiscal Year

Our fiscal year ends on the Sunday nearest to December 31.

Item 7A.Quantitative and Qualitative Disclosures about Market Risk.

In the normal course of business, we are exposed to market risk associated with fluctuations in foreign exchange rates. We are also subject to interest risk as it relates to long-term debt. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for details about our primary market risks, and the objectives and strategies used to manage these risks. Also see Note 12, Long-Term Debt, to the Company’s audited consolidated financial statements for additional information.

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Item 8.Financial Statements and Supplementary Data.

Report Of Independent Registered Public Accounting Firm

The Board of Directors
Metaldyne Corporation:

We have audited the accompanying consolidated balance sheets of Metaldyne Corporation and subsidiaries as of January 1, 2006 and January 2, 2005, and the related consolidated statements of operations, shareholders’ equity and other comprehensive income, and cash flows for the years ended January 1, 2006, January 2, 2005 and December 28, 2003. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Metaldyne Corporation and subsidiaries as of January 1, 2006 and January 2, 2005, and the results of their operations and their cash flows for the years ended January 1, 2006, January 2, 2005 and December 28, 2003 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related 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.

In 2005, the Company changed its method of accounting for conditional asset retirement obligations pursuant to FASB Interpretation No. (FIN) 47, Accounting for Conditional Asset Retirement Obligations an interpretation of Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations. In 2004, the Company changed its method of accounting for its redeemable preferred stock to conform with Statement of Financial Accounting Standards No. 150, Accounting for Certain Instruments with Characteristics of both Liabilities and Equity.

Detroit, Michigan

March 31, 2006

/s/ KPMG LLP

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METALDYNE CORPORATION
CONSOLIDATED BALANCE SHEET
January 1, 2006 and January 2, 2005
(Dollars in thousands except per share amounts)

	January 1, 2006			January 2, 2005
ASSETS
Current assets:
Cash and cash equivalents	$	3,687		$	—
Receivables, net:
Trade (net of allowance for doubtful accounts of $3,110 and $2,468 at January 1, 2006 and January 2, 2005, respectively)	130,018			165,846
TriMas	3,841			2,833
Other	6,020			12,505
Total receivables, net	139,879			181,184
Inventories	84,265			90,019
Deferred and refundable income taxes	11,010			18,468
Prepaid expenses and other assets	29,668			34,934
Assets of discontinued operations	116,612			304,205
Total current assets	385,121			628,810
Equity investments and receivables in affiliates	90,928			107,040
Property and equipment (net of accumulated depreciation of $270,686 and $228,750 at January 1, 2006 and January 2, 2005, respectively)	630,428			673,169
Excess of cost over net assets of acquired companies	583,990			611,231
Intangible and other assets	156,468			174,514
Total assets	$	1,846,935		$	2,194,764
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	261,098		$	253,481
Accrued liabilities	123,870			108,816
Current liabilities of discontinued operations	37,400			41,553
Current maturities, long-term debt	6,640			12,047
Total current liabilities	429,008			415,897
Long-term debt	850,739			847,853
Deferred income taxes	42,402			88,915
Minority interest	740			652
Other long-term liabilities	99,591			113,176
Long-term liabilities of discontinued operations	33,204			37,120
Redeemable preferred stock (aggregate liquidation value: $180,908 and $159,250 at January 1, 2006 and January 2, 2005, respectively). Authorized: 1,198,693 shares; Outstanding: 1,189,694 shares at January 1, 2006 and January 2, 2005	171,928			149,191
Total liabilities	1,627,612			1,652,804
Shareholders’ equity:
Preferred stock (non-redeemable), $1 par, Authorized: 25 million; Outstanding: None	—			—
Common stock, $1 par, Authorized: 250 million; Outstanding: 42.8 million at January 1, 2006 and January 2, 2005	42,845			42,830
Paid-in capital	698,868			698,868
Accumulated deficit	(524,648		)	(262,741		)
Accumulated other comprehensive income	2,258			63,003
Total shareholders’ equity	219,323			541,960
Total liabilities and shareholders’ equity	$	1,846,935		$	2,194,764

The accompanying notes are an integral part of the consolidated financial statements.

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METALDYNE CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED JANUARY 1, 2006, JANUARY 2, 2005 AND DECEMBER 28, 2003
(Dollars in thousands except per share data)

	January 1,			January 2,			December 28,
	2006			2005			2003
Net sales	$	1,886,939		$	1,695,171		$	1,176,462
Cost of sales	(1,725,126		)	(1,527,076		)	(1,043,766		)
Gross profit	161,813			168,095			132,696
Selling, general and administrative expenses (Includes non-cash stock award expense of $563 and $3,088 in 2004 and 2003, respectively)	(110,968		)	(126,499		)	(108,869		)
Restructuring charges	(3,288		)	(2,455		)	(12,744		)
Loss on disposition of manufacturing facilities	—			(7,600		)	—
Asset impairment	—			—			(4,868		)
Operating profit	47,557			31,541			6,215
Other expense, net:
Interest:
Interest expense	(89,650		)	(81,818		)	(75,283		)
Preferred stock dividends and accretion	(22,737		)	(19,900		)	—
Non-cash gain on maturity of interest rate arrangement	—			6,575			—
Equity income (loss) from affiliates, net	(11,011		)	1,451			(20,712		)
Gain on sale of equity investments, net	—			8,020			—
Other, net	(11,200		)	(6,981		)	(7,070		)
Other expense, net	(134,598		)	(92,653		)	(103,065		)
Loss from continuing operations before income taxes	(87,041		)	(61,112		)	(96,850		)
Income tax expense (benefit)	22,756			(35,557		)	(13,159		)
Loss from continuing operations	(109,797		)	(25,555		)	(83,691		)
Income (loss) from discontinued operations (net of tax of $(1.8) million, $(1.3) million and $4.5 million in 2005, 2004 and 2003, respectively)	(8,301		)	(2,439		)	8,352
Loss on discontinued operations (net of tax of $(32.3) million)	(140,547		)	—			—
Cumulative effect of change in accounting principle (net of tax of $(1.8) million)	(3,262		)	—			—
Net loss	(261,907		)	(27,994		)	(75,339		)
Preferred stock dividends	—			—			9,259
Net loss attributable to common stock	$	(261,907	)	$	(27,994	)	$	(84,598	)
Basic and diluted loss per share:
Loss from continuing operations less preferred stock dividends	$	(2.56	)	$	(0.60	)	$	(2.18	)
Loss from discontinued operations	(0.19		)	(0.05		)	0.20
Loss on discontinued operations	(3.28		)	—			—
Cumulative effect of change in accounting principle	(0.08		)	—			—
Net loss attributable to common stock	$	(6.11	)	$	(0.65	)	$	(1.98	)
Weighted average number of shares outstanding for basic and diluted loss per share	42,845			42,830			42,729

The accompanying notes are an integral part of the consolidated financial statements.

61

METALDYNE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 1, 2006, JANUARY 2, 2005 AND DECEMBER 28, 2003

(Dollars in thousands)

	January 1,			January 2,			December 28,
	2006			2005			2003
Operating activities:
Net loss	$	(261,907	)	$	(27,994	)		$	(75,339	)
Adjustments to reconcile net cash provided by operating activities:
Depreciation and amortization	112,183			104,825				79,675
Stock award expense	—			563				3,088
Debt fee amortization	3,206			3,880				2,480
Loss on fixed asset dispositions	15,137			2,275				8,795
Loss on idle leased assets	6,664			—				2,675
Asset impairment	—			—				4,868
Loss on disposition of manufacturing facilities	—			7,600				—
(Income) loss from discontinued operations, net of tax	8,301			2,439				(8,352		)
Loss on discontinued operations, net of tax	140,547			—				—
Cumulative effect of change in accounting principle, net of tax	3,262			—				—
Deferred income taxes	(11,213		)	(37,730		)		(24,250		)
Preferred stock dividends and accretion	22,737			19,900				—
Gain on sale of equity investments	—			(8,020		)		—
Non-cash interest expense (interest accretion)	290			256				7,393
Gain on maturity of interest rate arrangements	—			(6,575		)		—
Equity (income) loss from affiliates, net	11,011			(1,451		)		20,712
Curtailment gain and gain on elimination of certain benefits	(9,915		)	(1,948		)		—
Operating cash flows provided by discontinued operations	13,422			7,247				31,898
Other, net	233			(1,180		)		280
Changes in assets and liabilities, net of acquisition/disposition of business:
Receivables, net	17,505			(64,319		)		9,899
Net proceeds of accounts receivable facility	20,116			63,260				—
Inventories	1,581			(17,847		)		(4,651		)
Refundable income taxes	—			—				21,750
Prepaid expenses and other assets	3,456			398				2,940
Accounts payable and accrued liabilities	20,920			31,122				14,352
Change in other long-term assets	(2,829		)	(133		)		343
Changes in other long-term liabilities	(13,283		)	2,571				687
Net cash provided by operating activities	101,424			79,139				99,243
Investing activities:
Capital expenditures	(111,747		)	(140,274		)		(116,281		)
Disposition of businesses to a related party	—			—				22,570
(Payments for) reimbursement from acquisition of business, net of cash received	7,960			(203,870		)		(7,650		)
Proceeds from sale/leaseback of fixed assets	21,588			84,191				15,063
Disposition of manufacturing facilities	—			(500		)		—
Proceeds from sale of equity investments	—			33,830				20,000
Investment in joint venture	—			—				(20,000		)
Proceeds on sale of joint venture	—			1,260				—
Investing cash flows used for discontinued operations	(11,192		)	(4,842		)		(12,531		)
Net cash used for investing activities	(93,391		)	(230,205		)		(98,829		)
Financing activities:
Proceeds of term loan facilities	10,500			—				—
Principal payments of term loan facilities	(883		)	(1,325		)		(47,599		)
Proceeds of revolving credit facility	295,038			279,452				180,000
Principal payments of revolving credit facility	(298,975		)	(215,910		)		(180,000		)
Proceeds of senior notes, due 2013	—			—				150,000
Proceeds of senior subordinated notes, due 2014 (face value $31,746)	—			26,923				—
Principal payments of convertible subordinated debentures, due 2003 (net of $1,200 non-cash portion of repurchase).	—			—				(98,532		)
Proceeds of other debt	6,022			3,734				1,940
Principal payments of other debt	(14,183		)	(9,474		)		(8,935		)
Capitalization of debt refinancing fees	(1,396		)	(1,376		)		(2,346		)
Issuance of Series A-1 preferred stock (face value $64,454)	—			55,344				—
Financing cash flows used for discontinued operations	(135		)	(358		)		(246		)
Net cash provided by (used for) financing activities	(4,012		)	137,010				(5,718		)
Effect of exchange rates on cash	(334		)	230				—
Net increase (decrease) in cash	3,687			(13,826		)		(5,304		)
Cash and cash equivalents, beginning of year	—			13,826				19,130
Cash and cash equivalents, end of year	$	3,687		$	—			$	13,826
Supplementary cash flow information:
Cash paid (refunded) for income taxes, net	$	12,737		$	(8,342	)		$	(27,057	)
Cash paid for interest	$	87,402		$	78,471			$	63,416
Noncash transactions—capital leases	$	521		$	6,506			$	4,806

The accompanying notes are an integral part of the consolidated financial statements.

62

METALDYNE CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
AND OTHER COMPREHENSIVE INCOME
FOR THE YEARS ENDED JANUARY 1, 2006, JANUARY 2, 2005 AND DECEMBER 28, 2003
(Dollars in thousands)

													Other Comprehensive Income
	Preferred Stock			Common Stock			Paid-In Capital		Accumulated Deficit				Foreign Currency Translation and Other				Minimum Pension Liability				Interest Rate Arrangements				Total Shareholders Equity
Balances, December 29, 2002		$	—		$	42,650	$	684,869		$	(150,149	)		$	40,649			$	(37,871	)		$	(765	)		$	579,383
Comprehensive income:
Net loss										(75,339		)														(75,339		)
Foreign currency translation														45,010												45,010
Interest rate arrangements (net of tax, $1,080)																						7,340				7,340
Minimum pension liability (net of tax, $(9,446))																		(16,084		)						(16,084		)
Increase in TriMas investment														7,260												7,260
Total comprehensive loss																										(31,813		)
Preferred stock dividends										(9,259		)														(9,259		)
Disposition of business to a related party							6,270																			6,270
Exercise of restricted stock awards					79		1,261																			1,340
Balances, December 28, 2003		$	—		$	42,729	$	692,400		$	(234,747	)		$	92,919			$	(53,955	)		$	6,575			$	545,921
Comprehensive income:
Net loss										(27,994		)														(27,994		)
Foreign currency translation														33,321												33,321
Interest rate arrangements																						(6,575		)		(6,575		)
Minimum pension liability (net of tax, $(3,868))																		(6,612		)						(6,612		)
Dissolution of foreign entity upon transfer of operations to other consolidated subsidiaries							5,330							(5,330		)										—
Increase in TriMas investment														2,660												2,660
Total comprehensive loss																										(5,200		)
Restricted stock awards					101		1,138																			1,239
Balances, January 2, 2005		$	—		$	42,830	$	698,868		$	(262,741	)		$	123,570			$	(60,567	)		$	—			$	541,960
Comprehensive income:
Net loss										(261,907		)														(261,907		)
Foreign currency translation														(44,731		)										(44,731		)
Minimum pension liability (net of tax, $(3,254))																		(14,163		)						(14,163		)
Decrease in TriMas investment														(1,851		)										(1,851		)
Total comprehensive loss																										(322,652		)
Restricted stock awards					15																					15
Balances, January 1, 2006		$	—		$	42,845	$	698,868		$	(524,648	)		$	76,988			$	(74,730	)		$	—-			$	219,323

The accompanying notes are an integral part of the consolidated financial statements.

63

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.   Business and Other Information

Metaldyne Corporation (“Metaldyne” or “the Company”) is a leading global manufacturer of highly engineered metal components for the global light vehicle market. Our products include metal-formed and precision-engineered components and modular systems used in vehicle transmission, engine and chassis applications.

The Company maintains a fifty-two/fifty-three week fiscal year ending on the Sunday nearest to December 31. Fiscal year 2005 is comprised of fifty-two weeks, fiscal year 2004 is comprised of fifty-three weeks, and fiscal year 2003 is comprised of fifty-two weeks and ended on January 1, 2006, January 2, 2005 and December 28, 2003, respectively. All year and quarter references relate to the Company’s fiscal year and fiscal quarters unless otherwise stated.

In the fourth quarter of 2005, the Company entered into a definitive agreement to sell its business of supplying forged metal components to the automotive light vehicle market (“North American Forging” or “Forging Operations”). On March 10, 2006, the Company completed this divestiture. The Forging Operations, which were part of the Chassis segment, generated approximately $358 million revenue in 2005 and included plants located in Royal Oak, Michigan; Fraser, Michigan; Troy, Michigan; Detroit, Michigan; Minerva, Ohio; Canal Fulton, Ohio and Ft. Wayne, Indiana. In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” all revenue and expenses of the Forging Operations have been removed from the respective consolidated income statement line items and reported separately as discontinued operations. In addition, assets and liabilities of the Forging Operations have been removed from the respective consolidated balance sheet line items and reclassified separately as assets and liabilities held for sale. Cash flows generated by the Forging Operations have been removed from the respective consolidated cash flow line items and have been separately reported as cash flows from discontinued operations. Refer to Note 20, Discontinued Operations, and Note 31, Subsequent Events.

2.Accounting Policies

Principles of Consolidation.   The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. All significant intercompany transactions have been eliminated. Corporations that are 20 to 50 percent owned are accounted for by the equity method of accounting; ownership less than 20 percent is accounted for on the cost basis unless the Company exercises significant influence over the investee.

Use of Estimates.   The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ from those estimates.

Revenue Recognition.   The Company recognizes revenue when there is evidence of a sale, the delivery has occurred or services have been rendered, the sales price is fixed or determinable and the collectibility of receivables is reasonably assured. Consequently, sales are generally recorded upon shipment of product to customers and transfer of title under standard commercial terms. The Company has ongoing adjustments to its pricing arrangements with its customers based on the related content and cost of its products. The Company accrues for such amounts as its products are shipped to its customers. Such pricing accruals are adjusted as they are settled with the Company’s customers. Material surcharge pass through

64

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

arrangements with customers are recognized as revenue when an agreement is reached, delivery of the goods or services has occurred and the amount of the pass through is determinable.

Cash and Cash Equivalents.   The Company considers all highly liquid debt instruments with an initial maturity of three months or less to be cash and cash equivalents.

Derivative Financial Instruments.   The Company has entered into interest rate protection agreements to limit the effect of changes in the interest rates on any floating rate debt. All derivative instruments are recognized as assets or liabilities on the balance sheet and measured at fair value. Changes in fair value are recognized currently in earnings unless the instrument qualifies for hedge accounting. Instruments used as hedges must be effective at reducing the risks associated with the underlying exposure and must be designated as a hedge at the inception of the contract. Under hedge accounting, changes are recorded as a component of other comprehensive income to the extent the hedge is considered effective. The ineffective portion of the change in fair value of a derivative instrument that qualifies as a cash flow hedge is reported in earnings. The Company discontinues hedge accounting prospectively when it is determined that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative expires or is sold, terminated or exercised, the derivative is de-designated as a hedging instrument, because it is unlikely that a forecasted transaction will occur, a hedged firm commitment no longer meets the definition of a firm commitment, or management determines that designation of the derivative as a hedging instrument is no longer appropriate.

Receivables.   Receivables are presented net of allowances for doubtful accounts of approximately $3.1 million and $2.5 million at January 1, 2006 and January 2, 2005, respectively. The Company conducts a significant amount of business with a number of individual customers in the automotive industry. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the existing accounts receivable. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

The Company monitors its exposure for credit losses and maintains adequate allowances for doubtful accounts; the Company does not believe that significant credit risk exists. In order to reflect customer receivables at their estimated net realizable value, the Company records valuation allowances or accrued liabilities based upon current information. These allowances represent amounts relating to pricing accruals and customer deductions. In accordance with the Company’s accounts receivable securitization (see Note 4, Accounts Receivable Securitization and Factoring Agreements), trade accounts receivable of substantially all domestic business operations are sold, on an ongoing basis, to MRFC, Inc., a wholly owned subsidiary of the Company.

Inventories.   Inventories are stated at the lower of cost or net realizable value, with cost determined principally by use of the first-in, first-out method. The Company secures one-year or longer-term supply contracts for most of its major raw material purchases to protect against inflation and to reduce its raw material cost structure. Therefore, any material savings or price increases (primarily material surcharges) are reflected in the Company’s inventory cost.

Property and Equipment, Net.   Property and equipment additions, including significant betterments, are recorded at cost. Upon retirement or disposal of property and equipment, the cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in income. Repair and maintenance costs are charged to expense as incurred.

65

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Depreciation, Amortization and Impairment of Long-Lived Assets.   Depreciation is computed principally using the straight-line method over the estimated useful lives of the assets. Annual depreciation rates are as follows: buildings and land improvements, 3.33% to 10%, and machinery and equipment, 6.7% to 33.3%. Deferred financing costs are amortized over the lives of the related debt securities.

Deferred losses on sale-leasebacks are amortized over the life of the respective lease, which range from 3.5 years to 20 years. These losses were recorded as part of the sale-leaseback transactions and represent the difference between the carrying value of the assets sold and the proceeds paid at closing by the leasing companies. Fair value was equal to or in excess of the carrying value of these assets based on asset appraisal information provided by third party valuation firms. These deferred amounts are being amortized, instead of being currently recognized, on a straight-line basis over the lives of the respective leases as required under SFAS No. 28, “Accounting for Sales with Leasebacks” (an amendment of SFAS No. 13). Future amortization amounts relate to the remaining portion of the 2000 and 2001 sale-leaseback deferred losses. For sale-leaseback transactions entered into during 2002 and forward, the Company negotiated more favorable terms for these transactions, resulting in proceeds that were at fair value.

Customer contracts are amortized over a period from 6 years to 14 years depending upon the nature of the underlying contract. Trademarks/trade names are amortized over a 40-year period, while technology and other intangibles are amortized over a period between 3 years and 25 years. At January 1, 2006 and January 2, 2005, accumulated amortization of intangible assets was approximately $63 million and $49 million, respectively. Total amortization expense, including amortization of stock awards and deferred losses related to sale-leaseback transactions, was approximately $18 million in 2005 and $24 million in 2004 and 2003.

Leases.   The Company leases certain property and equipment under operating and capital lease arrangements. Leased property and equipment meeting certain capital lease criteria is capitalized and the present value of the related lease payments is recorded as a liability. Amortization of capitalized leased assets is computed on the straight-line method over the shorter of the estimated useful life or the initial lease term. The remaining leased property and equipment is accounted for as operating leases.

Goodwill.   Since its adoption of Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets” in 2002, the Company tests goodwill for impairment on an annual basis, unless conditions exist which would require a more frequent evaluation. Goodwill was tested for impairment as of January 1, 2006. In assessing the recoverability of goodwill, projections regarding estimated future cash flows and other factors are made to determine the fair value of the respective assets. The Company may be required to record impairment charges for goodwill if these estimates or related projections change in the future.

During  2005, 2004 and 2003, the Company determined that its goodwill was not impaired as fair values continued to exceed their carrying value. Fair value of goodwill is determined based upon the discounted cash flows of the reporting units using a 9.5% discount. However, if the discount rate were to increase to approximately 15% of if anticipated operating profit were to decrease by approximately 15-20%, we would be required to perform further analysis of goodwill impairment in our Chassis Products and European Forging units. There is currently approximately $132 million and $81 million of goodwill in the Chassis Products and European Forging units, respectively.

Foreign Currency Translation.   The financial statements of subsidiaries outside of the United States (“U.S.”) located in non-highly inflationary economies are measured using the currency of the primary

66

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

economic environment in which they operate as the functional currency, which for the most part represents the local currency. Transaction gains and losses are included in net earnings. When translating into U.S. dollars, income and expense items are translated at average monthly rates of exchange and assets and liabilities are translated at the rates of exchange at the balance sheet date. Translation adjustments resulting from translating the functional currency into U.S. dollars are deferred as a component of accumulated other comprehensive income in shareholders’ equity.

Accumulated Comprehensive Income.Accumulated comprehensive income is defined as net income and other changes in shareholders’ equity from transactions and other events from sources other than shareholders. The components of accumulated comprehensive income include foreign currency translation, minimum pension liability and interest rate arrangements. Total accumulated other comprehensive income was $2.3 million, $63.0 million and $45.5 million as of January 1, 2006, January 2, 2005 and December 28, 2003, respectively. Total cumulative tax effects included in accumulated comprehensive income were $(2.2) million, $1.1 million and $4.9 million as of January 1, 2006, January 2, 2005 and December 28, 2003, respectively.

Stock-Based Compensation.   The Company has a stock-based employee compensation plan and has issued equity-based incentives in various forms. The Company continues to account for stock-based employee compensation using the intrinsic value method under Accounting Principles Board (APB) No. 25 “Accounting for Stock Issued to Employees” and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under this plan had an exercise price equal to the market value of the underlying common stock on the date of grant.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation.

	(In thousands, except per share amounts)
	January 1,			January 2,			December 28,
	2006			2005			2003
Net loss attributable to common stock, as reported	$	(261,907	)	$	(27,994	)		$	(84,598	)
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	—			(423		)		(1,738		)
Pro forma net loss attributable to common stock	$	(261,907	)	$	(28,417	)		$	(86,336	)
Earnings (loss) per share:
Basic and diluted—as reported	$	(6.11	)	$	(0.65	)		$	(1.98	)
Basic and diluted—pro forma for stock-based compensation	$	(6.11	)	$	(0.65	)		$	(2.02	)

Income Taxes.   Income taxes are accounted for using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

67

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Valuation of Deferred Taxes.   In determining the provision for income taxes for financial statement purposes, the Company makes certain estimates and judgments, which affect its evaluation of the carrying value of deferred tax assets, as well as the calculation of certain tax liabilities. In accordance with SFAS No. 109, “Accounting for Income Taxes,” the Company evaluates the carrying value of its deferred tax assets on a quarterly basis. In completing this evaluation, it considers all available evidence. Such evidence includes historical results, expectations for future pretax operating income, the time period over which temporary differences will reverse and the implementation of tax planning strategies.

During 2005, losses for the U.S. resulted in an increase in the carrying value of the Company’s deferred tax assets. In light of its recent operating performance in the U.S. and current industry conditions, the Company assessed, based upon all available evidence, whether it was more likely than not that it would realize its U.S. deferred tax assets. The Company concluded that it was no longer more likely than not that it would realize its U.S. deferred tax assets. As a result it recorded a tax charge of $75.6 million comprised of (i) $45.9 million for continuing operations; (ii) $1.6 million for discontinued operations; and (iii) $28.1 million for loss on discontinued operations. Although the tax charge did not result in current cash expenditures, it did negatively impact net income, assets and stockholders’ equity as of and for the year ended January 1, 2006.

Self-Insurance Reserves.   The Company self-insures both a medical coverage program and a workers’ compensation program for its employees. The determination of accruals and expenses for these benefits is dependent on claims experience and the selection of certain assumptions used by actuaries in evaluating incurred, but not yet reported amounts. Significant changes in actual experience under either program or significant changes in assumptions may affect self-insured medical or workers’ compensation reserves and future experience. See also Note 26, Employee Benefit Plans.

Pension Plans and Postretirement Benefits Other Than Pensions.   Annual net periodic pension expense and benefit liabilities under defined benefit pension plans are determined on an actuarial basis. Assumptions used in the actuarial calculations have a significant impact on plan obligations and expense. Each September, the Company reviews the actual experience compared to the more significant assumptions used and make adjustments to the assumptions, if warranted. The healthcare trend rates are reviewed with the actuaries based upon the results of their review of claims experience. Discount rates are based upon an expected benefit payments duration analysis and the equivalent average yield rate for high-quality fixed-income investments. Pension benefits are funded through deposits with trustees and the expected long-term rate of return on fund assets is based upon actual historical returns modified for known changes in the market and any expected change in investment policy. Postretirement benefits are not funded and it is the Company’s policy to pay these benefits as they become due.

Environmental Matters.   The Company is subject to the requirements of U.S. federal, state and local and non-U.S. environmental and safety health laws and regulations. These include laws regulating air emissions, water discharge and waste management. The Company recognizes environmental cleanup liabilities when a loss is probable and can be reasonably estimated. Such liabilities are generally not subject to insurance coverage.

Valuation of Long-Lived Assets.   The Company periodically evaluates the carrying value of long-lived assets to be held and used, including intangible assets, when events or circumstances warrant such a review. The carrying value of a long-lived asset to be held and used is considered impaired when the anticipated separately identifiable undiscounted cash flows from such an asset are less than the carrying value of the asset. In that event, a loss is recognized based on the amount by which the carrying value exceeds that fair

68

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Impairment losses on long-lived assets held for sale are determined in a similar manner, except that fair values are reduced for the cost to dispose of the assets. See also Note 18, Asset Impairments and Restructuring Related Integration Actions.

Warranties.   Estimated warranty costs related to product warranties are accrued once the liability has become both reasonably probable and estimatable. The Company provides comprehensive warranties to its customers which may trigger responsibility for costs associated with a product recall caused by a defect in a part that the Company manufactures. As a result, the Company continuously monitors potential warranty implications of new and current business to assess whether a liability should be recognized. No significant warranty accrual is reflected in the January 1, 2006 or January 2, 2005 consolidated balance sheet as the Company has experienced relatively nominal warranty costs.

Reclassifications.   Certain prior year amounts have been reclassified to reflect current year classification. Changes include the update of financial information to reflect discontinued operations and greater detail of items presented on the cash flow statement.

3.Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4,” to clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) should be recognized as current period charges, and that allocation of fixed production overheads to the costs of conversion be based on normal capacity of the production facilities. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Accordingly, the Company will adopt SFAS No. 151 for the fiscal year beginning January 2, 2006. The Company has evaluated this pronouncement and does not believe that it will have a significant impact on the Company’s results of operations or financial position.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment.” This Statement is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation” and supercedes APB No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123 (revised 2004) requires that the compensation cost relating to stock options and other share-based compensation transactions be recognized at fair value in financial statements. Due to the Company being a nonpublic entity as defined in SFAS No. 123 (revised 2004), this Statement is effective for the Company at the beginning of its fiscal year 2006. The Company will then be required to record any compensation expense using the fair value method in connection with option grants to employees after adoption. Management does not believe the adoption of this Statement will have a material impact on the Company’s results of operations or financial position, the adoption of which is subject to a pending outside valuation.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections: a replacement of APB Opinion No. 20 and FASB Statement No. 3.” This Statement requires retrospective application for voluntary changes in accounting principles and changes required by an accounting pronouncement that does not include specific transition provisions, unless it is impracticable to do so. Retrospective application results in the restatement of prior periods’ financial statements to reflect the change in accounting principle. APB Opinion No. 20 previously required that the impact of most voluntary changes in accounting principles be recognized in the period of the change as a cumulative effect of a change in accounting principle. The provisions of this Statement are to be applied prospectively to

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METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

accounting changes made in fiscal years beginning after December 15, 2005. The Company will adopt the provisions of this Statement prospectively to accounting changes made after January 1, 2006.

4.Accounts Receivable Securitization and Factoring Agreements

On April 29, 2005, the Company and its newly formed wholly owned special purpose subsidiary, MRFC, Inc. (“MRFC”), entered into a new accounts receivable financing facility with General Electric Capital Corporation (“GECC”). Concurrent with entering into the new facility, the former accounts receivable financing facility with JPMorgan Chase Bank, N.A. was terminated. On July 8, 2005, the Company and MRFC amended and restated the existing accounts receivable financing facility with GECC. The terms of the facility that were amended and restated include (a) extending the maturity date to July 8, 2010, (b) favorable adjustments to certain default triggers, (c) increased program availability and (d) an increase to the applicable margin on LIBOR based drawings from 1.75% to 2.25%. The amendment and restatement also addressed various technical matters. The amended and restated facility represents the completion of the final step of the multi-step receivables facility modifications initiated on April 29, 2005.

The Company has entered into an arrangement to sell, on an ongoing basis, the trade accounts receivable of substantially all domestic business operations to MRFC. MRFC from time to time may sell an undivided fractional ownership interest in the pool of receivables up to approximately $175 million to a third party multi-seller receivables funding company. The net proceeds of sale are less than the face amount of accounts receivable sold by an amount that approximates the purchaser’s financing costs, which amounted to a total of $4.5 million, $2.9 million and $2.6 million in 2005, 2004 and 2003, respectively, and is included in other expense, net in the Company’s consolidated statement of operations. Prior to April 29, 2005, the Company’s trade accounts receivable of substantially all domestic business operations were sold in connection with the former accounts receivable financing facility with JPMorgan Chase Bank, N.A. At January 1, 2006 and January 2, 2005, the Company’s funding under the facility was $83.4 million and $63.3 million, respectively, with availability based upon qualified receivables of $126.8 million and $78.3 million, respectively, and $43.4 million available but not utilized at January 1, 2006 and $15 million available but not utilized at January 1, 2005. The interest rate was based on LIBOR plus 2.25% at January 1, 2006. In addition, the Company is required to pay a fee of 0.5% on the unused portion of the facility.

The Company has entered into agreements with international invoice factoring companies to sell customer accounts receivable of Metaldyne foreign locations in France, Germany, Spain, Czech Republic, United Kingdom and Mexico on a non-recourse basis. As of January 1, 2006 and January 2, 2005, the Company had available $61.7 million and $63.5 million from these commitments, and approximately $50.4 million and $53.1 million of receivables were sold under these programs, respectively. The Company pays a commission to the factoring company plus interest from the date the receivables are sold to the date of customer payment. Commission expense related to these agreements is recorded in other expense, net on the Company’s consolidated statement of operations and totaled $1.9 million, $1.5 million and $0.5 million for the years ended January 1, 2006, January 2, 2005 and December 28, 2003.

To facilitate the collection of funds from operating activities, the Company has entered into accelerated payment collection programs with certain customers. Although the majority of the accelerated payment collection programs were discontinued as of or prior to January 2, 2005, at January 1, 2006, collection of approximately $20.3 million of accounts receivable was accelerated under the remaining programs. In addition to the above programs, the Company continues to collect approximately $12 million per month on an accelerated basis as a result of favorable payment terms that it has negotiated with one of its customers, through an agreement that expires December 31, 2006. These payments are received on

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METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

average 18 days after shipment of product to the customer. While the impact of the discontinuance of these programs may be partially offset by a greater utilization of the Company’s accounts receivable securitization facility, the Company is examining other alternative programs in the marketplace, as well as enhanced terms directly from its customers.

5.Inventories

	(In thousands)
	January 1, 2006			January 2, 2005
Raw materials		$	38,727		$	35,402
Work in process		16,138			18,051
Finished goods		29,400			36,566
		$	84,265		$	90,019

6.Equity Investments and Receivables in Affiliates

On December 22, 2004, the Company sold its 36% common equity investment in Saturn Electronics & Engineering, Inc. (“Saturn”), a privately held manufacturer of electromechanical and electronic automotive components, for gross consideration totaling $15 million. Holders of Metaldyne options with the exercise price below the November 2000 merger consideration and former holders of Metaldyne restricted stock were entitled to additional cash amounts from the proceeds of the disposition of Saturn stock in accordance with the recapitalization agreement. Pursuant to modified agreements with former holders of the Company’s common stock as of November 28, 2000, such holders received a portion of the net proceeds from this disposition of Saturn. Total consideration paid to the former stock holders was $2.4 million. The initial agreements with the former stock holders that were modified upon the disposition of Saturn are now terminated with no additional obligations required by the Company. The gain recognized on the disposition of Saturn was $5.1 million and is included in gain on sale of equity investments, net on the Company’s consolidated statement of operations as of January 2, 2005.

On June 6, 2002, the Company sold 13.25 million shares of TriMas Corporation (“TriMas”) common stock to Heartland Industrial Partners (“Heartland”) and other investors amounting to approximately 66% of the fully diluted common equity of TriMas. The Company retained approximately 34% of the fully diluted common equity of TriMas in the form of common stock and a presently exercisable warrant to purchase shares of TriMas common stock at a nominal exercise price. As Heartland is the Company’s controlling shareholder, this transaction was accounted for as a reorganization of entities under common control and accordingly no gain or loss has been recognized. The Company accounts for its retained interest in TriMas under the equity method of accounting. In April 2003, TriMas exercised its right to repurchase 1 million shares of its common stock from the Company for $20 per share, the same price that it was valued on June 6, 2002, the date of the Company’s sale of TriMas.

On November 12, 2004, the Company sold approximately 924,000 shares of TriMas stock to Masco Corporation for $23 per share, or a total of $21.3 million. A gain on the sale of shares totaling $2.9 million was recognized and is included in gain on sale of equity investments, net on the Company’s consolidated statement of operations as of January 2, 2005. As a result of this sale of shares to Masco in 2004, the repurchase of shares by TriMas in 2003 and acquisitions performed by TriMas in 2003, the Company’s ownership in TriMas decreased to approximately 24%, or approximately 4.8 million shares as of January 2, 2005, which remained unchanged as of January 1, 2006. The carrying amount of the Company’s investment in TriMas was approximately $86.1 million and $102.8 million as of January 1, 2006 and January 2, 2005

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METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

respectively. Masco Corporation owns approximately 6% of Metaldyne’s outstanding shares. See also Note 30, Related Party Transactions.

In June 2004, the Company sold its interest in a Korean joint venture. A gain of $1.2 million was recognized in conjunction with this sale and is included with other, net in the Company’s consolidated statement of operations as of January 2, 2005.

On December 8, 2002, the Company entered into a joint venture agreement with DaimlerChrysler Corporation (“DaimlerChrysler”) to operate the New Castle (Indiana) machining and forge facility. On January 2, 2003, the Company closed on this joint venture. In connection with the closing, DaimlerChrysler contributed substantially all of the assets of business conducted at this facility in exchange for 100% of the common and preferred interests in the joint venture. In addition, the joint venture assumed certain liabilities of the business from DaimlerChrysler. Immediately following the contribution, the Company purchased 40% of the common interests in the joint venture from DaimlerChrysler for $20 million in cash. This investment was accounted for under the equity method of accounting in 2003, due to the Company’s investment representing greater than 20% but less than 50% of the interest in the joint venture. However, with respect to the Agreement, the Company did not recognize losses in the joint venture because DaimlerChrysler provided funding for the joint venture’s operations and capital expenditures.

On December 31, 2003, the Company completed a transaction with DaimlerChrysler that transferred full ownership of the New Castle Machining and Forge manufacturing operations to Metaldyne. See also Note 17, Acquisitions.

The carrying amount of investments in affiliates at January 1, 2006 and January 2, 2005 was $86.1 million and $102.8 million, respectively. Additionally, the equity investments and receivables in affiliates includes $4.8 million and $4.2 million related to long-term receivables on the Company’s consolidated balance sheet as of January 1, 2006 and January 2, 2005, respectively. Approximate combined condensed financial data of the Company’s equity affiliates accounted for under the equity method are as follows (24% interest in TriMas as of January 1, 2006 and January 2, 2005):

	(In thousands)
	January 1, 2006			January 2, 2005
Current assets		$	315,660		$	302,500
Long-term assets:
Property and equipment, net		164,630			198,610
Excess of cost over net assets of acquired companies		644,780			657,980
Intangible and other assets		255,220			304,910
Other assets		48,220			58,200
Total assets		$	1,428,510		$	1,522,200
Current liabilities		$	221,220		$	209,050
Long-term liabilities:
Long-term debt		711,760			735,030
Other long-term debt		146,230			172,960
Total liabilities		$	1,079,210		$	1,117,040

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METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	(In thousands)
	For The Years Ended
	January 1,			January 2,			December 28,
	2006			2005			2003
Net sales	$	1,010,120		$	1,045,160			$	1,305,450
Operating profit	$	84,100		$	62,360			$	31,370
Net loss	$	(45,880	)	$	(2,190	)		$	(66,280	)

7.Property and Equipment, Net

	(In thousands)
	January 1, 2006				January 2, 2005
Land and land improvements		$	12,839			$	12,935
Buildings		141,258				123,316
Machinery and equipment		747,017				765,668
		901,114				901,919
Less: Accumulated depreciation		(270,686		)		(228,750		)
Property and equipment, net		$	630,428			$	673,169

Depreciation expense totaled approximately $94 million, $82 million and $59 million in 2005, 2004 and 2003, respectively. The Company recorded losses on fixed asset dispositions and losses on idle leased assets of $15.1 million and $6.7 million, respectively, in 2005; $2.3 million and zero, respectively, in 2004; and $8.8 million and $2.7 million, respectively, in 2003.

8.Excess of Cost over Net Assets of Acquired Companies and Intangible Assets

At January 1, 2006, the excess of cost over net assets of acquired companies (“goodwill”) balance was approximately $584 million. During 2005, 2004 and 2003, the Company determined that its goodwill was not impaired as fair values continue to exceed their carrying value. For purposes of testing this goodwill for potential impairment, fair values were determined based upon the discounted cash flows of the reporting units using a 9.5% discount rate as of January 1, 2006. The Company determined that goodwill associated with the Forging Operations was impaired as of January 1, 2006. Therefore, the related goodwill was written off in the loss on discontinued operations adjustment recorded in 2005. See also Note 20, Discontinued Operations.

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METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Acquired Intangible Assets

	As of January 1, 2006								As of January 2, 2005
	Gross							Weighted	Gross							Weighted
	Carrying			Accumulated				Average	Carrying			Accumulated				Average
	Amount			Amortization				Life	Amount			Amortization				Life
	(In thousands, except weighted average life)
Amortized Intangible Assets:
Customer Contracts		$	74,969		$	(25,346	)	10.9 years		$	75,995		$	(19,340	)	10.9 years
Technology and Other		109,903			(37,680		)	14.3 years		111,221			(29,189		)	14.3 years
Total		$	184,872		$	(63,026	)	12.7 years		$	187,216		$	(48,529	)	12.7 years
Aggregate Amortization Expense
(Included in Cost of Sales):
For the year ended December 28, 2003					$	11,967
For the year ended January 2, 2005					14,484
For the year ended January 1, 2006					13,742
Estimated Amortization Expense:
For the year ending December 31, 2006					13,742
For the year ending December 31, 2007					13,651
For the year ending December 31, 2008					12,908
For the year ending December 31, 2009					12,908
For the year ending December 31, 2010					11,157

The “technology and other intangibles, net” category represents primarily patents and/or in-depth process knowledge embedded within the Company.

Goodwill

The carrying amounts of goodwill by segment for the years ended January 1, 2006 and January 2, 2005 are as follows:

	Chassis			Powertrain				Total
	(In thousands)
Balance as of December 28, 2003	$	218,699			$	350,684		$	569,383
Exchange impact from foreign currency	10,150				3,463			13,613
New Castle acquisition	28,773				—			28,773
Other	(276		)		(262		)	(538		)
Balance as of January 2, 2005	$	257,346			$	353,885		$	611,231
Exchange impact from foreign currency	(15,215		)		(4,800		)	(20,015		)
New Castle adjustment	(7,960		)		—			(7,960		)
Other	1,467				(733		)	734
Balance as of January 1, 2006	$	235,638			$	348,352		$	583,990

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METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9.Intangible and Other Assets

	January 1, 2006			January 2, 2005
	(In thousands)
Customer contracts, net		$	49,623		$	56,655
Technology and other intangibles, net		72,223			82,032
Deferred loss on sale-leaseback transactions		7,336			10,415
Deferred financing costs, net		15,964			16,358
Other		11,322			9,054
Total		$	156,468		$	174,514

10.Accrued Liabilities

	January 1, 2006			January 2, 2005
	(In thousands)
Workers’ compensation and self insurance		$	12,511		$	13,956
Accrued exit and shutdown costs for plant closures		—-			3,200
Salaries, wages and commissions		8,455			9,830
Vacation, holiday and bonus		18,963			13,896
Interest		13,717			11,759
Property, payroll and other taxes		24,593			15,991
Pension		23,878			23,298
Other		21,753			16,886
Accrued liabilities		$	123,870		$	108,816

11.Other Long-Term Liabilities

	January 1, 2006			January 2, 2005
	(In thousands)
Accrued post retirement benefits		$	19,028		$	31,590
Pension		69,685			66,985
Warranty reserve		698			731
Deferred compensation		—-			106
Other		10,180			13,764
Other long-term liabilities		$	99,591		$	113,176

12.Long-Term Debt

Long-term debt consisted of the following:

	January 1, 2006				January 2, 2005
	(In thousands)
Senior credit facilities:
Term loan (8.58% variable interest at January 1, 2006)		$	350,193			$	351,077
Revolving credit facility (8.5% to 10.5% variable interest at January 1, 2006)		59,605				63,542
Total senior credit facility		409,798				414,619
Senior secured term loan credit facility, with interest payable quarterly, due 2009 (13.75% variable interest at January 1, 2006)		10,500				—-
11% senior subordinated notes, with interest payable semi-annually, due 2012		250,000				250,000
10% senior notes, with interest payable semi-annually, due 2013		150,000				150,000
10% senior subordinated notes, with interest payable semi-annually, due 2014 (face value $31.7 million)		27,469				27,179
Other debt (various interest rates; includes capital lease obligations)		9,612				18,102
Total		$	857,379			$	859,900
Less current maturities		(6,640		)		(12,047		)
Long-term debt		$	850,739			$	847,853

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METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The maturities of the Company’s total debt at January 1, 2006 during the next five years and beyond are as follows (in millions): 2006—$7; 2007—$61; 2008—$1; 2009—$360; 2010—$1; 2011 and beyond—$432.

The credit facility includes a term loan with $350.2 million outstanding and a revolving credit facility with a principal commitment of $200 million (prior to the Company’s October 2003 senior note offering, this facility was $250 million). The revolving credit facility matures on May 28, 2007 and the term loan facility matures on December 31, 2009. The obligations under the credit facility are collateralized by substantially all of the Company’s assets and of the assets of substantially all of its domestic subsidiaries and are guaranteed by substantially all of the Company’s domestic subsidiaries on a joint and several basis.

At January 1, 2006, the Company had approximately $115 million of undrawn commitments, which consisted of $71.6 million and $43.4 million from its revolving credit facility and accounts receivable securitization facility, respectively. At January 1, 2006, the Company was limited by covenant restrictions and could thus draw only $70.4 million of the $115 million total available in undrawn commitments from these facilities.

Borrowings under the credit facility will bear interest, at our option, at either:

·A base rate corresponding to the prime rate, plus an applicable margin; or

·A eurocurrency rate on deposits, plus an applicable margin.

The applicable margin on revolving credit facility borrowings is subject to change depending on the Company’s leverage ratio and is presently 3.25% on base rate loans and 4.25% on eurocurrency loans. The applicable margin on the term loan borrowing is dependent on the Company’s leverage ratio and is currently 3.50% on base rate loans and 4.50% on eurocurrency loans. A commitment fee of 1% per annum is assessed on the unused portion of the revolving credit facility. In December 2004, the Company obtained an amendment to its credit facility to, among other things, modify certain covenants, including the cash interest expense coverage ratio and the debt to EBITDA leverage ratio. Under this amendment, the applicable interest rate spreads on the Company’s term loan obligations increased from 4.25% to 4.50% over the current London Interbank Offered Rate (“LIBOR”) and the leverage covenant was modified to be less restrictive. Prior to this, in July 2003, the Company obtained an amendment to its credit facility to, among other things, permit the $150 million offering of 10% senior subordinated notes and the use of proceeds to complete the December 31, 2003 acquisition of DaimlerChrysler’s common and preferred interest in the New Castle joint venture and modify certain negative and affirmative covenants. Under this amendment, the applicable interest rate spreads on the Company’s term loan obligations increased from 2.75% to 4.25% over LIBOR. As of January 1, 2006, the Company was in compliance with the amended covenants. At January 1, 2006, the cash interest expense coverage ratio was 2.27 and the debt to EBITDA leverage ratio was 4.42.

The senior credit facility contains covenants and requirements affecting the Company and its subsidiaries, including a financial covenant requirement for an Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”) to cash interest expense coverage ratio to exceed 2.30 through April 2, 2006, 2.50 through July 2, 2006, 2.65 through October 1, 2006 and increasing to 2.75 through December 31, 2006; and a debt to EBTIDA ratio not to exceed 4.75 through April 2, 2006, decreasing to 4.50, 4.25 and 4.00 for the quarters ending July 2, 2006, October 1, 2006 and December 31, 2006, respectively. On February 3, 2006, the Company entered into an amended and restated credit agreement, as described in Note 31, Subsequent Events, in which the covenant restrictions were

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METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

significantly relaxed. The amended EBITDA to cash interest expense coverage ratio is now to exceed 2.20 through the year ended January 1, 2006 and 1.75 through the year ending December 31, 2006; and the amended debt to EBITDA leverage ratio is not to exceed 4.75 through the year ended January 1, 2006 and 5.25 through the year ending December 31, 2006. See also Note 31, Subsequent Events.

Other debt includes borrowings by the Company’s subsidiaries denominated in foreign currencies and capital lease obligations.

On December 20, 2005, the Company entered into a senior secured loan facility. This senior secured loan facility provides for term loans totaling $20 million, of which $10.5 million was drawn as of January 1, 2006 and the remainder of which is available until June 30, 2006 to finance in part the purchase of additional specified machinery and equipment. A commitment fee of 7.5% per annum on the unused portion of this loan will accrue through June 30, 2006. The senior secured loan facility matures December 31, 2009.

On December 31, 2003, the Company issued $31.7 million of 10% senior subordinated notes due 2014 to DaimlerChrysler. These notes have a carrying amount of $27.5 million and $27.2 million as of January 1, 2006 and January 2, 2005, respectively. The notes were issued as part of the financing of the New Castle acquisition.

In October 2003, the Company issued $150 million of 10% senior notes due 2013 in a private placement under Rule 144A and Regulation S of the Securities Act of 1933, as amended. As these notes were not registered within 210 days after the closing date, the annual interest rate increased by 1% until the registration statement was declared effective in November 2005. The net proceeds from this offering were used to redeem the balance of the $98.5 million aggregate principal amount of the outstanding 4.5% subordinated debentures that were due December 15, 2003, and to repay $46.6 million of the term loan debt under the Company’s credit facility. In connection with this financing, the Company agreed with its banks to decrease the revolving credit facility from $250 million to $200 million.

Certain of the Company’s domestic wholly owned subsidiaries, as defined in the related bond indentures, (the “Guarantors”) irrevocably and unconditionally fully guarantee the 11% senior subordinated and 10% senior notes. The condensed consolidating financial information included in Note 32, Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes, presents the financial position, results of operations and cash flows of the guarantors.

At January 1, 2006, the Company was contingently liable for standby letters of credit totaling $68.8 million issued on its behalf by financial institutions. These letters of credit are used for a variety of purposes, including meeting requirements to self-insure workers’ compensation claims.

In 2005, the Company capitalized $0.3 million and $1.1 million of debt issuance costs associated with the 10% senior subordinated notes due 2013 and the amended credit facility, respectively. In 2004, the Company capitalized $1.4 million of debt issuance costs associated with the amended credit facility. In 2003, the Company capitalized $6.4 million and $2.3 million of debt issuance costs associated with the 10% senior subordinated notes due 2013 and the amended credit facility, respectively. These debt issuance costs consist of fees paid to representatives of the initial purchasers, legal fees and facility fees paid to the lenders. The unamortized balance of $16 million related to debt issuance costs as of January 1, 2006 is being amortized based on the effective interest method over the respective life of the related debt and is included in “other assets” in the Company’s consolidated balance sheet as of January 1, 2006.

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METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13.   Leases

The Company leases certain property and equipment under operating and capital lease arrangements that expire at various dates through 2023. Most of the operating leases provide the Company with the option, after the initial lease term, either to purchase the property or renew its lease at the then fair value. Rent expense was $56.1 million, $46.4 million and $35.7 million for the years ended January 1, 2006, January 2, 2005 and December 28, 2003, respectively.

The Company completed sale-leaseback financings from 2000 through 2005 relating to certain equipment and buildings, the proceeds of which were used to finance new capital purchases and to pay down the revolving credit and term loan facilities. Due to the sale-leaseback financings, the Company has significantly increased its commitment to future lease payments.

In February 2005, the Company entered into a sale-leaseback transaction for machinery and equipment with a third party lessor, and received $11.4 million cash as part of this transaction. The Company entered into two additional sale-leaseback transactions for machinery and equipment with a third party lessor in April 2005 and September 2005, and received $4.9 million and $5.3 million cash as part of these transactions, respectively. Each of these sale-leasebacks is accounted for as an operating lease with combined annual lease expense of approximately $4 million which is included in the Company’s financial results on a straight-line basis.

In December 2004, the Company entered into two sale-leaseback transactions for machinery and equipment with third party lessors. The Company received cash proceeds of $11.8 million and $7.2 million as part of these two transactions, of which $7.3 million related to the Forging Operations. On June 17, 2004, the Company entered into a sale-leaseback transaction for machinery and equipment whereby it received cash proceeds of $7.5 million cash as part of this transaction. Each of these three sale-leasebacks is accounted for as an operating lease with combined annual lease expense of approximately $5 million which is included in the Company’s financial results on a straight-line basis. On December 31, 2003, the Company entered into a sale-leaseback with proceeds of approximately $4.5 million. This lease was accounted for as a capital lease and is included in long-term debt in the Company’s consolidated balance sheet as of January 2, 2005. The Company also entered into a $65 million sale-leaseback on December 31, 2003, as part of its financing related to the purchase of New Castle. This lease for New Castle equipment is accounted for as an operating lease and the annual lease expense is approximately $10 million.

In March 2003, the Company entered into a sale-leaseback transaction with respect to certain manufacturing equipment for proceeds of approximately $8.5 million, of which $1.4 million related to the Forging Operations. In October 2003, the Company entered into a sale-leaseback transaction for machinery and equipment for additional proceeds of $8.5 million, of which $0.5 million related to the Forging Operations. In July 2003, the Company entered into an approximate $10 million operating lease associated with the acquisition of its Greensboro, North Carolina facility. The proceeds from this lease were used to finance a portion of the acquisition of this facility from Dana Corporation. All of these leases are accounted for as operating leases and the associated rent expense is included in the Company’s financial results on a straight-line basis. The sale-leasebacks initiated in 2003 contribute an additional $3.8 million in annualized lease expense.

In December 2001 and January 2002, the Company entered into additional sale-leaseback transactions with respect to equipment and approximately 20 real properties for net proceeds of approximately $56 million and used the proceeds to repay a portion of its term debt under the credit facility. In

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METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 2002, three additional sale-leaseback transactions were completed with respect to equipment for net proceeds of approximately $19 million. Of the $56 million in proceeds resulting from the December 2001 and January 2002 sale-leaseback transactions, approximately $21 million were from the sale of TriMas properties.

In June 2001, a subsidiary of the Company sold and leased back equipment under a synthetic sale-leaseback structure. At closing, the Company provided a guarantee of all obligations of its subsidiary under the lease. At the end of the lease (including the expiration of all renewal options through 2007) the Company has the option of either purchasing all of the equipment for approximately $10 million or returning the equipment to the lessor under the lease. In the event the equipment is returned, the Company and lessor shall arrange for the disposition of the equipment. At such time the Company is obligated to pay approximately $10 million to the lessor and is entitled to receive from the lessor a residual value equal to approximately $1.4 million plus proceeds from the disposition of the equipment for the extent such proceeds exceed $1.4 million.

Deferred losses are recorded as part of the sale-leaseback transactions, and represent the difference between the carrying value of the assets sold and proceeds paid at closing by the leasing companies. Fair value was equal to or in excess of the carrying value of these assets based on asset appraisal information provided by third party valuation firms. These deferred amounts are being amortized, instead of being currently recognized, on a straight-line basis over the lives of the respective leases as required under SFAS No. 28, “Accounting for Sales with Leasebacks.” Future amortization amounts relate to the remaining portion of the 2000 and 2001 sale-leaseback deferred losses. Amortization expense of deferred losses on sale-leasebacks was $2.7 million, $8.8 million and $8.9 million for the years ended January 1, 2006, January 2, 2005 and December 28, 2003, respectively, and is included in cost of sales. Unamortized deferred losses on sale-leasebacks are $7.3 million and $10.4 million at January 1, 2006 and January 2, 2005, respectively.

Future minimum lease payments under scheduled capital and operating leases that have initial or remaining noncancelable terms in excess of one year as of January 1, 2006 are as follows:

	Capital Leases				Operating Leases
	(In thousands)
2006		$	2,394			$	55,741
2007		1,482				55,673
2008		937				48,024
2009		787				40,779
2010		787				34,534
Thereafter		—				108,491
Total minimum payments		$	6,387			$	343,242
Amount representing interest		(742		)
Obligations under capital leases		5,645
Obligations due within 1 year		(2,033		)
Long-term obligations under capital leases		$	3,612

The preceding total future minimum operating lease payments will be reduced by $32.8 million associated with a repurchase of leased assets subsequent to year-end as part of our North American Forging divestiture. See Note 31, Subsequent Events.

79

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following is a summary of contractual obligations for equipment and property that was originally leased by the Company and subsequently subleased to a third party based on the current lease payments (excluding scheduled lease payment escalation provisions). No liability has been recognized for the contractual obligations that might arise if the third party were to default on the sublease. The Company believes that in the event of default, an alternative lessee might be located to mitigate these maximum contractual obligations.

	Sublease Payments
	(In thousands)
2006		$	579.0
2007		579.0
2008		579.0
2009		579.0
2010		579.0
Thereafter		6,369.3
Total contractual sublease obligations		$	9,264.3

14.   Redeemable Preferred Stock

The Company has authorized and outstanding 644,540 shares, $1 par value, of $64.5 million in liquidation value ($57.1 million carrying value as of January 1, 2006) Series A-1 preferred stock to DaimlerChrysler Corporation. The Company will accrete from the carrying value to the liquidation value ratably over the ten-year period. The preferred stock is mandatorily redeemable on December 31, 2013. Series A-1 preferred stockholders are entitled to receive, when, as and if declared by the Company’s board of directors, cumulative quarterly cash dividends at a rate of 11% per annum plus 2% per annum for any period for which there are any accrued and unpaid dividends.

The Company has authorized 370,000 shares, $1 par value, of $36.1 million in liquidation value ($34.5 million carrying value as of January 1, 2006) Series A preferred stock, of which 361,001 are issued and outstanding to Masco Corporation. The Company will accrete from the fair value at issuance to the liquidation value ratably over the twelve-year period. The preferred stock is mandatorily redeemable on December 31, 2012. Series A preferred stockholders are entitled to receive, when, as and if declared by the Company’s board of directors, cumulative quarterly cash dividends at a rate of 13% per annum for periods ending on or prior to December 31, 2005 and 15% per annum for periods after December 31, 2005 plus 2% per annum for any period for which there are any accrued and unpaid dividends.

The Company has authorized and outstanding 184,153 shares, $1 par value, with a carrying value of $18.4 million of redeemable Series B preferred stock to Heartland. The redeemable Series B preferred shares issued are mandatory redeemable on June 15, 2013. The Series B preferred stockholders are entitled to receive, when, as and if declared by the Company’s Board of Directors, cumulative semi-annual cash dividends at a rate of 11.5% per annum. Heartland Industrial Partners (“Heartland”) purchased all of the outstanding shares of Series B preferred stock from former GMTI shareholders on December 31, 2003.

Preferred stock dividends (including accretion of $1.1 million in 2005) were $22.7 million, $19.9 million and $9.3 million, while dividend cash payments were zero, for the years ended January 1, 2006, January 2, 2005 and December 28, 2003, respectively. Thus, unpaid accrued dividends were $61.9 million and $40.3 million for the years ended January 1, 2006 and January 2, 2005, respectively. Redeemable

80

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

preferred stock, consisting of outstanding shares and unpaid dividends, was $171.9 million and $149.2 million in the Company’s consolidated balance sheet at January 1, 2006 and January 2, 2005, respectively.

15.   Derivative Financial Instruments

In the past, the Company has managed its exposure to changes in interest rates through the use of interest rate protection agreements. These interest rate derivatives are designated as cash flow hedges. The effective portion of each derivative’s gain or loss is initially reported as a component of other comprehensive income (loss) and subsequently reclassified into earnings when the forecasted transaction affects earnings. The Company does not use derivatives for speculative purposes.

In February 2001, the Company entered into interest rate protection agreements with various financial institutions to hedge a portion of its interest rate risk related to the term loan borrowings under its credit facility. These agreements included two interest rate collars with a term of three years, a total notional amount of $200 million, and a three-month LIBOR interest rate cap and floor of 7% and approximately 4.5%, respectively. The agreements also included four interest rate caps at a three-month LIBOR interest rate of 7% with a total notional amount of $301 million as of December 28, 2003.

All of the Company’s interest rate protection arrangements matured in February 2004 and, as a result of their maturity, a cumulative pre-tax non-cash gain of $6.6 million was recorded and is reflected as a non-cash gain on maturity of interest rate arrangements in the Company’s consolidated statement of operations for the year ended January 2, 2005. Prior to their maturity, $6.6 million net of tax was included in accumulated other comprehensive income related to these arrangements. Prior to the expiration of these agreements, the Company recognized additional interest expense of $1.1 million and $6.5 million for the years ended January 2, 2005 and December 28, 2003, respectively. The Company was not engaged in any derivative financial investments at January 1, 2006.

16.   Segment Information

In January 2005, the Company reorganized and consolidated its operations into two segments:  the Chassis segment and the Powertrain segment. The Chassis segment consists of the former Chassis operations plus a portion of the former Driveline operations, while the Powertrain segment consists of the former Engine operations combined with the remainder of the former Driveline operations. The prior year amounts have been restated to reflect these changes for comparison purposes.

CHASSIS—Manufactures components, modules and systems used in a variety of engineered chassis applications, including wheel-ends, axle shaft, knuckles and mini-corner assemblies. This segment utilizes a variety of processes including hot, warm and cold forging, powder metal forging and machinery and assembly.

POWERTRAIN—Manufactures a broad range of engine components, modules and systems, including sintered metal, powder metal, hydraulic controls, precision shafts, and forged and tubular fabricated products used for a variety of applications. These applications include balance shaft modules and front cover assemblies. This segment applys integrated program management to a broad range of  engine and transmission applications.

The Company has established Adjusted Earnings Before Interest Taxes Depreciation and Amortization (“Adjusted EBITDA”) as a key indicator of financial operating performance. The Company defines Adjusted EBITDA as income from continuing operations and before interest, taxes, depreciation,

81

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

amortization, asset impairment, loss on disposition of manufacturing facilities, non-cash losses on sale-leaseback of property and equipment and non-cash restricted stock award expense. Adjusted EBITDA is a non-GAAP measure and therefore caution must be exercised in using Adjusted EBITDA as an analytical tool and should not be used in isolation or as a substitute for analysis of our results as reported under GAAP. In evaluating Adjusted EBITDA, management deems it important to consider the quality of the Company’s underlying earnings by separately identifying certain costs undertaken to improve the Company’s results, such as costs related to consolidating facilities and businesses in an effort to eliminate duplicative costs or achieve efficiencies, costs related to integrating acquisitions and restructuring costs related to expense reduction efforts.

The Company’s export sales approximated $292 million, $313 million and $140 million in 2005, 2004 and 2003, respectively. Intercompany sales for 2005 were $7.1 million and $3.2 million for the Chassis and Powertrain segments, respectively. Intercompany sales for 2004 were $5.3 million and $2.8 million for the Chassis and Powertrain segments, respectively. Intercompany sales for 2003 were $6.6 million and $2.9 million for the Chassis and Powertrain segments, respectively. North American Forging intercompany sales to the Chassis and Powertrain segments were $48.0 million, $36.8 million and $20.1 million for 2005, 2004 and 2003, respectively. Intercompany sales are recognized in accordance with the Company’s revenue recognition policy and are eliminated in consolidation.

Segment activity for the years ended January 1, 2006, January 2, 2005 and December 28, 2003 is as follows:

	2005			2004			2003
	(In thousands)
Sales
Chassis	$	1,000,712		$	861,936		$	370,052
Powertrain	886,227			833,235			806,410
Total Sales	$	1,886,939		$	1,695,171		$	1,176,462
Adjusted EBITDA
Chassis	$	68,206		$	78,377		$	42,004
Powertrain	106,518			103,075			79,535
Corporate/Centralized Resources	(13,359		)	(35,926		)	(28,303		)
Total Adjusted EBITDA	161,365			145,526			93,236
Depreciation & amortization	(112,183		)	(104,825		)	(79,675		)
Legacy stock award expense	—			(563		)	(3,088		)
Asset impairment	—			—			(4,868		)
Loss from operations due to sale of manufacturing facilities	—			(7,600		)	—
Non-cash charges	(1,625		)	(997		)	610
Operating profit	$	47,557		$	31,541		$	6,215

82

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Financial Summary by Segment:

	2005		2004
	(In thousands)
Total Assets:
Chassis	$	707,784	$	810,621
Powertrain	763,112		723,733
Corporate/centralized resources	259,427		356,205
Assets held for sale	116,612		304,205
Total	$	1,846,935	$	2,194,764

	2005		2004		2003
Capital Expenditures:
Chassis	$	42,029	$	52,508	$	42,398
Powertrain	69,070		86,228		59,263
Corporate/centralized resources	648		1,538		14,620
Total	$	111,747	$	140,274	$	116,281
Depreciation and Amortization:
Chassis	$	51,669	$	44,864	$	22,310
Powertrain	51,322		49,106		48,028
Corporate/centralized resources	9,192		10,855		9,337
Total	$	112,183	$	104,825	$	79,675

The following table presents the Company’s revenues for each of the years ended January 1, 2006, January 2, 2005 and December 28, 2003, and total assets and long lived assets (defined as equity investments and receivables in affiliates, net fixed assets, intangible and other assets and excess of cost over net assets of acquired companies) at each year ended January 1, 2006 and January 2, 2005, by geographic area, attributed to each subsidiary’s continent of domicile (in thousands). Revenue and total assets from no single foreign country were material to the consolidated revenues and net assets of the Company.

	2005									2004									2003
			Total		Long Lived		Net					Total		Long Lived		Net
	Sales		Assets		Assets		Assets			Sales		Assets		Assets		Assets			Sales
	(In thousands)
United States	$	1,386,325	$	1,329,141	$	1,037,571	$	(168,661	)	$	1,271,047	$	1,641,285	$	1,115,665		$	130,321		$	823,188
Europe	$	352,651	$	386,643	$	330,318	$	276,813		$	334,777	$	435,496	$	364,266		$	313,918		$	287,211
Other North America	107,281		90,454		71,187		80,036			71,929		85,690		62,576			70,917			58,171
Other foreign	40,682		40,697		22,738		31,135			17,418		32,293		$	23,447		26,804			7,892
Total foreign	$	500,614	$	517,794	$	424,243	$	387,984		$	424,124	$	553,479	$	450,289		$	411,639		$	353,274

A significant percentage of the Automotive Group’s revenue is from three major customers. The following is a summary of the percentage of revenue from these customers for the fiscal year ended:

	January 1, 2006			January 2, 2005			December 28, 2003
DaimlerChrysler Corporation		25.8	%		25.7	%		8.7	%
Ford Motor Company		12.1	%		13.4	%		20.1	%
General Motors Corporation		6.5	%		7.7	%		11.8	%

83

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17.   Acquisitions

In the first quarter of 2004, effective December 31, 2003, the Company completed a transaction with DaimlerChrysler Corporation (“DaimlerChrysler”) that transferred full ownership of the New Castle Machining and Forge (“New Castle”) manufacturing operations to Metaldyne. From January 2003 until the transaction at December 31, 2003, New Castle was managed as a joint venture between Metaldyne and DaimlerChrysler; at December 28, 2003, the Company’s investment in this joint venture was approximately $20 million (before fees and expenses of approximately $2 million). The New Castle facility manufactures suspension and powertrain components for Chrysler, Jeep and Dodge vehicles; additionally, Metaldyne has launched initiatives to expand the customer base beyond DaimlerChrysler. The New Castle manufacturing operations are part of the Company’s Chassis segment.

As part of the New Castle transaction, Metaldyne acquired Class A and Class B units representing DaimlerChrysler’s entire joint venture interest in New Castle. In exchange, Metaldyne delivered to DaimlerChrysler $215 million (before fees and expenses of approximately $3 million), comprised of $118.8 million in cash; $31.7 million (fair value of $26.9 million as of December 31, 2003) in aggregate principal amount of a new issue of its 10% senior subordinated notes; and $64.5 million (fair value of $55.3 million as of December 31, 2003) in aggregate liquidation preference of its Series A-1 preferred stock. Included in the $5 million fees and expenses is a $2.5 million transaction fee paid to Heartland Industrial Partners (‘‘Heartland’’) pursuant to the acquisition of New Castle. The cash portion of the consideration was funded in part by the net cash proceeds of approximately $58 million from the sale-leaseback of certain New Castle machinery and equipment with a third-party lessor, with the remainder funded through Metaldyne’s revolving credit facility. The remaining $7 million of net cash proceeds from the sale-leaseback of certain equipment purchased by the Company was for use in the New Castle facility.

The Company determined the fair value of the 10% senior subordinated notes based upon an estimated yield appropriate for the level of risk inherent in the notes. The 10% senior subordinated notes feature substantially the same terms and rank pari-passu in rights of payments as the Company’s 11% senior subordinated notes which are registered and traded from time to time. Based upon available information about the prices at which the 11% senior subordinated notes were being traded, the Company determined that the required rate of return on the 10% senior subordinated notes to be 13.1% resulting in a fair value of approximately $26.9 million. This analysis resulted in a reduction in estimated current value of approximately $4.8 million below the face value for the 10% senior subordinated notes. The Company is ratably recognizing the unamortized accretion of the 10% senior subordinated notes in accordance with the interest method.

The Company also determined the fair value of the preferred stock based upon an estimated yield appropriate for the level of risk inherent in the preferred stock. As assessment of the credit worthiness of the Company was made as of the valuation date vis-à-vis an analysis of its financial ratios. In addition, the Company took into consideration the put option provided as part of the issuance of stock which would allow the shares to be “put” back to the Company in an event of an equity offering triggering event. The Company determined the appropriate rate of return on the preferred stock to be between 15.5% and 15.7% resulting in a fair value of approximately $55.3 million. This analysis resulted in a reduction in estimated current value of approximately $9.1 million below the face value for the preferred stock. The Company is ratably recognizing the unamortized accretion of the preferred stock in accordance with the interest method.

84

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair value of assets and liabilities of New Castle at December 31, 2003 consisted of the following (in thousands):

Current assets	$	13,370
Property and equipment, net	109,022
Intangible assets - customer contracts	32,883
Goodwill	28,770
Total assets	184,045
Total liabilities (including deferred taxes of $1,690)	15,800
Net assets	$	168,245

In connection with the acquisition of New Castle, the Company recorded $22.4 million of tax deductible goodwill that is amortizable over a 15 year period. The tax deductible goodwill in excess of goodwill recorded in connection with the transaction for financial reporting purposes is attributable to the unamortized accretion, as of the issue date, of the 10% senior subordinated notes.

Also in conjunction with the purchase agreement for the acquisition of New Castle, DaimlerChrysler agreed to reimburse the Company for potential equipment purchases related to production capacity for a specified product line. The Company received reimbursement totaling $8.0 million as of January 1, 2006. In the third quarter of 2005, the Company identified $1.7 million in assets that were included in the appraised value of assets reflected in the original purchase price allocation at a value in excess of fair value in consideration of the Company’s intended use of these assets. Consequently, an adjustment was made to increase goodwill and reduce fixed assets for this amount in the quarter. The net effect of the reimbursement and adjustment to the original assets acquired has been recognized in the net reduction to the goodwill recorded at the time of the acquisition.

The following unaudited pro forma financial information summarizes the results of operations for the Company for the year ended December 28, 2003 assuming the New Castle acquisition had been completed as of the beginning of the period (in thousands).

	Year Ended December 28, 2003 (Unaudited)
Net sales		$	1,886.7
Net loss attributable to common stock		(108.1		)
Loss per share		(2.53		)

In addition to the purchase accounting adjustments, the pro forma results reflect a reduction in sales to contractual sales prices and a reduction in labor costs related to the employee agreement with DaimlerChrysler.

Historically, revenue for the New Castle facility was determined based upon the sale of product to DaimlerChrysler assembly plants within North America and to third party customers not related to DaimlerChrysler based upon New Castle’s standard cost of production. For pro forma presentation, an adjustment of $19 million has been made to reduce net sales based upon the contract with DaimlerChrysler.

85

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The historical results reflect labor costs based upon existing labor agreements. For pro forma purposes, an adjustment of $54 million has been made to reflect the reduction in employee costs based upon the employee matters agreement with DaimlerChrysler.

On May 15, 2003, the Company acquired a facility in Greensboro, North Carolina, from Dana Corporation (“Dana”) for approximately $7.7 million at closing and agreed to pay an additional $1.4 million in cash over a period of time ending on December 31, 2004. The Company may also be obligated to pay up to an additional $1.4 million in cash conditioned upon being awarded new business by June 30, 2005 valued at least at $1.4 million. The Greensboro facility became part of the Chassis segment’s Chassis Products division. The Greensboro operation, which employs approximately 140 people, machines cast iron and aluminum castings, including various steering knuckles and aluminum carriers for light truck applications. The results of operations of the facility have been included in the consolidated financial statements since that date.

In connection with the acquisition of the Greensboro location, the Company entered into a 20 year lease agreement with a third party on the facility. This lease is accounted for as an operating lease with annual lease expense of approximately $1.1 million.

In addition, the Company signed a seven-year supply agreement with Dana covering all existing business at Greensboro, including a right of last refusal on successor programs. As part of the valuation of the Greensboro facility, the Company determined that the intangible assets identified were deemed to have a minor value to the Company due to the Greensboro facility’s lack of generating profits. As a result, no value was allocated to the supply agreement with Dana. In addition, in connection with the Greensboro acquisition, Dana had committed to award certain additional business to Metaldyne. In February 2006, Dana was released from its commitment to award this additional business to the Company as part of a settlement agreement between the parties.

18.   Asset Impairments and Restructuring Related Integration Actions

The Company incurred approximately $3.3 million of restructuring costs in fiscal 2005 compared to $2.5 million incurred in fiscal 2004. The 2005 charge relates principally to two actions taken in the first and fourth quarters. In the first quarter of 2005, the Company incurred a $1.5 million charge relating to the consolidation of its operating segments from three into two (elimination of the Driveline segment and consolidation into the Chassis and Powertrain segments). In the fourth quarter of 2005, the Company realigned its commercial functions including sales and purchasing by splitting them between its two operating segments: Chassis and Powertrain. As a result of both of the above actions, the Company eliminated numerous positions and anticipates further savings in the future. Approximately $1.4 million of the 2004 charge relates to the Company’s Chassis group to close a facility in Europe and $0.2 million to achieve headcount reductions in the Powertrain group. An additional $0.8 million charge in 2004 primarily relates to costs to reduce headcount at the Corporate offices.

In fiscal 2003, the Company entered into several restructuring arrangements whereby it incurred approximately $12.7 million of costs associated with severance and facility closures. These actions include the completion of the Chassis segment’s European operation reorganization that was initiated in fiscal 2002 and completed in the first quarter of 2003 and severance costs to replace certain members of the Company’s executive management team and the costs to restructure several departments in the Company’s corporate office.

86

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company expects to realize additional savings from the restructuring actions, described above, as reductions in employee-related expenses recognized in both cost of goods sold and selling, general and administrative expense.

The following table summarizes the activity for the accruals established relating to restructuring activities for 2002 through 2005. Adjustments to previously recognized acquisition related severance and exit costs were reversed to goodwill.

	Acquisition Related				2002 Additional Severance				2003 Additional Severance				2004 Additional Severance				2005 Additional Severance
	Severance				And Other				And Other				And Other				And Other
	Costs				Exit Costs				Exit Costs				Exit Costs				Exit Costs				Total
	(In thousands)
Balance at December 28, 2003		$	1,089			$	348			$	7,322			$	—			$	—		$	8,759
Charges to expense		—				—				—				2,455				—			2,455
Cash payments		(290		)		(361		)		(4,605		)		(2,010		)		—			(7,266		)
Other adjustments		(40		)		—				40				—				—			—
Reversal of unutilized amounts		(84		)		—				—				—				—			(84		)
Balance at January 2, 2005		$	675			$	(13	)		$	2,757			$	445			$	—		$	3,864
Charges to expense		—				13				(240		)		(12		)		3,527			3,288
Cash payments		(12		)		—				(2,436		)		(354		)		(2,529		)	(5,331		)
Other adjustments		(218		)		—				8				(52		)		99			(163		)
Balance at January 1, 2006		$	445			$	—			$	89			$	27			$	1,097		$	1,658

The above amounts represent total estimated cash payments, of which $1.7 million and $3.2 million are recorded in accrued liabilities in the Company’s consolidated balance sheet at January 1, 2006 and January 2, 2005, respectively. An additional $0.7 million was recorded in other long-term liabilities in the Company’s consolidated balance sheet at January 2, 2005.

19.   Disposition of Businesses

On February 1, 2004, the Company completed an asset sale pursuant to which substantially all of the business associated with two of the aluminum die casting facilities in its former Driveline segment was sold to Lester PDC, Ltd, a Kentucky-based aluminum die casting and machining company. The Company retained an interest in approximately $5.6 million in working capital (principally accounts receivable). Cash paid in the transaction to buy out the remaining portion of the equipment that had previously been sold under an operating lease arrangement by the Company was approximately $6.1 million, net of proceeds from Lester PDC of $4.1 million. The buyer also agreed to lease the Bedford Heights, Ohio and sub-lease the Rome, Georgia facilities from the Company for total annual lease payments of approximately $0.6 million. In addition, Lester PDC and Metaldyne entered into a supply agreement. These facilities had 2003 combined sales of approximately $62 million and an operating loss of approximately $14 million. Both manufacturing operations were part of the Company’s former Driveline segment. In connection with the disposition of these manufacturing facilities, the Company recognized a charge of $7.6 million on the Company’s consolidated statement of operations for the year ended January 2, 2005. The charge represents the book value of approximately $12 million in fixed assets and deferred financing fees offset by the $4.1 million in cash consideration paid by Lester PDC for the assets.

87

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In November 2004, Lester PDC discontinued operations at the Bedford Heights facility and the supply agreement and lease agreement between Lester PDC and Metaldyne were terminated. As a result, Metaldyne assumed production of some of the products at the Bedford Heights facility that were subject to the terminated supply agreement. One of these product lines is currently being manufactured at the Bedford Heights facility and the remaining products have been moved to other Metaldyne facilities.

On May 9, 2003, the Company sold its Chassis segment’s Fittings division to TriMas for $22.6 million plus the assumption of an operating lease. This transaction was accounted for as a sale of entities under common control, due to common ownership between TriMas and the Company. Therefore, the proceeds, in excess of the book value, amounting to $6.3 million were recorded as “equity and other investments in affiliates” in the Company’s consolidated balance sheet. The Fittings division, which is a leading manufacturer of specialized fittings and cold-headed parts used in automotive and industrial applications, became part of the TriMas Fastening Systems Group.

20.   Discontinued Operations

On October 28, 2005, the Company announced the possible divestiture of its business of supplying forged metal components to the automotive light vehicle market (“North American Forging” or “Forging Operations”) and engaged a third party investment banking firm to assist in the sale process. The Forging Operations, which were part of the Chassis segment and operated as a separate division with separate management within the segment, manufacture a variety of gear blanks, driveline shaft blanks, differential gears, wheel end components and precision cold forged components for global automotive original equipment manufacturers and Tier 1 component suppliers. On December 1, 2005, the Company entered into a definitive agreement to sell the Forging Operations. As a result of this agreement, the Company’s Board of Directors approved the disposition of the business prior to January 1, 2006. On January 7, 2006 the Company entered into an Asset Purchase Agreement (the “Agreement”) with Forming Technologies, Inc. (“FTI”) whereby FTI agreed to purchase the equipment, machinery, raw materials and other assets of the Forging Operations.

In accordance with SFAS No. 144, the Company determined that the Forging Operations qualified for assets held for sale treatment. Therefore, the results of operations for the Forging Operations for the current and prior periods have been reported as discontinued operations. In addition, the assets and liabilities of the Forging Operations have been reclassified as assets and liabilities of discontinued operations in the Company’s consolidated balance sheet at January 1, 2006 and January 2, 2005.

The Company determined that the undiscounted cash flows of the Forging Operations did not support the current carrying value of the Forging Operations assets. Since these assets met the held for sale criteria listed under SFAS No. 144, the Company recorded an impairment loss to reduce the assets to their fair value less cost to sell. The loss recognized was determined based upon the selling price established in the Agreement with FTI. This loss on disposition amounted to $140.5 million (net of approximately $32.3 million of taxes) reflecting the impairment of the Forging Operations long-lived assets and estimated costs to sell of approximately $4.1 million.

88

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenue from the Forging Operations, including sales with other Metaldyne affiliates, income (loss) from discontinued operations and related tax (benefit) expense for the years ended January 1, 2006, January 2, 2005 and December 28, 2003 are presented below:

	January 1, 2006				January 1, 2005				December 28, 2003
	(In millions)
Sales to third parties		$	357.6			$	345.9			$	351.8
Sales with other Metaldyne affiliates		$	48.0			$	36.8			$	20.1
Income (loss) from discontinued operations before income taxes		(10.1		)		(3.7		)		12.8
Income tax (benefit) expense		$	(1.8	)		$	(1.3	)		$	4.5
Income (loss) from discontinued operations		$	(8.3	)		$	(2.4	)		$	8.3

The components of assets and liabilities of the discontinued operations in the consolidated balance sheet are as follows:

	January 1, 2006			January 2, 2005
	(In thousands)
Cash		$	4		$	—
Accounts receivable		2,808			430
Inventories		36,151			37,005
Prepaid expenses and other		2,439			1,721
Property and equipment, net		73,896			183,083
Other assets		1,314			81,966
Assets of discontinued operations		$	116,612		$	304,205
Trade accounts payable		$	29,992		$	33,105
Accrued liabilities		7,222			8,238
Current portion of long-term debt		186			210
Current liabilities of discontinued operations		37,400			41,553
Long-term debt		7,500			7,594
Other long-term liabilities		25,704			29,526
Long-term liabilities of discontinued operations		$	70,604		$	78,673

The Company and its Forging Operations sell trade accounts receivable of substantially all domestic business operations, on an on-going basis, to MRFC, Inc., a wholly owned subsidiary of the Company. Other long-term liabilities consist of pension and post-retirement obligations of which $2.7 million will not be retained by the Company. See Note 26, Employee Benefit Plans for detail.

21.   Cumulative Effect of Change in Accounting Principle

Under FASB Interpretation (FIN) No. 47, “Accounting for Conditional Asset Retirement Obligations,” obligations associated with the retirement of long-lived assets are recorded when there is a legal obligation to incur such costs and the fair value of the liability can be reasonably estimated. This amount is accounted for as an additional element of cost, and, like other cost elements, is depreciated over the corresponding asset’s useful life. On January 1, 2006, the Company recorded a transition charge of $5.1

89

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

million ($3.3 million after tax), which is reported in the caption, “Cumulative effect of accounting changes.” FIN No. 47 primarily affects the accounting for costs associated with the future buyback or retirement of assets  under the Company’s various lease agreements.

On a pro forma basis, the amount of the liability for asset retirement obligation would have been $3.3 million and $1.8 million as of January 2, 2005 and December 28, 2003, respectively, had the Company applied FIN No. 47 for all periods presented. The adoption of FIN No. 47 did not have a significant impact on prior year results.

22.   Other Income (Expense), Net

	2005			2004			2003
	(In thousands)
Other, net:
Interest income	$	1,272		$	1,396		$	474
Debt fee amortization	(3,206		)	(3,880		)	(2,480		)
Accounts receivable securitization financing fees	(4,506		)	(2,947		)	(2,634		)
Foreign currency gains (losses)	389			(940		)	(1,010		)
Other, net	(5,149		)	(610		)	(1,420		)
Total other, net	$	(11,200	)	$	(6,981	)	$	(7,070	)

23.   Stock Options and Awards

The Company has a stock-based employee compensation plan (the “Plan”) and has issued equity-based incentives in various forms. At January 1, 2006, the Company has stock options and units outstanding to key employees of the Company for approximately 0.7 million shares at a price of $16.90 per share, 1.0 million shares at a price of $8.50 per share and 1.2 million shares at a price of $6.50 per share. However, these options and units are required to be held and cannot be exercised until the elapse of a certain time period after a public offering.

Beginning in 2004, the Company offered eligible employees the opportunity to participate in a new Voluntary Stock Option Exchange Program (the “Program”), to exchange all of their outstanding options to purchase shares of the Company’s common stock granted under the Plan for new stock options and restricted stock units to be granted under the Plan. Participation in the Program was voluntary; however, elections were required to be received by January 14, 2004, with new stock options granted on or after July 15, 2004 and restricted stock units granted on January 15, 2004. Non-eligible participants in the existing Plan and one eligible employee not electing to participate in the new Program continue to participate in the existing Plan. No stock compensation expense was recorded for the year ended January 1, 2006.

Prior to November 2001, the Company’s Long Term Stock Incentive Plan provided for the issuance of stock-based incentives. The Company granted long-term stock awards, net, for approximately 0.4 million shares of Company common stock during 2000 to key employees of the Company. The weighted average fair value per share of long-term stock awards granted during 2000 on the date of grant was $13. Compensation expense for the vesting of long-term stock awards was approximately $3.1 million in 2003, and is included with selling, general and administrative expenses in the Company’s consolidated statement of operations. Beginning in December 2000, the unamortized value of unvested stock awards was

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METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

amortized over a ten-year vesting period and recorded in the financial statements as a deduction from shareholders’ equity.

The Company cancelled outstanding stock awards in 2000 and made new restricted stock awards to certain employees of approximately 3.7 million shares of Company common stock in 2001. Under the terms of the recapitalization agreement, those shares become free of restriction, or vest, as to one-quarter upon the closing of the recapitalization merger and one-quarter in each of January 2002, 2003 and 2004. Holders of restricted stock were entitled to elect cash in lieu of 40% of their respective stock, which vested at the closing of the recapitalization merger. On each of the subsequent vesting dates, holders of restricted stock may elect to receive all of the installment in common shares, 40% in cash and 60% in common shares, or 100% of the installment in cash. The number of shares to be received will increase by 6% per annum and any cash to be received will increase by 6% per annum from the $16.90 per share recapitalization consideration.

A summary of the status of the Company’s stock options and units granted under the Plan for the three years ended 2005, 2004 and 2003 is as follows:

	2005			2004			2003
	(Shares in thousands)
Option shares outstanding, beginning of year	2,736			2,661			2,539
Weighted average exercise price	$	10.57		$	16.90		$	16.90
Option and unit shares granted	575			1,983			306
Weighted average exercise price	$	6.50		$	7.58		$	16.90
Option and unit shares exercised	—			—			—
Weighted average exercise price	—			—			—
Option and unit shares cancelled due to forfeitures	(174		)	(109		)	(184		)
Option shares exchanged for units	(153		)	(1,799		)	—-
Weighted average exercise price	$	12.20		$	16.90		$	16.90
Option and unit shares outstanding, end of year	2,984			2,736			2,661
Weighted average exercise price	$	9.59		$	10.57		$	16.90
Weighted average remaining option term (in years)	5.5			6.5			7.5
Option and unit shares exercisable, end of year	—			—			—
Weighted average exercise price	—			—			—

The weighted average exercise price of long-term stock awards is $9.59 per share at January 1, 2006. A combined total of approximately 4.9 million shares of Company common stock was available for the granting of options and incentive awards under the above plans in 2005, 2004 and 2003.

The weighted average fair value on the date of grant of options granted was $4.80 in 2005 and 2004 and $8.50 in 2003. Had stock option compensation expense been determined pursuant to the methodology of SFAS No. 123, the pro forma effects on the Company’s basic earnings per share would have been no effect in 2005 and 2004 and a reduction of approximately $0.04 in 2003. The fair value of the Company’s stock at the date of grant was $4.80 (assuming the removal of the lack of marketability and minority discount applied for purposes of this stock valuation, the value would range between $8.50 and $9.00 per share) in 2005 and 2004, and $8.50 in 2003.

91

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair value of the options was estimated at the date of grant using the minimum value method for 2005, 2004 and 2003, with no assumed dividends or volatility, a weighted average risk-free interest rate of 3.94% in 2005 and 3.67% in 2004, and an expected option life of 5.5 years in both 2005 and 2004.

24.   Loss Per Share

The following provides information relating to the numerators and denominators used in the computations of basic and diluted loss per common share:

	2005			2004			2003
	(In thousands except per share amounts)
Weighted average number of shares outstanding for basic and diluted	42,845			42,830			42,729
Loss from continuing operations	$	(109,797	)	$	(25,555	)	$	(83,691	)
Income (loss) from discontinued operations, net of tax	(8,301		)	(2,439		)	8,352
Loss on discontinued operations, net of tax	(140,547		)	—			—
Cumulative effect of change in accounting principle	(3,262		)	—			—
Net loss	$	(261,907	)	$	(27,994	)	$	(75,339	)
Less: Preferred stock dividends	—			—			9,259
Loss used for basic and diluted earnings per share computation	$	(261,907	)	$	(27,994	)	$	(84,598	)
Basic and diluted loss per share:
Loss from continuing operations less preferred stock	$	(2.56	)	$	(0.60	)	$	(2.18	)
Loss from discontinued operations	(0.19		)	(0.05		)	0.20
Loss on discontinued operations	(3.28		)	—			—
Cumulative effect of change in accounting principle	(0.08		)	—			—
Net loss attributable to common stock	$	(6.11	)	$	(0.65	)	$	(1.98	)

Diluted earnings per share reflect the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. Excluded from the calculation of diluted earnings per share are stock options representing 2.94 million and 2.69 million of common shares as they are anti-dilutive at January 1, 2006 and January 2, 2005, respectively.

Contingently issuable shares, representing approximately 50,000, 50,000 and 900,000 of restricted stock options and restricted stock awards, have an anti-dilutive effect on earnings per share for the years ended January 1, 2006, January 2, 2005 and December 28, 2003, respectively.

92

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

25.   Income Taxes

	2005			2004			2003
	(In thousands)
Income (loss) from continuing operations:
Domestic	$	(143,030	)	$	(110,302	)	$	(135,550	)
Foreign	55,989			49,190			38,700
	$	(87,041	)	$	(61,112	)	$	(96,850	)
Provision for income taxes:
Currently payable:
Federal	$	(1,009	)	$	(5,913	)	$	—
Foreign	20,957			4,901			15,128
State and local	3,224			1,869			408
	23,172			857			15,536
Deferred:
Federal	1,023			(29,058		)	(28,731		)
Foreign	1,799			(1,330		)	973
State and local	(3,238		)	(6,026		)	(937		)
	(416		)	(36,414		)	(28,695		)
Income taxes	$	22,756		$	(35,557	)	$	(13,159	)

The components of deferred taxes at January 1, 2006 and January 2, 2005 are as follows:

	2005			2004
	(In thousands)
Deferred tax assets:
Inventories	$	2,145		$	571
Accrued liabilities and other long-term liabilities	53,392			60,853
Net operating losses	139,789			72,968
Investment in subsidiary	6,907			2,980
	202,233			137,372
Valuation allowance	(87,840		)	(12,220		)
	114,393			125,152
Deferred tax liabilities:
Property and equipment	107,467			143,339
Intangible assets	27,609			48,079
Other, principally investments	10,709			9,728
	145,785			201,146
Net deferred tax liability	$	31,392		$	75,994

The net deferred tax liability resides in the following components of the balance sheet:

	(In thousands)
Assets:
Deferred and refundable income taxes	$	11,010	$	18,468
Less: refundable income taxes	—		(5,547		)
Deferred income taxes	11,010		12,921
Liabilities:
Deferred income taxes	42,402		88,915
Total net deferred tax liability	$	31,392	$	75,994

93

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following is a reconciliation of tax computed at the U.S. federal statutory rate to the provision for income taxes allocated to income from continuing operations:

	2005			2004			2003
	(In thousands)
U.S. federal statutory rate	35		%	35		%	35		%
Tax at U.S. federal statutory rate	$	(30,464	)	$	(21,389	)	$	(33,898	)
State and local taxes, net of federal tax benefit	(9		)	(1,087		)	(344		)
Higher (lower) effective foreign tax rate	2,676			(4,401		)	2,556
Foreign dividends	—			506			5,990
Refunds received in excess of prior recorded amounts	(581		)	(7,065		)	—
Preferred stock dividends	7,579			6,592			—
Change in accrual for tax contingencies	482			(6,252		)	—
Valuation allowance	45,864			(2,700		)	1,985
Undistributed foreign earnings	(990		)	750			10,200
Other, net	(1,801		)	(511		)	352
Income taxes	$	22,756		$	(35,557	)	$	(13,159	)

The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” As part of the process of preparing consolidated financial statements, the Company is required to determine its income taxes in each of the jurisdictions in which it operates. This process involves determining the current tax expense together with assessing temporary differences resulting from different treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in the Company’s consolidated balance sheet using enacted rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company must assess the likelihood that its deferred tax asset will be recovered from various means including future taxable income and, to the extent it believes that recovery is not more likely than not, it must establish a valuation allowance. To the extent that the Company establishes a valuation allowance or increases this allowance in a period, it must include an expense within the tax provision in the Company’s consolidated statement of operations. The Company does not believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.

The Company has recorded an increase in the valuation allowance of $75.6 million comprised of (i) $45.9 million for continuing operations; (ii) $1.6 million for discontinued operations; and (iii) $28.1 million for loss on discontinued operations, against its domestic deferred tax assets, net of reversing liabilities, as of January 1, 2006, due to uncertainties related to its ability to utilize a portion of its deferred tax assets, primarily consisting of net operating losses. In establishing the valuation allowance, the Company considered, among other factors, its historical profitability, projections for future profits and timing of the reversal of specific deferred tax liabilities, predominantly depreciation expense. The net increase (decrease) in the valuation allowance for the years ended January 2, 2005 and December 28, 2003 was $1.0 million and $(4.3) million, respectively.

As of January 1, 2006, the Company had unused U.S. net operating loss (“NOL”) carryforwards of approximately $337 million. $0.4 million of these losses will expire in 2020; $42.4 million will expire in 2021; $1.2 million will expire in 2022; $85 million will expire in 2023; $102 million will expire in 2024; and $106 million will expire in 2025. The Company has also recognized a deferred tax asset for unused state NOL carryforwards totaling $3.5 million in 2005 and $2.7 million in 2004. These NOL carryforwards expire in various years beginning in 2024.

94

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Included in the state deferred tax expense for the year ended January 2, 2005 is a benefit of $2.7 million that is attributable to a reduction in a valuation allowance previously established against deferred tax assets for certain net operating loss carryforwards that the Company determined was no longer warranted.

A provision has been made for U.S. or additional foreign withholding taxes on approximately $10 million and $11 million of the undistributed earnings of one foreign subsidiary at January 1, 2006 and January 2, 2005, respectively. A provision for such taxes has not been made on approximately $389 million and $368 million of the undistributed earnings of the Company’s other foreign subsidiaries for the years ended January 1, 2006 and January 2, 2005, respectively, as the Company intends to permanently reinvest the earnings of these entities. Generally, such earnings become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances. It is not practicable to estimate the amount of deferred tax liability on such undistributed earnings.

In 2002, the Company completed its analysis of the impact related to the U.S. Department of Treasury’s regulations that replaced the loss disallowance rules applicable to the sale of stock of a subsidiary member of a consolidated tax group. These regulations permit the Company to utilize a previously disallowed capital loss that primarily resulted from the sale of a subsidiary in 2000. In the year ended December 29, 2002, the Company filed an amended tax return to claim a refund relating to the previously disallowed loss and recorded a tax benefit of $20 million relating to the refund claim. In July 2004, the Company received a $27 million refund relating to the claim. The difference in the amount of benefit recorded in 2002 and the refund received in 2004, $7 million, has been recorded as a benefit in the tax provision for the year ended January 2, 2005.

26.   Employee Benefit Plans

Substantially all employees participate in noncontributory profit-sharing and/or contributory defined contribution plans, to which payments are approved annually by the Board of Directors. Aggregate charges to income under defined contribution plans were $10.3 million in 2005, $8.8 million in 2004 and $9.3 million in 2003. Anticipated 2006 contributions to the defined contribution plans will be approximately $11.0 million.

As of January 1, 2003, the Company replaced its existing combination of defined benefit plans and defined contribution plans for non-union employees with an age-weighted profit-sharing plan and a 401(k) plan. Defined benefit plan benefits no longer accrue after 2002 for these employees. This change affected approximately 1,200 employees. The profit-sharing component of the new plan is calculated using allocation rates that are integrated with Social Security and that increase with age. As a result of the disposition of TriMas on June 6, 2002, the Company is not responsible for TriMas’ net periodic pension cost subsequent to this date. However, the Company must continue to record TriMas’ portion of the net liability recognized on the Company’s consolidated balance sheet.

The Company also provides other postretirement medical and life insurance benefit plans, none of which are funded, for certain of its active and retired employees. The health care plans are contributory with participants’ contributions adjusted annually. As a result of the disposition of TriMas on June 6, 2002, the Company is not responsible for TriMas’ net periodic postretirement benefit cost, benefit obligations and net liability subsequent to this date.

The Company uses a September 30 measurement date for all of its plans. The straight-line method is used to amortize prior service amounts and unrecognized net actuarial losses over a 14 to 15 year average for all on-going pension and postretirement benefit plans. The below includes all of the Company’s domestic and foreign pension and other postretirement benefit plans.

95

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Obligations and funded status of the Company (including the obligations related to the Forging Operations) at January 1, 2006 and January 2, 2005:

	Pension  Benefits						Other Benefits
	2005			2004			2005			2004
	(In thousands)
Change in Benefit Obligation
Benefit obligation at beginning of year	$	304,181		$	289,122		$	54,261		$	53,342
Service cost	2,841			3,071			1,629			1,329
Interest cost	17,768			17,321			2,144			2,965
Plan participants’ contributions	191			191			402			448
Amendments	—			229			—			—
Actuarial loss	21,188			6,930			191			1,442
Benefits paid	(14,594		)	(13,955		)	(2,949		)	(3,290		)
Change in foreign currency	(3,376		)	2,744			—			—
Change due to amendment	—			—			(16,879		)	(1,975		)
Change due to settlement	—			—			(2,843		)	—
Change due to curtailment	—			(1,472		)	—			—
Benefit obligation at end of year	328,199			304,181			35,956			54,261
Change in Plan Assets
Fair value of plan assets at beginning of year	182,939			162,721			—			—
Actual return on plan assets	18,068			13,647			—			—
Employer contribution	22,343			18,930			2,547			2,842
Plan participants’ contributions	191			191			402			448
Benefits paid	(14,594		)	(13,955		)	(2,949		)	(3,290		)
Exchange rate changes	(1,505		)	1,405			—			—
Fair value of plan assets at end of year	207,442			182,939			—			—
Net Amount Recognized
Funded status	(120,757		)	(121,242		)	(35,956		)	(54,261		)
Unrecognized net actuarial loss	118,513			101,390			8,528			14,806
Unrecognized prior service cost (benefit)	2,010			2,165			—			(2,579		)
Net amount recognized	$	(234	)	$	(17,687	)	$	(27,428	)	$	(42,034	)
Amounts Recognized in the Statement of Financial Position
Accrued benefit cost	$	(115,798	)	$	(115,974	)	$	(27,428	)	$	(42,034	)
Intangible assets	2,010			2,165			—			—
Accumulated other comprehensive income	113,554			96,122			—			—
Net amount recognized	$	(234	)	$	(17,687	)	$	(27,428	)	$	(42,034	)
Projected benefit obligation	328,199			304,181			N/A			N/A
Accumulated benefit obligation	323,089			298,847			N/A			N/A
Fair value of plan assets	207,442			182,939			N/A			N/A

The accrued benefit cost is recorded in accrued liabilities, other long-term liabilities and long-term liabilities of discontinued operations in the Company’s consolidated balance sheet. See Note 10, Accrued Liabilities, Note 11, Other Long-term Liabilities and Note 20, Discontinued Operations, for detail.

The increase in accumulated other comprehensive income to $113.6 million ($74.7 million net of tax) at January 1, 2006 primarily reflects the excess of the accumulated benefit obligation over the fair value of the plan assets.

The Company expects to make contributions of approximately $23.7 million to the defined benefit pension plans for 2006. This amount assumes that the funding law applicable for 2005 is extended as proposed by Congress for the 2006 plan year. Absent this extension, the Company would expect to contribute an additional $2 million to the defined benefit pension plans for 2006.

96

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	Pension Benefits									Other Benefits
	2005			2004			2003			2005			2004			2003
	(In thousands)
Components of Net Periodic Benefit Cost
Service cost	$	2,841		$	3,071		$	3,213		$	1,629		$	1,329		$	1,021
Interest cost	17,768			17,321			17,102			2,144			2,965			3,008
Expected return on plan assets	(18,293		)	(17,229		)	(16,566		)	—			—			—
Amortization of prior service cost	164			146			101			(16,971		)	(286		)	(121		)
Recognized (gain) loss due to curtailments/ settlements	—			(1,472		)	(2,454		)	(2,478		)	(478		)	277
Amortization of net (gain) loss	3,479			2,369			699			7,569			476			—
Net periodic benefit cost	$	5,959		$	4,206		$	2,095		$	(8,107	)	$	4,006		$	4,185
Additional Information
Increase in minimum liability included in other comprehensive income (before tax)	$	17,432		$	10,471		$	25,536		N/A			N/A			N/A
Assumptions
Weighted-average assumptions used to determine benefit obligations at January 1, 2006, January 2, 2005 and December 28, 2003:
Discount rate	5.66		%	5.99		%	6.11		%	5.75		%	6.00		%	6.13		%
Rate of compensation increase	3.64		%	3.62		%	3.59		%	N/A			N/A			N/A
Weighted-average assumptions used to determine net periodic benefit cost for years ended January 1, 2006, January 2, 2005 and December 28, 2003:
Discount rate	5.99		%	6.11		%	6.73		%	6.00		%	6.13		%	6.75		%
Expected long-term return on plan assets	8.96		%	8.96		%	8.96		%	N/A			N/A			N/A
Rate of compensation increase	3.62		%	3.59		%	4.01		%	N/A			N/A			N/A
Assumed health care cost trend rates at January 1, 2006, January 2, 2005 and December 28, 2003:
Health care cost trend rate assumed for next year	N/A			N/A			N/A			9.00		%	9.50		%	10.00		%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	N/A			N/A			N/A			5.00		%	5.00		%	5.00		%
Year that the rate reaches the ultimate trend rate	N/A			N/A			N/A			2013			2013			2013

97

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:

	1-Percentage-			1-Percentage-
	Point Increase			Point Decrease
	(In thousands)
Effect on total of service and interest cost		$	457		$	(623	)
Effect on postretirement benefit obligation		4,204			(5,515		)

Plan Assets

The Company’s pension plans’ and other postretirement benefit plans’ weighted-average asset allocations at January 1, 2006 and January 2, 2005, by asset category, are as follows:

	Pension Benefits
	Plan Assets At
	January 1, 2006			January 2, 2005
Asset Category
Equity securities		67	%		65	%
Debt securities		29	%		33	%
Other (Cash)		4	%		2	%
Total		100	%		100	%

Investment Policy and Strategy

The policy, established by the Retirement Plan Administrative Committee, is to provide for growth of capital with a moderate level of volatility by investing assets per the target allocations stated above. The asset allocation and the investment policy will be reviewed on a semi-annual basis, to determine if the policy should be changed.

Determination of Expected Long-Term Rate of Return

The expected long-term rate of return for the plan’s total assets is based on the expected return of each of the above categories, weighted based on the target allocation for each class. Equity securities are expected to return 10% to 11% over the long-term, while debt securities are expected to return between 4% and 7%. The Retirement Plan Administrative Committee expects that the plans’ asset manager will provide a modest (0.5% to 1.0% per annum) premium to the respective market benchmark indices.

Cash Flows

The following pension benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

	Pension Benefits			Other Benefits
	January 1, 2006			January 1, 2005
2006		$	12,922		$	1,631
2007		$	13,496		$	1,623
2008		$	14,165		$	1,676
2009		$	14,805		$	1,755
2010		$	15,626		$	1,853
2011–2015		$	90,509		$	11,026

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METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Medicare Prescription Drug, Improvement and Modernization Act

On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act was signed into law. This law provides for a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to the benefit established by the law. The Company provides retiree drug benefits that exceed the value of the benefits that will be provided by Medicare Part D, and the Company’s eligible retirees generally pay a premium for this benefit that is less than the Part D premium. Therefore, the Company has concluded that these benefits are at least actuarially equivalent to the Part D program so that Metaldyne will be eligible for the basic Medicare Part D subsidy. An application to obtain this subsidy has been submitted to Medicare.

In the second quarter of 2004, a Financial Accounting Standards Board (FASB) Staff Position (FSP FAS 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug Improvement and Modernization Act of 2003”) was issued providing guidance on the accounting for the effects of the Act for employers that sponsor postretirement health care plans that provide prescription drug benefits. The FSP is effective for the first interim or annual period beginning after June 15, 2004. The federal subsidy reduced the Company’s postretirement benefit obligation by approximately $7.0 million; this savings is reflected in the balance at January 1, 2006. For 2005, the Company recognized a net reduction in postretirement expense of $0.9 as a result of this subsidy.

Postretirement Medical and Life Insurance Benefit Plans

In December 2004, the Company announced that it will discontinue retiree medical and life insurance coverage to its salaried and nonunion retirees and their beneficiaries effective January 1, 2006. This event has no impact on the Company’s 2004 annual results since the announcement occurred subsequent to the September 30, 2004 measurement date for postretirement benefits. The Company recorded a curtailment gain of $2.1 million for the year ended January 1, 2006 pursuant to this announcement, which is included in selling, general and administrative expenses in its consolidated statement of operations. Additionally, the Company recorded a benefit for net periodic benefit costs of $5.4 million, of which $1.1 million is included in selling, general and administrative expenses and $4.3 million is included in cost of sales in the Company’s consolidated statement of operations. Had the Company not made the changes noted above, its expense would have been approximately $4.5 million, or $9.9 million higher than actually recorded in 2005.

As a result of the discontinuation of retiree medical and life insurance coverage discussed above, the Company expects to receive an estimated cash savings of $1.0 million in 2006. The Company expects to make contributions of approximately $1.6 million to the postretirement medical and life insurance benefit plans for 2006.

In 2005, TriMas agreed to indemnify the Company for the cost of certain postretirement benefit plans for retired employees of former operations attributed to TriMas. As a result, as of January 1, 2006, the Company recorded $1.0 million receivable due from TriMas as reimbursement for amounts previously paid, a reduction of $2.8 million in its long-term liability for amounts expected to be paid in future periods, a $4.7 million reduction in equity investments in and receivables from affiliates and a reduction in expense of $1.0 million.

As a condition of the sale of the Forging Operations, all defined benefit pension plan obligations relating to the Forging Operations’ employees will be retained by the Company. Postretirement medical and life insurance benefit obligations relating to the former Forging Operations’ employees will also be

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METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

retained by the Company with obligations related to the current employees transferred to the new owners. This transferred obligation was approximately $2.7 million as of January 1, 2006. Pension expense associated with the Forging Operations was $0.7 million, $0.6 million and $0.1 million for the years ended January 1, 2006, January 2, 2005 and December 28, 2003, respectively. Net postretirement expense (income) associated with the Forging Operations was $(2.7) million, $0.7 million and $0.9 million for the years ended January 1, 2006, January 2, 2005 and December 28, 2003, respectively.

27.   Fair Value of Financial Instruments

In accordance with Statement of Financial Accounting Standards No. 107, “Disclosures about Fair Value of Financial Instruments,” the following methods were used to estimate the fair value of each class of financial instruments:

Cash and Cash Equivalents

The carrying amount reported in the balance sheet for cash and cash equivalents approximates fair value.

Long-Term Debt

The carrying amount of bank debt and certain other long-term debt instruments approximates fair value as the floating rates applicable to this debt reflect changes in overall market interest rates.

The carrying amounts and fair values of the Company’s financial instruments at January 1, 2006 and January 2, 2005 are as follows:

	2005				2004
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(In thousands)
Cash and cash investments	$	3,687	$	3,687	$	—	$	—
Receivables	$	140,040	$	140,040	$	181,985	$	181,985
Long-term debt:
Bank debt	$	409,798	$	409,798	$	414,618	$	414,618
11% senior subordinated notes, due 2012	$	250,000	$	191,250	$	250,000	$	210,000
10% senior notes, due 2013	$	150,000	$	135,000	$	150,000	$	144,750
10% senior subordinated notes, due 2014	$	31,746	$	27,469	$	31,750	$	27,179
Senior secured term loan credit facility	$	10,500	$	10,500	—		—
Other long-term debt	$	9,612	$	9,612	$	18,103	$	18,103

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METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

28.   Interim and Other Supplemental Financial Data (Unaudited)

	For the Quarters Ended
	January 1st			October 2nd				July 3rd		April 3rd
	(In thousands except per share amounts)
2005:
Net sales	$	448,125			$	442,837		$	506,605	$	489,372
Gross profit	$	8,902			$	40,293		$	61,064	$	51,554
Income (loss) from continuing operation	$	(94,910	)		$	(12,557	)	$	550	$	(2,880	)
Net loss	$	(243,237	)		$	(15,230	)	$	60	$	(3,500	)
Per common share:
Basic and diluted	$	(5.68	)		$	(0.35	)	$	—	$	(0.08	)

	For the Quarters Ended
	January 2nd				October 3rd				June 27th			March 28th
	(In thousands except per share amounts)
2004:
Net sales		$	424,608			$	424,848		$	439,411			$	406,304
Gross profit		$	33,011			$	35,699		$	51,739			$	47,646
Loss from continuing operation		$	(1,719	)		$	(14,882	)	$	(2,217	)		$	(6,737	)
Net income (loss)		$	(2,204	)		$	(17,370	)	$	(3,170	)		$	(5,250	)
Per common share:
Basic and diluted		$	(0.05	)		$	(0.41	)	$	(0.07	)		$	(0.12	)

The first quarter 2005 results include a postretirement medical and life insurance plan curtailment gain of $2.5 million. Additionally, fourth quarter results include $14.9 million of fixed asset disposal losses, $6.7 million of losses on idle leased assets, a $3.3 million recognition of a cumulative effect of change in accounting principle, a $12.7 million equity loss from affiliates, a $46 million tax valuation allowance and a $140.5 million loss on discontinued operations.

Fourth quarter 2004 results include an $8.0 million gain on the sale of Saturn and TriMas common stock.

29.   Commitments and Contingencies

The Company is subject to claims and litigation in the ordinary course of its business but does not believe that any such claim or litigation will have a material adverse effect on its financial position or results of operations.

The Company has one pending lawsuit by a customer regarding base material prices. The Company believes that there will be a favorable outcome based on information currently available. Approximately $1 million of accounts receivables related to this issue is recorded on the Company’s consolidated balance sheet as of January 1, 2006. It is the Company’s policy to record charges to earnings when estimates of the Company’s exposure for lawsuits and pending or asserted claims meet the criteria for recognition under SFAS No. 5, “Accounting for Contingencies.” The ultimate resolution of any such exposure to the Company may differ due to subsequent developments.

As of January 1, 2006, the Company employed certain employees who are subject to union agreements. The Company does not have national agreements in place with any union, and its facilities are

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METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

represented by a variety of different union organizations. The Company has two facilities with union contracts expiring within the next twelve months. The remaining union facilities have contracts which expire in 2007 and 2008.

30.   Related Party Transactions

In November 2000, the Company was acquired by an investor group led by Heartland and Credit Suisse First Boston (“CSFB”) in a recapitalization transaction. Heartland is a private equity fund established to “buy, build and grow” industrial companies in sectors with attractive consolidation opportunities. In addition to TriMas (see Note 6, Equity Investments and Receivables in Affiliates), Heartland has equity interests in other industrial companies. The recapitalization and Heartland’s investment have allowed the Company to continue to aggressively pursue internal growth opportunities and strategic acquisitions, and to increase the scale and future profitability of the Company. At January 1, 2006, Heartland and CSFB owned approximately 50% and 25% of the Company’s common stock, respectively.

The Company maintains a monitoring agreement with Heartland for an annual fee of $4 million plus additional fees for financings and acquisitions under certain circumstances. The Heartland monitoring agreement is based on a percentage of assets calculation and Heartland has the option of taking the greater of the calculated fee (which would have totaled $5.3 million for 2005) or $4 million. The Company paid a 1% transaction fee of $2.5 million to Heartland in 2004 related to the New Castle acquisition. Total monitoring fees paid to Heartland were $4 million for each of the years ended January 1, 2006, January 2, 2005 and December 28, 2003. Additionally, the Company recorded $0.1 million in 2005, $0.2 million in 2004 and $0.7 million in 2003 for expense reimbursements to Heartland in the ordinary course of business.

Heartland is also entitled to a 1% transaction fee in exchange for negotiating, contracting and executing certain transactions on behalf of Metaldyne, including transactions for sale-leaseback arrangements and other financings. These fees totaled approximately $0.2 million, $1.0 million and $1.9 million for the years ended January 1, 2006, January 2, 2005 and December 28, 2003, respectively. Total fee and expense reimbursements paid in 2005 and 2004 were approximately $2.2 million and $0.2 million, respectively, and amounts not remitted to Heartland total approximately $0.8 million and $2.8 million as of January 1, 2006 and January 2, 2005, respectively. These amounts are recorded as accounts payable in the Company’s consolidated balance sheet as of the year ended January 1, 2006.

On December 31, 2003, Heartland purchased all of the outstanding shares of Series B preferred stock from the Company’s former GMTI shareholders. See Note 14, Redeemable Preferred Stock.

Effective January 23, 2001, the Company changed its name to Metaldyne Corporation from MascoTech, Inc. The Company had a corporate service agreement through 2002 with Masco Corporation (“Masco”), which at January 1, 2006 owned approximately 6% of the Company’s common stock. No fees have been assessed under this service agreement since 2002. Total fee and expense reimbursements not yet remitted to Masco total $0.9 million as of January 1, 2006 and January 2, 2005, and are recorded as accounts payable in the Company’s consolidated balance sheet as of the year ended January 1, 2006.

On June 6, 2002, the Company sold 66% of its former TriMas subsidiary to Heartland and other investors. The Company’s current ownership percentage in TriMas is approximately 24%. The Company had a corporate services agreement with TriMas, which required the Company to provide corporate staff support and administrative services to TriMas subsequent to the divestiture of TriMas. Under the terms of the agreement, the Company received fees from TriMas, which aggregated approximately $0.4 million and

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METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$2.5 million in 2004 and 2003, respectively. No fees were received from TriMas in 2005. TriMas also reimburses Metaldyne for expense reimbursements in the ordinary course of business. The Company has recorded $8.6 million due from TriMas, consisting of tax net operating losses created prior to the disposition of TriMas, pension obligations and other expense reimbursements in the ordinary course of business, of which $3.8 million is recorded as receivables from TriMas and $4.8 million is recorded as equity investments and receivables in affiliates in the Company’s consolidated balance sheet as of January 1, 2006.

On November 12, 2004, the Company sold approximately 924,000 shares of its TriMas stock to Masco for $23 per shares, or a total of $21.3 million. As TriMas is a privately owned entity and no price is available for its stock, this valuation was based upon available financial information and third party valuation presented to and reviewed by the Company’s Board of Directors. A gain on the sale of shares totaling $2.9 million was recognized and is included in equity (income) loss from affiliates, net on the Company’s consolidated statement of operations as of January 2, 2005. See Note 6, Equity Investments and Receivables in Affiliates.

The Company purchased approximately $0.4 million of product from TriMas for each of the years ended January 1, 2006, January 2, 2005 and December 28, 2003.

31.   Subsequent Events

On January 10, 2006, the Company issued a press release announcing that it and its subsidiaries, Metaldyne Company LLC and Metaldyne Precision Forming—Fort Wayne, Inc., as sellers (together, the “Sellers”), entered into an Asset Purchase Agreement, dated as of January 7, 2006 (the “Agreement”), between the Company, the Sellers and Forming Technologies, Inc., as buyer (the “Buyer”). Pursuant to this agreement, the Buyer agreed to acquire, and the Sellers agreed to sell, equipment, machinery, raw materials and other assets relating to the Sellers’ business of supplying forged metal components to the automotive light vehicle market (“North American Forging” or “Forging Operations”). This divestiture was completed on March 10, 2006. In consideration for North American Forging and upon the closing of the transaction, the Sellers received consideration of approximately $79.2 million in cash (of which $11.3 million was used to repurchase assets held under sale-leasebacks by the Buyer), and retained its interest in trade accounts receivable of approximately $41 million which is subject to the accounts receivable securitization agreement. In addition, the buyer assumed $7.5 million of outstanding indebtedness of North American Forging, the assumption by the Buyer of other working capital items and the assumption by the Buyer of specified liabilities. Within 120 days from the transaction close, the Buyer and Sellers will true up working capital (excluding accounts receivable) that existed at the time of the closing to $5.7 million. As part of the Agreement, the Company will continue to provide management transition services, including accounting, finance and information technology support, to the Buyer for approximately one year subsequent to the divestiture. See also Note 20, Discontinued Operations.

On February 3, 2006, Metaldyne Corporation (the “Company”) and its wholly owned subsidiary, Metaldyne Company LLC, entered into an amended and restated credit agreement, dated as of February 3, 2006, among the Company, Metaldyne Company LLC, the foreign subsidiary borrowers party thereto, the lenders party thereto, JPMorgan Chase Bank, as Administrative Agent and Collateral Agent, Credit Suisse, as Syndication Agent, and Comerica Bank, First Union National Bank, National City Bank and Bank One, N.A. as Documentation Agents. The amendment and restatement effects the following principal changes, as well as updating and technical changes, to the existing credit agreement: (a) it adds an additional $50 million of term loans, of which $25 million was used to prepay the preexisting term loan;

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METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(b) it adjusts certain covenants to take account of the North American Forging divestiture and to provide the Company with additional covenant flexibility; and (c) it increases pricing on the existing revolving credit facility from 4.25% to 4.50% over the current LIBOR. The Company is required to use the proceeds from the planned divestiture of North American Forging to prepay (a) $25 million of the preexisting term loans and (b) to repurchase at least $45 million of assets under current operating leases. At the time of this filing, the Company repurchased approximately $48 million of assets under these operating leases with the proceeds from the North American Forging sale. Excess proceeds can be used to repurchase additional assets under current operating leases and to increase the Company’s liquidity through repayment of outstanding obligations under its revolving credit and accounts receivable securitization facilities. In connection with the repurchase of these leased assets, the Company will complete a valuation to determine the fair value of the assets purchased. Based upon the results of this valuation, the Company expects to incur a loss associated with the repurchase of the leased assets. On February 3, 2006, pursuant to the terms of the amended and restated credit agreement, Metaldyne Company LLC borrowed $50 million of additional term loans. All term loans mature on December 31, 2009. Based on the new covenants and the changes and modifications discussed above, the Company’s January 1, 2006 liquidity would have approximated $183 million.

On March 3, 2006, Dana Corporation and 40 of its U.S. subsidiaries (“Dana”) filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Dana and its domestic subsidiaries are significant customers of Metaldyne, representing one of the Company’s top 10 customers in terms of sales. Metaldyne does not believe that this bankruptcy filing will have a material financial impact on its operations or financial position. Accounts receivable with Dana outstanding at January 1, 2006 were $10.2 million. Subsequent to year end and prior to Dana’s filing, the Company received $10.0 million of the outstanding receivables balance. The Company has taken various measures to mitigate its receivable collection exposure, including a credit default swap and membership on the Unsecured Creditors’ Committee.

32.   Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes

The following condensed consolidating financial information presents:

(1)Condensed consolidating financial statements as of January 1, 2006 and January 2, 2005, and for the years ended January 1, 2006, January 2, 2005 and December 28, 2003 of (a) Metaldyne Corporation, the parent and issuer, (b) the guarantor subsidiaries, (c) the non-guarantor subsidiaries and (d) the Company on a consolidated basis, and

(2)Elimination entries necessary to consolidate Metaldyne Corporation, the parent, with guarantor and non-guarantor subsidiaries.

The condensed consolidating financial statements are presented on the equity method. Under this method, the investments in subsidiaries are recorded at cost and adjusted for the Company’s share of the subsidiaries’ cumulative results of operations, capital contributions, distributions and other equity changes. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.

Investments in non-domestic subsidiaries are primarily held at Metaldyne Company LLC, a wholly owned subsidiary of Metaldyne Corporation and the guarantor subsidiaries. Equity in non-domestic subsidiary investees is included in the guarantor column of the accompanying consolidating financial information.

104

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Guarantor/Non-Guarantor
Condensed Consolidating Balance Sheet
January 1, 2006

	Parent			Guarantor		Non-Guarantor			Eliminations				Consolidated
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	—		$	—		$	3,687		$	—			$	3,687
Total receivables, net	—			4,275			135,604			—				139,879
Inventories	—			48,824			35,441			—				84,265
Deferred and refundable income taxes	—			9,406			1,604			—				11,010
Prepaid expenses and other assets	—			20,244			9,424			—				29,668
Assets of discontinued operations	—			116,612			—			—				116,612
Total current assets	—			199,361			185,760			—				385,121
Equity investments and receivables in affiliates	90,928			—			—			—				90,928
Property and equipment, net	—			371,596			258,832			—				630,428
Excess of cost over net assets of acquired companies	—			435,302			148,688			—				583,990
Investment in subsidiaries	300,323			217,642			—			(517,965		)		—
Intangible and other assets	—			137,613			18,855			—				156,468
Total assets	$	391,251		$	1,361,514		$	612,135		$	(517,965	)		$	1,846,935
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	—		$	201,747		$	59,351		$	—			$	261,098
Accrued liabilities	—			96,012			27,858			—				123,870
Current liabilities of discontinued
operations	—			37,400			—			—				37,400
Current maturities, long-term debt	—			2,627			4,013			—				6,640
Total current liabilities	—			337,786			91,222			—				429,008
Long-term debt	427,469			423,010			260			—				850,739
Deferred income taxes	—			14,967			27,435			—				42,402
Minority interest	—			—			740			—				740
Other long-term liabilities	—			86,980			12,611			—				99,591
Long-term liabilities of discontinued operations	—			33,204			—			—				33,204
Redeemable preferred stock	171,928			—			—			—				171,928
Intercompany accounts, net	(427,469		)	165,244			262,225			—				—
Total liabilities	171,928			1,061,191			394,493			—				1,627,612
Shareholders’ equity:
Preferred stock	—			—			—			—				—
Common stock	42,845			—			—			—				42,845
Paid-in capital	698,868			—			—			—				698,868
Accumulated deficit	(524,648		)	—			—			—				(524,648		)
Accumulated other comprehensive income	2,258			—			—			—				2,258
Investment by Parent/Guarantor	—			300,323			217,642			(517,965		)		—
Total shareholders’ equity	219,323			300,323			217,642			(517,965		)		219,323
Total liabilities and shareholders’ equity	$	391,251		$	1,361,514		$	612,135		$	(517,965	)		$	1,846,935

105

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Guarantor/Non-Guarantor
Condensed Consolidating Balance Sheet
January 2, 2005

	Parent			Guarantor		Non-Guarantor			Eliminations				Consolidated
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	—		$	—		$	—		$	—			$	—
Total receivables, net	—			12,448			168,736			—				181,184
Inventories	—			47,568			42,451			—				90,019
Deferred and refundable income taxes	—			14,498			3,970			—				18,468
Prepaid expenses and other assets	—			27,112			7,822			—				34,934
Assets of discontinued operations	—			304,205			—			—				304,205
Total current assets	—			405,831			222,979			—				628,810
Equity investments and receivables in affiliates	107,040			—			—			—				107,040
Property and equipment, net	—			397,699			275,470			—				673,169
Excess of cost over net assets of acquired companies	—			457,042			154,189			—				611,231
Investment in subsidiaries	584,111			261,038			—			(845,149		)		—
Intangible and other assets	—			155,423			19,091			—				174,514
Total assets	$	691,151		$	1,677,033		$	671,729		$	(845,149	)		$	2,194,764
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	—		$	166,602		$	86,879		$	—			$	253,481
Accrued liabilities	—			83,765			25,051			—				108,816
Current liabilities of discontinued operations	—			41,553			—			—				41,553
Current maturities, long-term debt	—			3,423			8,624			—				12,047
Total current liabilities	—			295,343			120,554			—				415,897
Long-term debt	427,180			418,723			1,950			—				847,853
Deferred income taxes	—			61,943			26,972			—				88,915
Minority interest	—			—			652			—				652
Other long-term liabilities	—			105,786			7,390			—				113,176
Long-term liabilities of discontinued operations	—			37,120			—			—				37,120
Redeemable preferred stock	149,191			—			—			—				149,191
Intercompany accounts, net	(427,180		)	174,007			253,173			—				—
Total liabilities	149,191			1,092,922			410,691			—				1,652,804
Shareholders’ equity:
Preferred stock	—			—			—			—				—
Common stock	42,830			—			—			—				42,830
Paid-in capital	698,868			—			—			—				698,868
Accumulated deficit	(262,741		)	—			—			—				(262,741		)
Accumulated other comprehensive income	63,003			—			—			—				63,003
Investment by Parent/Guarantor	—			584,111			261,038			(845,149		)		—
Total shareholders’ equity	541,960			584,111			261,038			(845,149		)		541,960
Total liabilities and shareholders’ equity	$	691,151		$	1,677,033		$	671,729		$	(845,149	)		$	2,194,764

106

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Guarantor/Non-Guarantor
Condensed Consolidating Statement of Operations
Year Ended January 1, 2006

	Parent			Guarantor			Non-Guarantor				Eliminations			Consolidated
	(In thousands)
Net sales	$	—		$	1,380,859			$	506,080			$	—	$	1,886,939
Cost of sales	—			(1,311,802		)		(413,324		)		—		(1,725,126		)
Gross profit	—			69,057				92,756				—		161,813
Selling, general and administrative expenses	—			(87,188		)		(23,780		)		—		(110,968		)
Restructuring charges	—			(2,953		)		(335		)		—		(3,288		)
Operating profit (loss)	—			(21,084		)		68,641				—		47,557
Other expense, net:
Interest expense	—			(87,633		)		(2,017		)		—		(89,650		)
Preferred stock dividends and accretion	(22,737		)	—				—				—		(22,737		)
Equity loss from affiliates, net	(11,011		)	—				—				—		(11,011		)
Other, net	—			(4,263		)		(6,937		)		—		(11,200		)
Other expense, net	(33,748		)	(91,896		)		(8,954		)		—		(134,598		)
Income (loss) from continuing operations before income taxes	(33,748		)	(112,980		)		59,687				—		(87,041		)
Income tax expense	—			—				22,756				—		22,756
Income (loss) from continuing operations	(33,748		)	(112,980		)		36,931				—		(109,797		)
Loss from discontinued operations, net of tax	—			(8,301		)		—				—		(8,301		)
Loss on discontinued operations, net of tax	—			(140,547		)		—				—		(140,547		)
Cumulative effect of change in accounting principle, net of tax	—			(3,262		)		—				—		(3,262		)
Equity in net income of subsidiaries	(228,159		)	36,931				—				191,228		—
Earnings (loss) attributable to common stock	$	(261,907	)	$	(228,159	)		$	36,931			$	191,228	$	(261,907	)

107

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Guarantor/Non-Guarantor
Condensed Consolidating Statement of Operations
Year Ended January 2, 2005

	Parent			Guarantor			Non-Guarantor				Eliminations				Consolidated
	(In thousands)
Net sales	$	—		$	1,271,011			$	424,160			$	—		$	1,695,171
Cost of sales	—			(1,187,176		)		(339,900		)		—			(1,527,076		)
Gross profit	—			83,835				84,260				—			168,095
Selling, general and administrative expenses	—			(103,939		)		(22,560		)		—			(126,499		)
Restructuring charges	—			(1,075		)		(1,380		)		—			(2,455		)
Loss on disposition of manufacturing facilities	—			(7,600		)		—				—			(7,600		)
Operating profit (loss)	—			(28,779		)		60,320				—			31,541
Other expense, net:
Interest expense	—			(78,958		)		(2,860		)		—			(81,818		)
Preferred stock dividends and accretion	(19,900		)	—				—				—			(19,900		)
Non-cash gain on maturity of interest rate arrangements	—			6,575				—				—			6,575
Equity income from affiliates, net	1,451			—				—				—			1,451
Gain on sale of equity investments	8,020			—				—				—			8,020
Other, net	—			(5,051		)		(1,930		)		—			(6,981		)
Other expense, net	(10,429		)	(77,434		)		(4,790		)		—			(92,653		)
Income (loss) from continuing operations before income taxes	(10,429		)	(106,213		)		55,530				—			(61,112		)
Income tax expense (benefit)	—			(39,327		)		3,770				—			(35,557		)
Income (loss) from continuing operations	(10,429		)	(66,886		)		51,760				—			(25,555		)
Loss from discontinued operations, net of tax	—			(2,439		)		—				—			(2,439		)
Equity in net income of subsidiaries	(17,565		)	51,760				—				(34,195		)	—
Earnings (loss) attributable to common stock	$	(27,994	)	$	(17,565	)		$	51,760			$	(34,195	)	$	(27,994	)

108

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Guarantor/Non-Guarantor
Condensed Consolidating Statement of Operations
Year Ended December 28, 2003

	Parent			Guarantor			Non-Guarantor				Eliminations			Consolidated
	(In thousands)
Net sales	$	—		$	822,732			$	353,730			$	—	$	1,176,462
Cost of sales	—			(751,316		)		(292,450		)		—		(1,043,766		)
Gross profit	—			71,416				61,280				—		132,696
Selling, general and administrative expenses	—			(90,999		)		(17,870		)		—		(108,869		)
Restructuring charges	—			(11,164		)		(1,580		)		—		(12,744		)
Asset impairment	—			(4,868		)		—				—		(4,868		)
Operating profit (loss)	—			(35,615		)		41,830				—		6,215
Other expense, net:
Interest expense	—			(69,413		)		(5,870		)		—		(75,283		)
Equity loss from affiliates, net	(20,712		)	—				—				—		(20,712		)
Other, net	—			(10,680		)		3,610				—		(7,070		)
Other expense, net	(20,712		)	(80,093		)		(2,260		)		—		(103,065		)
Income (loss) from continuing operations before income taxes	(20,712		)	(115,708		)		39,570				—		(96,850		)
Income tax expense (benefit)	—			(31,939		)		18,780				—		(13,159		)
Income (loss) from continuing operations	(20,712		)	(83,769		)		20,790				—		(83,691		)
Income from discontinued operations	—			8,352				—				—		8,352
Equity in net income of subsidiaries	(54,627		)	20,790				—				33,837		—
Net income (loss)	(75,339		)	(54,627		)		20,790				33,837		(75,339		)
Preferred stock dividends	9,259			—				—				—		9,259
Earnings (loss) attributable to common stock	$	(84,598	)	$	(54,627	)		$	20,790			$	33,837	$	(84,598	)

109

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Guarantor/Non-Guarantor
Condensed Consolidating Statement of Cash Flows
Year Ended January 1, 2006

	Parent		Guarantor			Non-Guarantor				Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities:
Net cash provided by operating activities	$	—	$	6,234			$	95,190			$	—		$	101,424
Cash flows from investing activities:
Capital expenditures	—		(78,258		)		(33,489		)		—			(111,747		)
Reimbursement from acquisition of business, net of cash received	—		7,960				—				—			7,960
Proceeds from sale/leaseback of fixed assets	—		21,588				—				—			21,588
Investing cash flows used for discontinued operations	—		(11,192		)		—				—			(11,192		)
Net cash used for investing activities	—		(59,902		)		(33,489		)		—			(93,391		)
Cash flows from financing activities:
Proceeds of term loan facilities	—		10,500				—				—			10,500
Principal payments of term loan facilities	—		(883		)		—				—			(883		)
Proceeds of revolving credit facility	—		295,038				—				—			295,038
Principal payments of revolving credit facility	—		(298,975		)		—				—			(298,975		)
Proceeds of other debt	—		—				6,022				—			6,022
Principal payments of other debt	—		(2,676		)		(11,507		)		—			(14,183		)
Capitalization of debt financing fees	—		(1,396		)		—				—			(1,396		)
Financing cash flows used for discontinued operations	—		(135		)		—				—			(135		)
Net cash provided by (used for) financing activities	—		1,473				(5,485		)		—			(4,012		)
Effect of exchange rates on cash	—		—				(334		)		—			(334		)
Change in intercompany accounts	—		52,195				(52,195		)		—			—
Net increase in cash	—		—				3,687				—			3,687
Cash and cash equivalents, beginning of period	—		—				—				—			—
Cash and cash equivalents, end of period	$	—	$	—			$	3,687			$	—		$	3,687

110

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Guarantor/Non-Guarantor
Condensed Consolidating Statement of Cash Flows
Year Ended January 2, 2005

	Parent			Guarantor			Non-Guarantor				Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities:
Net cash provided by operating activities	$	—		$	47,399			$	31,740			$	—		$	79,139
Cash flows from investing activities:
Capital expenditures	—			(99,991		)		(40,283		)		—			(140,274		)
Acquisition of business, net of cash received	—			(203,870		)		—				—			(203,870		)
Proceeds from sale/leaseback of fixed assets	—			84,191				—				—			84,191
Disposition of manufacturing facilities	—			(500		)		—				—			(500		)
Proceeds from sale of equity investments	33,830			—				—				—			33,830
Proceeds on sale of joint venture	—			1,260				—				—			1,260
Investing cash flows used for discontinued operations	—			(4,842		)		—				—			(4,842		)
Net cash provided by (used for) investing activities	33,830			(223,752		)		(40,283		)		—			(230,205		)
Cash flows from financing activities:
Principal payments of term loan facilities	—			(1,325		)		—				—			(1,325		)
Proceeds of revolving credit facility	—			279,452				—				—			279,452
Principal payments of revolving credit facility	—			(215,910		)		—				—			(215,910		)
Proceeds of senior subordinated notes, due 2014	26,923			—				—				—			26,923
Proceeds of other debt	—			—				3,734				—			3,734
Principal payments of other debt	—			(4,163		)		(5,311		)		—			(9,474		)
Capitalization of debt financing fees	—			(1,376		)		—				—			(1,376		)
Issuance of Series A-1 preferred stock	55,344			—				—				—			55,344
Financing cash flows used for discontinued operations	—			(358		)		—				—			(358		)
Net cash provided by (used for) financing activities	82,267			56,320				(1,577		)		—			137,010
Effect of exchange rates on cash	—			—				230				—			230
Change in intercompany accounts	(116,097		)	109,287				6,810				—			—
Net decrease in cash	—			(10,746		)		(3,080		)		—			(13,826		)
Cash and cash equivalents, beginning of period	—			10,746				3,080				—			13,826
Cash and cash equivalents, end of period	$	—		$	—			$	—			$	—		$	—

111

METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)

Guarantor/Non-Guarantor
Condensed Consolidating Statement of Cash Flows
Year Ended December 28, 2003

	Parent			Guarantor			Non-Guarantor				Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities:
Net cash provided by operating activities	$	—		$	48,779			$	50,464			$	—		$	99,243
Cash flows from investing activities:
Capital expenditures	—			(90,143		)		(26,138		)		—			(116,281		)
Disposition of businesses to a related party	—			—				22,570				—			22,570
Acquisition of business, net of cash received	—			(7,650		)		—				—			(7,650		)
Proceeds from sale/leaseback of fixed assets	—			15,063				—				—			15,063
Proceeds from sale of TriMas shares	20,000			—				—				—			20,000
Investment in joint venture	—			(20,000		)		—				—			(20,000		)
Investing cash flows used for discontinued operations	—			(12,531		)		—				—			(12,531		)
Net cash provided by (used for) investing activities	20,000			(115,261		)		(3,568		)		—			(98,829		)
Cash flows from financing activities:
Principal payments of term loan facilities	—			(47,599		)		—				—			(47,599		)
Proceeds of revolving credit facility	—			180,000				—				—			180,000
Principal payments of revolving credit facility	—			(180,000		)		—				—			(180,000		)
Proceeds of senior notes, due 2013	150,000			—				—				—			150,000
Principal payments of convertible subordinated debentures, due 2003	(98,532		)	—				—				—			(98,532		)
Proceeds of other debt	—			—				1,940				—			1,940
Principal payments of other debt	—			(3,831		)		(5,104		)		—			(8,935		)
Capitalization of debt financing fees				(2,346		)		—				—			(2,346		)
Financing cash flows used for discontinued operations	—			(246		)		—				—			(246		)
Net cash provided by (used for) financing activities	51,468			(54,022		)		(3,164		)		—			(5,718		)
Effect of exchange rates on cash	—			—				—				—			—
Change in intercompany accounts	(71,468		)	116,640				(45,172		)		—			—
Net decrease in cash	—			(3,864		)		(1,440		)		—			(5,304		)
Cash and cash equivalents, beginning of period	—			14,610				4,520				—			19,130
Cash and cash equivalents, end of period	$	—		$	10,746			$	3,080			$	—		$	13,826

112

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

Not Applicable.

Item 9A.Controls and Procedures.

In connection with its audit of the Company’s financial statements as of January 1, 2006, KPMG advised the Company in March 2006 that the Company’s certain deficiencies over controls over fixed assets perpetual records constituted a material weakness. It was noted adjustments were recorded in 2003 and again in 2005 based on the Company’s efforts to verify existence and useful lives of owned and leased assets. It has been recommended that existing policies and procedures relative to the maintenance of perpetual records for owned and leased assets should be reviewed and revised, if appropriate, to ensure timely identification and recording of changes to assets. In addition, procedures should be adopted to ensure periodic reviews of fixed asset records in the future. This material weakness, if unaddressed, could result in material errors in the Company’s financial statements.

Realizing the controls associated with fixed assets were not sufficient to ensure timely identification of changes to assets, the Company undertook comprehensive physical inventories of leased and owned assets during the current year, which resulted in adjustments to previously recorded amounts of company owned fixed assets and obligations for idle or missing leased assets. Utilizing the fixed asset information validated from these physical inventory procedures, the Company intends to take additional actions to address the underlying processes to ensure that fixed asset activity is recorded on a timely basis. While these process improvements are being implemented, the Company will continue to support this activity with periodic physical counts of fixed assets.

Changes in Controls and Procedures

Our report on controls and procedures for the year ended January 2, 2005 described six material weaknesses previously communicated to the Company by KPMG in March 2005 in our controls and procedures with respect to the extent to which manual journal entries at the plant level were able to be made without appropriate review or supporting documentation; the extent to which manual corporate level adjustments were required in the consolidation and financial reporting/close process; the need to perform regular, detailed account analyses and reconciliations; the need to improve controls to limit access to accounts payable and vendor files; the need to enhance controls related to fixed assets to ensure, among other things, timely asset classifications and the need to develop a process for controlling access to its various information technology systems. The Company committed itself to these matters during the course of the year and with the exception of the continuing material weakness noted in fixed assets, these previous material weaknesses were addressed during the year. Management considers the improvements implemented to address these five material weaknesses to represent a change that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The Company continues to devote substantial resources to the improvement and review of its control processes and procedures as part of the Company’s preparation for compliance with the internal control over financial reporting requirements of Section 404 of the Sarbanes-Oxley Act. There can be no assurance that the Company will be able fully address the control requirements associated with Section 404 of the Sarbanes-Oxley Act by the required compliance date. The Company must begin to comply with these requirements for its fiscal year ending December 30, 2007.

113

Specific remedial actions that were completed during 2005 include the following:

·training of accounting personnel and non-accounting personnel in accounting matters;

·revision of incentive compensation system to eliminate plant specific performance criteria in favor of division-wide criteria;

·appointment of a Financial Controller to oversee all North American plant controllers and work to ensure that financial reporting requirements are understood throughout the North American plants;

·appointment of a Senior Finance Director, who reports directly to the Chief Financial Officer, to provide direct line of reporting for all European plant controllers;

·appointed a Director, Sarbanes-Oxley Implementation in order to manage the Company’s efforts to comply with the requirements of Section 404 of the Sarbanes-Oxley Act.

·improved corporate accounting policies and procedures documentation, including the institution of quarterly updates on accounting policy and procedure changes;

·seperated assignments, responsibility and access between the accounts payable group and central procurement group; and

·improved procedures and review processes relative to plant manual journal entries, including the adoption of a new corporate policy requiring approval of manual journal entries exceeding certain designated amounts.

Disclosure Controls and Procedures

Concurrent with the annual audit of the Company’s financial statements, management, with the participation of our Chief Executive Officer and Chief Financial Officer, concluded an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934) pursuant to Rule 13a-15 of the Exchange Act. Our disclosure controls and procedures are designed only to provide reasonable assurance that they will meet their objectives. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are not effective to provide reasonable assurance that they will meet their objectives as of January 1, 2006. Consequently, in connection with the preparation of this Annual Report, management of the Company undertook and completed reconciliations, analyses and reviews, including comprehensive physical inventories of owned and leased assets, in addition to those historically completed to confirm that this Annual Report fairly presents in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in accordance with generally accepted accounting principles.

Item 9B.Other Information.

Not Applicable.

114

PART III

Item 10.Directors and Executive Officers of the Registrant.

Information regarding executive officers required by this Item is set forth as a Supplementary Item at the end of Part I hereof (pursuant to Instruction 3 to Item 401(b) of Regulation S-K). Other information required by this Item will be contained in the Company’s definitive Proxy Statement for its 2006 Annual Meeting of Stockholders, to be filed on or before May 1, 2006, and such information is incorporated herein by reference.

Item 11.Executive Compensation.

Information required by this Item will be contained in the Company’s definitive Proxy Statement for its 2006 Annual Meeting of Stockholders, to be filed on or before May 1, 2006, and such information is incorporated herein by reference.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information required by this Item will be contained in the Company’s definitive Proxy Statement for its 2006 Annual Meeting of Stockholders, to be filed on or before May 1, 2006, and such information is incorporated herein by reference.

Item 13.Certain Relationships and Related Transactions.

Information required by this Item will be contained in the Company’s definitive Proxy Statement for its 2006 Annual Meeting of Stockholders, to be filed on or before May 1, 2006, and such information is incorporated herein by reference.

Item 14.Principal Accounting Fees and Services.

Information required by this Item will be contained in the Company’s definitive Proxy Statement for its 2006 Annual Meeting of Stockholders, to be filed on or before May 1, 2006, and such information is incorporated herein by reference.

115

PART IV

Item 15.Exhibits, Financial Statement Schedule.

(A)Listing of Documents:

(1)Financial Statements.   The Company’s Consolidated Financial Statements included in Item 8 hereof, as required at January 1, 2006 and January 2, 2005, and for the periods ended January 1, 2006, January 2, 2005 and December 28, 2003, consist of the following:

Consolidated Balance Sheet

Consolidated Statement of Income

Consolidated Statement of Cash Flows

Consolidated Statement of Shareholders’ Equity

Notes to Consolidated Financial Statements

(2)Financial Statement Schedule.   Financial Statement Schedule of the Company appended hereto, as required for the periods ended January 1, 2006, January 2, 2005 and December 28, 2003, consists of the following:

Valuation and Qualifying Accounts

(3)Exhibits.

Exhibit Number	Description of Exhibit
2.1	Recapitalization Agreement, dated as of August 1, 2000, between MascoTech, Inc. (now known as Metaldyne Corporation) and Riverside Company LLC (including Amendment No. 1 to the Recapitalization Agreement dated October 23, 2000 and Amendment No. 2 to the Recapitalization Agreement dated November 28, 2000) (Incorporated by reference to Exhibit 2 to MascoTech, Inc.’s Registration Statement on Form S-1 filed December 27, 2000).
3.1	Restated Certificate of Incorporation of MascoTech, Inc. (Incorporated by reference to Exhibit 3.1 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 31, 2000).
3.2	Bylaws of Metaldyne Corporation, as amended (Incorporated by reference to Exhibit 3.2 to MascoTech, Inc.’s Registration Statement on Form S-1 filed December 27, 2000).
3.3	Certificate of Designation of Series A-1 Preferred Stock and Series A-2 Preferred Stock (Incorporated by reference to Exhibit 10.5 to Metaldyne Corporation’s Current Report on Form 8-K filed December 11, 2002).
3.4	Certificate of Designation of Series B Preferred Stock (Incorporated by reference to Exhibit 3.4 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended January 2, 2005).
4.1	Shareholders Agreement, dated as of November 28, 2000, by and among MascoTech, Inc., Masco Corporation, Richard Manoogian, certain of their respective affiliates and other co-investors party thereto (Incorporated by reference to Exhibit 10.20 to MascoTech, Inc.’s Registration Statement on Form S-1 filed December 27, 2000).
4.2	Indenture relating to the 11% Senior Subordinated Notes due 2012, dated as of June 20, 2002, by and among Metaldyne Corporation, each of the Guarantors named therein, and The Bank of New York as Trustee (Incorporated by reference to Exhibit 4.1 to Metaldyne Corporation’s Registration Statement on Form S-4 filed on September 10, 2002).

116

4.3	Form of note relating to the 11% Senior Subordinated Notes due 2012 (Incorporated by reference to Exhibit 4.2 to Metaldyne Corporation’s Registration Statement on Form S-4 filed on September 10, 2002).
4.4	Registration Rights Agreement relating to the notes, dated as of June 20, 2002, by and among Metaldyne Corporation and the parties named therein (Incorporated by reference to Exhibit 4.3 to Metaldyne Corporation’s Registration Statement on Form S-4 filed on September 10, 2002).
4.5	Indenture relating to the 10% Senior Subordinated Notes due 2014, dated as of December 31, 2003, by and among Metaldyne Corporation, the Guarantors named therein and the Trustee (as defined therein) (Incorporated by reference to Exhibit 10.3 to Metaldyne Corporation’s Current Report on Form 8-K filed January 14, 2004).
4.6	Form of note relating to the 10% Senior Subordinated Notes due 2014 (included in Exhibit 4.5).
4.7	Registration Rights Agreement, dated as of December 31, 2003, by and among Metaldyne Corporation, each of the Guarantors named therein, and DaimlerChrysler Corporation (Incorporated by reference to Exhibit 10.4 to Metaldyne Corporation’s Current Report on Form 8-K filed January 14, 2004).
4.8	Indenture relating to the 10% Senior Notes due 2013, dated as of October 27, 2003, by and among Metaldyne Corporation, each of the Guarantors named therein, and The Bank of New York as Trustee (Incorporated by reference to Exhibit 4.8 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).
4.9	Form of note relating to the 10% Senior Notes due 2013 (included in Exhibit 4.8).
4.10	Registration Rights Agreement relating to the 10% Senior Notes due 2013, dated as of October 27, 2003, by and among Metaldyne Corporation and the other parties named therein (Incorporated by reference to Exhibit 4.10 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).
10.1	Assumption and Indemnification Agreement, dated as of May 1, 1984, between Masco Corporation and Masco Industries, Inc. (now known as Metaldyne Corporation) (Incorporated by reference to Exhibit 10.3 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 31, 2000).
10.2	Amended and Restated Credit Agreement as of February 3, 2006, by and among Metaldyne Corporation, Metaldyne Company, the foreign subsidiary borrowers party thereto, the lenders party thereto and JP Morgan Chase Bank, as administrative agent and collateral agent (the “Amended and Restated Credit Agreement”) (Incorporated by reference to Exhibit 10.1 to Metaldyne Corporation’s Current Report on Form 8-K filed February 9, 2006).
10.3	Amended and Restated Receivables Purchase Agreement dated as of July 8, 2005 (Incorporated by reference to Exhibit 99.1 to Metaldyne Corporation’s Current Report on Form 8-K/A filed July 15, 2005).
10.4	Amended and Restated Receivables Transfer Agreement dated as of July 8, 2005 (Incorporated by reference to Exhibit 99.2 to Metaldyne Corporation’s Current Report on Form 8-K/A filed July 15, 2005).

117

10.5	Credit Agreement dated as of December 20, 2005, by and among Metaldyne Company LLC, Metaldyne Corporation, Credit Suisse as Administrative Agent and Lender, and other lenders party thereto (Incorporated by reference to Exhibit 10.1 to Metaldyne Corporation’s Current Report on Form 8-K filed December 23, 2005).
10.6	Metaldyne Corporation 2001 Long Term Incentive and Share Award Plan (Incorporated by reference to Exhibit 4.1 to Metaldyne Corporation’s Registration Statement of Form S-8 filed April 15, 2002).
10.7	MascoTech, Inc. Supplemental Executive Retirement and Disability Plan (Incorporated by reference to Exhibit 10.n to MascoTech, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999).
10.8	Description of the MascoTech, Inc. program for Estate, Financial Planning and Tax Assistance (Incorporated by reference to Exhibit 10.x to MascoTech, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1997).
10.9	Description of the Metaldyne Annual Value Creation Plan (Incorporated by reference to Exhibit 10.9 to Metaldyne Corporation’s Quarterly Report on Form 10-Q for the quarter ended April 3, 2005).
10.10	Description of the Metaldyne Executive Retirement Plan (Incorporated by reference to Exhibit 10.10 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).
10.11	Metaldyne Corporation Voluntary Stock Option Exchange Program Offer Summary (Incorporated by reference to Exhibit 10.11 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).
10.12	Joint Venture Formation Agreement, dated as of December 8, 2002, by and among NC-M Chassis Systems, LLC, DaimlerChrysler Corporation and Metaldyne Corporation (Incorporated by reference to Exhibit 10.1 to Metaldyne Corporation’s Current Report on Form 8-K filed December 11, 2002).
10.13	Investor Rights Agreement, dated as of December 31, 2003, by and among Metaldyne Corporation and DaimlerChrysler Corporation (Incorporated by reference to Exhibit 10.2 to Metaldyne Corporation’s Current Report on Form 8-K filed January 14, 2004).
10.14	Asset Purchase Agreement, dated as of May 9, 2003, by and among TriMas Corporation, Metaldyne Corporation and Metaldyne Company LLC (Incorporated by reference to Exhibit 10.2 to Metaldyne Corporation’s Quarterly Report on Form 10-Q for the period ended June 29, 2003).
10.14.1	Asset Purchase Agreement dated as of January 7, 2006, by and among Metaldyne Company LLC and Metaldyne Precision Forming—Fort Wayne, Inc. as Sellers and Forming Technologies, Inc. as Buyer.
10.15	Fittings Facility Sublease, dated May 9, 2003, by and between Metaldyne Company LLC and Fittings Products Co., LLC (Incorporated by reference to Exhibit 10.3 to Metaldyne Corporation’s Report Quarterly on Form 10-Q for the period ended June 29, 2003).
10.16	Employment Agreement between Metaldyne Corporation and Timothy Leuliette (as amended) (Incorporated by reference to Exhibit 10.16 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).

118

10.16.1	Amendment to Employment Agreement between Metaldyne Corporation and Timothy Leuliette (Incorporated by reference to Exhibit 10.2 to Metaldyne Corporation’s Current Report on Form 8-K filed February 9, 2006).
10.17	Employment Agreement between Metaldyne Corporation and Jeffrey M. Stafeil (Incorporated by reference to Exhibit 10.1 to Metaldyne Corporation’s Quarterly Report on Form 10-Q for the period ended September 28, 2003.)
10.17.1	Amendment to Employment Agreement between Metaldyne Corporation and Jeffrey M. Stafeil (Incorporated by reference to Exhibit 10.17.1 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).
10.17.2	Amendment to Employment Agreement between Metaldyne Corporation and Jeffrey M. Stafeil (Incorporated by reference to Exhibit 10.17.2 to Metaldyne Corporation’s Quarterly Report on Form 10-Q for the quarter ended October 2, 2005).
10.19	Employment Agreement between Metaldyne Corporation and Joseph Nowak (as amended) (Incorporated by reference to Exhibit 10.19 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).
10.25	Change of Control Agreement, dated August 11, 2004, between Metaldyne Corporation and Thomas Chambers (Incorporated by reference to Exhibit 10.25 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).
10.27	Employment Agreement between Metaldyne Corporation and Thomas Amato (as amended).
12.1	Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.
14.1	Code of Ethics (Incorporated by reference to Exhibit 14.1 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).
21.1	Subsidiaries of Metaldyne Corporation.
23.1	Consent of KPMG LLP.
31.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

119

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.

Metaldyne Corporation
By:	/s/ JEFFREY M. STAFEIL
	Jeffrey M. Stafeil
	Executive Vice President and Chief Financial Officer (Chief Accounting Officer and Authorized Signatory)
	March 31, 2006

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 and on the date indicated.

	Signature		Title		Date
/s/ TIMOTHY D. LEULIETTE		Chairman, President and Chief Executive		March 31, 2006
Timothy D. Leuliette		Officer (Principal Executive Officer)
/s/ JEFFREY M. STAFEIL		Executive Vice President and Chief		March 31, 2006
Jeffrey M. Stafeil		Financial Officer (Chief Accounting Officer)
/s/ GARY M. BANKS		Director		March 31, 2006
Gary M. Banks
/s/ CHARLES E. BECKER		Director		March 31, 2006
Charles E. Becker
/s/ MARSHALL A. COHEN		Director		March 31, 2006
Marshall A. Cohen
/s/ CYNTHIA L. HESS		Director		March 31, 2006
Cynthia L. Hess
/s/ J. MICHAEL LOSH		Director		March 31, 2006
J. Michael Losh
/s/ WENDY B. NEEDHAM		Director		March 31, 2006
Wendy B. Needham
/s/ DANIEL P. TREDWELL		Director		March 31, 2006
/s/ Daniel P. Tredwell
/s/ SAMUEL VALENTI, III		Director		March 31, 2006
Samuel Valenti, III

120

METALDYNE CORPORATION

FINANCIAL STATEMENT SCHEDULE
PURSUANT TO ITEM 14(A)(2) OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED JANUARY 1, 2006

Schedule, as required for the years ended January 1, 2006, January 2, 2005 and December 28, 2003.

	Page
II.Valuation and Qualifying Accounts		122

121

METALDYNE CORPORATION
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JANUARY 1, 2006, JANUARY 2, 2005 AND DECEMBER 28, 2003

Column A	Column B		Column C							Column D		Column E
			Additions
Description	Balance at Beginning of Period		Charged (Credited) to Cost and Expenses				Charged (Credited) to Other Accounts			Deductions		Balance at End of Period
							(A)			(B)
Allowance for doubtful accounts, deducted from accounts receivable in the balance sheet:
2005	$	2,468,000		$	(113,000	)	$	974,000		$	219,000		$	3,110,000
2004	$	3,090,000		$	(93,000	)	$	587,000		$	1,116,000		$	2,468,000
2003	$	3,819,000		$	2,393,000		$	(1,702,000	)	$	1,420,000		$	3,090,000

Notes:

(A)Represents transfers between accounts, net and other adjustments, net.

(B)Deductions, representing uncollectible accounts written off, less recoveries of accounts written off in prior years.

122

EXHIBIT INDEX

Exhibit Number		Description of Exhibit
2.1	Recapitalization Agreement, dated as of August 1, 2000, between MascoTech, Inc. (now known as Metaldyne Corporation) and Riverside Company LLC (including Amendment No. 1 to the Recapitalization Agreement dated October 23, 2000 and Amendment No. 2 to the Recapitalization Agreement dated November 28, 2000) (Incorporated by reference to Exhibit 2 to MascoTech, Inc.’s Registration Statement on Form S-1 filed December 27, 2000).
3.1	Restated Certificate of Incorporation of MascoTech, Inc. (Incorporated by reference to Exhibit 3.1 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 31, 2000).
3.2	Bylaws of Metaldyne Corporation, as amended (Incorporated by reference to Exhibit 3.2 to MascoTech, Inc.’s Registration Statement on Form S-1 filed December 27, 2000).
3.3	Certificate of Designation of Series A-1 Preferred Stock and Series A-2 Preferred Stock (Incorporated by reference to Exhibit 10.5 to Metaldyne Corporation’s Current Report on Form 8-K filed December 11, 2002).
3.4	Certificate of Designation of Series B Preferred Stock (Incorporated by reference to Exhibit 3.4 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended January 2, 2005).
4.1	Shareholders Agreement, dated as of November 28, 2000, by and among MascoTech, Inc., Masco Corporation, Richard Manoogian, certain of their respective affiliates and other co-investors party thereto (Incorporated by reference to Exhibit 10.20 to MascoTech, Inc.’s Registration Statement on Form S-1 filed December 27, 2000).
4.2	Indenture relating to the 11% Senior Subordinated Notes due 2012, dated as of June 20, 2002, by and among Metaldyne Corporation, each of the Guarantors named therein, and The Bank of New York as Trustee (Incorporated by reference to Exhibit 4.1 to Metaldyne Corporation’s Registration Statement on Form S-4 filed on September 10, 2002).
4.3	Form of note relating to the 11% Senior Subordinated Notes due 2012 (Incorporated by reference to Exhibit 4.2 to Metaldyne Corporation’s Registration Statement on Form S-4 filed on September 10, 2002).
4.4	Registration Rights Agreement r elating to the notes, dated as of June 20, 2002, by and among Metaldyne Corporation and the parties named therein (Incorporated by reference to Exhibit 4.3 to Metaldyne Corporation’s Registration Statement on Form S-4 filed on September 10, 2002).
4.5	Indenture relating to the 10% Senior Subordinated Notes due 2014, dated as of December 31, 2003, by and among Metaldyne Corporation, the Guarantors named therein and the Trustee (as defined therein) (Incorporated by reference to Exhibit 10.3 to Metaldyne Corporation’s Current Report on Form 8-K filed January 14, 2004).
4.6	Form of note relating to the 10% Senior Subordinated Notes due 2014 (included in Exhibit 4.5).

123

Exhibit Number		Description of Exhibit
4.7	Registration Rights Agreement, dated as of December 31, 2003, by and among Metaldyne Corporation, each of the Guarantors named therein, and DaimlerChrysler Corporation (Incorporated by reference to Exhibit 10.4 to Metaldyne Corporation’s Current Report on Form 8-K filed January 14, 2004).
4.8	Indenture relating to the 10% Senior Notes due 2013, dated as of October 27, 2003, by and among Metaldyne Corporation, each of the Guarantors named therein, and The Bank of New York as Trustee (Incorporated by reference to Exhibit 4.8 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).
4.9	Form of note relating to the 10% Senior Notes due 2013 (included in Exhibit 4.8).
4.10	Registration Rights Agreement relating to the 10% Senior Notes due 2013, dated as of October 27, 2003, by and among Metaldyne Corporation and the other parties named therein (Incorporated by reference to Exhibit 4.10 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).
10.1	Assumption and Indemnification Agreement, dated as of May 1, 1984, between Masco Corporation and Masco Industries, Inc. (now known as Metaldyne Corporation) (Incorporated by reference to Exhibit 10.3 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 31, 2000).
10.2	Amended and Restated Credit Agreement as of February 3, 2006, by and among Metaldyne Corporation, Metaldyne Company, the foreign subsidiary borrowers party thereto, the lenders party thereto and JP Morgan Chase Bank, as administrative agent and collateral agent (the “Amended and Restated Credit Agreement”) (Incorporated by reference to Exhibit 10.1 to Metaldyne Corporation’s Current Report on Form 8-K filed February 9, 2006).
10.3	Amended and Restated Receivables Purchase Agreement dated as of July 8, 2005 (Incorporated by reference to Exhibit 99.1 to Metaldyne Corporation’s Current Report on Form 8-K/A filed July 15, 2005).
10.4	Amended and Restated Receivables Transfer Agreement dated as of July 8, 2005 (Incorporated by reference to Exhibit 99.2 to Metaldyne Corporation’s Current Report on Form 8-K/A filed July 15, 2005).
10.5	Credit Agreement dated as of December 20, 2005, by and among Metaldyne Company LLC, Metaldyne Corporation, Credit Suisse as Administrative Agent and Lender, and other lenders party thereto (Incorporated by reference to Exhibit 10.1 to Metaldyne Corporation’s Current Report on Form 8-K filed December 23, 2005).
10.6	Metaldyne Corporation 2001 Long Term Incentive and Share Award Plan (Incorporated by reference to Exhibit 4.1 to Metaldyne Corporation’s Registration Statement of Form S-8 filed April 15, 2002).
10.7	MascoTech, Inc. Supplemental Executive Retirement and Disability Plan (Incorporated by reference to Exhibit 10.n to MascoTech, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999).

124

Exhibit Number		Description of Exhibit
10.8	Description of the MascoTech, Inc. program for Estate, Financial Planning and Tax Assistance (Incorporated by reference to Exhibit 10.x to MascoTech, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1997).
10.9	Description of the Metaldyne Annual Value Creation Plan (Incorporated by reference to Exhibit 10.9 to Metaldyne Corporation’s Quarterly Report on Form 10-Q for the quarter ended April 3, 2005).
10.10	Description of the Metaldyne Executive Retirement Plan (Incorporated by reference to Exhibit 10.10 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).
10.11	Metaldyne Corporation Voluntary Stock Option Exchange Program Offer Summary (Incorporated by reference to Exhibit 10.11to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).
10.12	(Incorporated by reference to Exhibit 10.1 to Metaldyne Corporation’s Current Report on Joint Venture Formation Agreement, dated as of December 8, 2002, by and among NC-M Chassis Systems, LLC, DaimlerChrysler Corporation and Metaldyne CorporationForm 8-K filed December 11, 2002).
10.13	Investor Rights Agreement, dated as of December 31, 2003, by and among Metaldyne Corporation and DaimlerChrysler Corporation (Incorporated by reference to Exhibit 10.2 to Metaldyne Corporation’s Current Report on Form 8-K filed January 14, 2004).
10.14	Asset Purchase Agreement, dated as of May 9, 2003, by and among TriMas Corporation, Metaldyne Corporation and Metaldyne Company LLC (Incorporated by reference to Exhibit 10.2 to Metaldyne Corporation’s Quarterly Report on Form 10-Q for the period ended June 29, 2003).
10.14.1	Asset Purchase Agreement dated as of January 7, 2006, by and among Metaldyne Company LLC and Metaldyne Precision Forming—Fort Wayne, Inc. as Sellers and Forming Technologies, Inc. as Buyer.
10.15	Fittings Facility Sublease, dated May 9, 2003, by and between Metaldyne Company LLC and Fittings Products Co., LLC (Incorporated by reference to Exhibit 10.3 to Metaldyne Corporation’s Quarterly Report on Form 10-Q for the period ended June 29, 2003).
10.16	Employment Agreement between Metaldyne Corporation and Timothy Leuliette (as amended) (Incorporated by reference to Exhibit 10.16 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).
10.16.1	Amendment to Employment Agreement between Metaldyne Corporation and Timothy Leuliette (Incorporated by reference to Exhibit 10.2 to Metaldyne Corporation’s Current Report on Form 8-K filed February 9, 2006).
10.17	Employment Agreement between Metaldyne Corporation and Jeffrey M. Stafeil (Incorporated by reference to Exhibit 10.1 to Metaldyne Corporation’s Quarterly Report on Form 10-Q for the period ended September 28, 2003.)

125

Exhibit Number		Description of Exhibit
10.17.1	Amendment to Employment Agreement between Metaldyne Corporation and Jeffrey M. Stafeil (Incorporated by reference to Exhibit 10.17.1 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).
10.17.2	Amendment to Employment Agreement between Metaldyne Corporation and Jeffrey M. Stafeil (Incorporated by reference to Exhibit 10.17.2 to Metaldyne Corporation’s Quarterly Report on Form 10-Q for the quarter ended October 2, 2005).
10.19	Employment Agreement between Metaldyne Corporation and Joseph Nowak (as amended) (Incorporated by reference to Exhibit 10.19 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).
10.25	Change of Control Agreement, dated August 11, 2004, between Metaldyne Corporation and Thomas Chambers (Incorporated by reference to Exhibit 10.25 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).
10.27	Employment Agreement between Metaldyne Corporation and Thomas Amato (as amended).
12.1	Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.
14.1	Code of Ethics (Incorporated by reference to Exhibit 14.1 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).
21.1	Subsidiaries of Metaldyne Corporation (Incorporated by reference to Exhibit 21.1 to Metaldyne Corporation’s Annual Report on Form 10-K for the year ended December 28, 2003).
23.1	Consent of KPMG LLP.
31.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

126

EX-10.14.1

Exhibit 10.14.1

ASSET PURCHASE AGREEMENT

Between

FORMING TECHNOLOGIES, INC.

METALDYNE COMPANY LLC

METALDYNE PRECISION FORMING — FORT WAYNE, INC.

and

METALDYNE CORPORATION

Dated as of January 7, 2006

TABLE OF CONTENTS

			Page
ARTICLE I
SALE AND PURCHASE OF THE ASSETS
1.1.	Assets		1
1.2.	Excluded Assets		3
ARTICLE II
THE CLOSING
2.1.	Place and Date		4
2.2.	Purchase Price		4
2.3.	Allocation of Purchase Price		4
2.4.	Trade Accounts Payable Adjustment		4
2.5.	Purchase Price Adjustment		5
2.6.	Assumption of Liabilities		6
2.7.	Retained Liabilities		7
2.8.	Consents of Third Parties		7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1.	Representations and Warranties of the Sellers		8
	3.1.1.	Organization; Ownership	8
	3.1.2.	Authorization, etc.	8
	3.1.3.	No Conflicts, etc.	8
	3.1.4.	Financial Statements	9
	3.1.5.	Books and Records	9
	3.1.6.	Taxes	9
	3.1.7.	Events Subsequent to the Unaudited Balance Sheet Date	10
	3.1.8.	Litigation	11
	3.1.9.	Compliance with Laws; Governmental Approvals	11
	3.1.10.	Assets	12
	3.1.11.	Contracts	12
	3.1.12.	Inventories	13
	3.1.13.	Customers	13
	3.1.14.	Suppliers; Raw Materials	13
	3.1.15.	Products; Product and Service Warranties; Product Liability; Selling Material and Policies	13
	3.1.16.	Intellectual Property	13
	3.1.17.	Insurance	14
	3.1.18.	Real Property	15
	3.1.19.	Environmental Matters	16
	3.1.20.	Employees, Labor Matters, etc.	16
	3.1.21.	Employee Benefit Plans and Related Matters	17

i

				Page
	3.1.22.	Brokers, Finders, etc.	17
	3.1.23.	Sufficiency of Assets	18
3.2.	Representations and Warranties of the Buyer		18
	3.2.1.	Corporate Status; Authorization, etc.	18
	3.2.2.	No Conflicts, etc.	18
	3.2.3.	Litigation	19
	3.2.4.	Brokers, Finders, etc.	19
	3.2.5.	Financing	19
ARTICLE IV
COVENANTS
4.1.	Covenants of the Sellers		19
	4.1.1.	Conduct of Business	19
	4.1.2.	Access and Information	20
	4.1.3.	Public Announcements	21
	4.1.4.	Further Actions	21
	4.1.5.	Further Assurances	21
	4.1.6.	Transfer Taxes	22
	4.1.7.	Bulk Sales Laws	22
	4.1.8.	Exclusivity	22
	4.1.9.	Other Actions	22
	4.1.10.	Minerva, Ohio Site	23
4.2.	Covenants of the Buyer		23
	4.2.1.	Public Announcements	23
	4.2.2.	Further Actions	23
	4.2.3.	Further Assurances	23
	4.2.4.	Use of Business Names and Marks by the Buyer	24
	4.2.5.	Confidentiality	24
	4.2.6.	Bulk Sales Laws	24
	4.2.7.	Minerva, Ohio Site	24
	4.2.8.	Other Agreements	24
4.3.	Baseline Environmental Assessment		25
ARTICLE V
CONDITIONS PRECEDENT
5.1.	Conditions to Obligations of Each Party		25
	5.1.1.	HSR Act Notification	25
	5.1.2.	No Injunction, etc.	25
5.2.	Conditions to Obligations of the Buyer		25
	5.2.1.	Representations; Performance	26
	5.2.2.	Consents	26
	5.2.3.	Collateral Agreements	26
	5.2.4.	Transfer Documents	26
	5.2.5.	Indiana Responsible Property Transfer Law	27
	5.2.6.	FIRPTA Certificate	27
5.3.	Conditions to Obligations of the Sellers		27

ii

				Page
	5.3.1.	Representations, Performance, etc.	28
	5.3.2.	Consents	28
	5.3.3.	Assumption Agreement	28
	5.3.4.	Collateral Agreements	28
	5.3.5.	Bank Consent	28
ARTICLE VI
EMPLOYEES AND EMPLOYEE BENEFIT PLANS
6.1.	Employment of the Sellers’ Employees		28
	6.1.1.	Non-Solicitation	28
	6.1.2.	Employees Represented by a Labor Organization	28
	6.1.3.	Transferred Employees	29
	6.1.4.	Responsibility Under the Worker Adjustment and Retraining Notification Act (WARN)	30
6.2.	Worker’s Compensation Claims		30
6.3.	Welfare Benefit Plans		30
	6.3.1.	Transferred Employees	30
	6.3.2.	Cooperation	31
6.4.	Information; Cooperation		31
ARTICLE VII
TERMINATION
7.1.	Termination		31
7.2.	Effect of Termination		32
ARTICLE VIII
GUARANTY
8.1.	Guaranty of Sellers’ Obligations		32
8.2.	Subrogation		33
8.3.	Representations and Warranties		33
8.4.	Liquidation, Winding Up, etc.		34
ARTICLE IX
DEFINITIONS; MISCELLANEOUS
9.1.	Definition of Certain Terms		34
9.2.	Indemnification		40
9.3.	Survival of Representations and Warranties, etc.		43
9.4.	Exclusive Remedy		44
9.5.	No Special Damages		44
9.6.	Expenses		44
9.7.	Severability		44
9.8.	Notices		44
9.9.	Miscellaneous		46

iii

					Page
	9.9.1.		Headings	46
	9.9.2.		Entire Agreement	46
	9.9.3.		Counterparts	46
	9.9.4.		Governing Law, etc.	46
	9.9.5.		Binding Effect	47
	9.9.6.		Assignment	47
	9.9.7.		No Third Party Beneficiaries	47
	9.9.8.		Amendment; Waivers, etc.	47
	9.9.9.		Sellers’ Obligations	48
EXHIBITS
EXHIBIT A		Form of Supply Agreement
EXHIBIT B		Form of Escrow Agreement
EXHIBIT C		Form of Assignment and Assumption

iv

ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT, dated as of January 7, 2006, between Forming Technologies, Inc., a Delaware corporation (the “Buyer”), Metaldyne Company LLC, a Delaware limited liability company (“Metaldyne LLC”), Metaldyne Precision Forming — Fort Wayne, Inc., an Indiana corporation (“Metaldyne Precision” and, together with Metaldyne LLC, the “Sellers”), and Metaldyne Corporation, a Delaware corporation (the “Guarantor”).

W I T N E S S E T H :

WHEREAS, the Sellers are in the business of supplying forged metal components to the automotive light vehicle market (the “Business”);

WHEREAS, the Buyer wishes to purchase or acquire from the Sellers, and the Sellers wish to sell, assign and transfer to the Buyer, all of the Assets, and the Buyer has agreed to assume the Assumed Liabilities, all for the purchase price and upon the terms and subject to the conditions hereinafter set forth;

WHEREAS, in connection with the transactions contemplated hereby, the Sellers and the Buyer wish to enter into a Transition Services Agreement and Supply Agreement, as set forth in Section 5.2.3, each on the terms and subject to the conditions set forth therein; and

WHEREAS, Guarantor, the holder of all of the outstanding capital stock of each of the Sellers, desires that Buyer purchase from Sellers all of the Assets and assume the Assumed Liabilities, and desires to guarantee to Buyer payment and performance of the obligations of Sellers set forth in this Agreement and in the Collateral Agreements.

NOW, THEREFORE, in consideration of the mutual covenants, representations and warranties made herein, and of the mutual benefits to be derived hereby, the parties hereto agree as follows:

ARTICLE I

SALE AND PURCHASE OF THE ASSETS

1.1.Assets. Subject to and upon the terms and conditions set forth in this Agreement, at the Closing, the Sellers will, or will cause their Affiliates (including, without limitation, with respect to clauses 1.1(i) and 1.1(o) below, the Guarantor) to, sell, transfer, convey, assign and deliver to the Buyer, and the Buyer will purchase or acquire, all right, title and interest of the Sellers and their Affiliates in and to all of the following properties, assets and rights of every nature, kind and description, tangible and intangible (including goodwill), wherever located, whether real, personal or mixed, whether accrued, contingent or otherwise (other than the Excluded Assets), primarily used in the Business, including the following assets (collectively, the “Assets”), in each case as the same may exist on the Closing Date:

(a)all machinery, equipment, furniture, furnishings, automobiles, trucks, vehicles, tools, dies, molds and parts and similar property (including, but not limited to, any of the foregoing purchased subject to any conditional sales or title retention agreement) listed or generally described in Section 1.1(a) of the Company Disclosure Letter (provided, however, that each such item that has an acquired value or original asset cost, as shown in Section 1.1(a) of the Company Disclosure Letter, of less than $10,000 shall be conveyed hereunder at the Closing Date only if such item is (i) located on or at the Real Property, (ii) in transit to or from the Real Property or

(iii) held at or by a third party for purposes of repairs, cleaning, maintenance, storage or the like and only such items so located, in transit or held shall be “Assets”);

(b)all inventories of raw materials, work in process, finished products and office and other supplies (collectively, the “Inventories”), including Inventories held at any location controlled by either Seller, held on behalf of either Seller (by outside processors or other Persons) or deposited by either Seller with a bailee or in a warehouse and Inventories previously purchased and in transit to either Seller, in each case at or to such locations listed or generally described in Section 1.1(b) of the Company Disclosure Letter;

(c)subject to Section 2.8, all rights of the Sellers (including but not limited to any and all Intellectual Property rights) in and to the products sold in connection with the Business;

(d)subject to Section 2.8, all of the rights of the Sellers and Guarantor under all contracts, arrangements, licenses, leases and other agreements, including, without limitation, any right to receive payment for products sold or services rendered, and to receive goods and services, pursuant to such agreements and to assert claims and take other rightful actions in respect of breaches, defaults and other violations of such contracts, arrangements, licenses, leases and other agreements listed or generally described in Section 1.1(d) of the Company Disclosure Letter;

(e)all credits, prepaid expenses, deferred charges, advance payments, security deposits and prepaid items reflected in the Closing Statement of Net Assets Sold;

(f)subject to Section 2.8, all Intellectual Property of the Sellers and all rights thereunder or in respect thereof, including all goodwill associated therewith, all Owned Intellectual Property, all rights to sue for and remedies against past, present and future infringements thereof, and rights of priority and protection of interests therein under the laws of any jurisdiction worldwide and all tangible embodiments thereof (together with all Intellectual Property rights and all rights thereunder or in respect thereof included in the other clauses of this Section 1.1, the “Intellectual Property Assets”) listed or generally described in Section 1.1(f) of the Company Disclosure Letter;

(g)all books, records, manuals and other materials (in any form or medium), including, without limitation, all records and materials maintained at the headquarters of the Sellers, advertising matter, catalogues, price lists, correspondence, mailing lists, lists of customers, distribution lists, photographs, production data, sales and promotional materials and records, purchasing materials and records, personnel records, manufacturing and quality control records and procedures, blueprints, research and development files, records, data and laboratory books, media materials and plates, accounting records and sales order files relating to the Business, subject to Sections 1.2(b) and 4.2.4;

(h)to the extent their transfer is permitted by law, all Governmental Approvals (including all applications therefor and pending renewals), including those listed or described in Section 1.1(h) of the Company Disclosure Letter;

(i)the Real Property listed or described in Section 1.1(i) of the Company Disclosure Letter;

(j)all insurance benefits, including rights and proceeds, arising from or relating to the Assets or the Assumed Liabilities subsequent to the date hereof and prior to the Closing Date, unless expended in accordance with this Agreement;

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(k)all rights to causes of action, lawsuits, judgments, claims and demands of any nature available to or being pursued by the Sellers relating to the Business or the ownership, use, function or value of any Asset, whether arising by way of counterclaim or otherwise, listed or described in Section 1.1(k) of the Company Disclosure Letter;

(l)subject to Section 2.8, all air emissions credits and allowances Sellers have, are entitled to or applied for, including any air emissions where Sellers have credit for or have banked, applied to bank or agreed to sell or trade;

(m)all outstanding written offers or solicitations made by or to the Sellers to enter into any Contracts, provided, however, that for purposes of the representations and warranties in Article III, the term “Assets” shall not include such offers or solicitations;

(n)all rights of Sellers relating to the accrued volume discounts from MacSteel (the “MacSteel Accrued Volume Discount”);

(o)all of the Sellers’ and Guarantor’s rights under customer Contracts of the Business (including rights under expired and/or terminated Contracts) described in Section 2.6(a)(vi); and

(p)subject to Section 2.8, all guarantees, warranties, indemnities and similar rights in favor of the Sellers with respect to any Asset listed in Section 1.1(a)-(o) of the Company Disclosure Letter.

Subject to the terms and conditions hereof, at the Closing, the Sellers’ or their Affiliates’ interest in the Assets shall be transferred or otherwise conveyed to the Buyer free and clear of all liabilities, obligations, liens and encumbrances excepting only Assumed Liabilities, Liens listed in Section 3.1.9 of the Company Disclosure Letter and Permitted Liens.

1.2.Excluded Assets. The Sellers will retain and not transfer, and the Buyer will not purchase or acquire, the following assets (collectively, the “Excluded Assets”):

(a)the assets listed or described in Section 1.2 of the Company Disclosure Letter;

(b)the name and mark “Metaldyne” and any variations thereof in whole or in part;

(c)all cash and cash equivalents;

(d)accounts receivable for all products shipped prior to the Closing Date; and

(e)any intercompany receivables or intercompany indebtedness.

Within 30 days after the date hereof, the Sellers and the Buyer agree to develop a transition plan for the removal of the pinion gear assets and side gear assets set forth in Section 1.2 of the Company Disclosure Letter.

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ARTICLE II

THE CLOSING

2.1.Place and Date. The closing of the sale and purchase of the Assets (the “Closing”) shall take place at 10:00 A.M. local time on the second Business Day following the satisfaction or waiver of all conditions to Closing set forth in Article V hereof at the offices of Cahill Gordon & Reindel LLP, 80 Pine Street, New York, New York 10005, or such other time and place upon which the parties may agree. The day on which the Closing actually occurs is herein sometimes referred to as the “Closing Date.”

2.2.Purchase Price.

(a)On the terms and subject to the conditions set forth in this Agreement, the Buyer agrees to pay or cause to be paid to the Sellers an aggregate of $79,200,000, as adjusted pursuant to Section 2.5 (the “Purchase Price”), and to assume the Assumed Liabilities as provided in Section 2.6. An amount equal to the Purchase Price less the Deposit and the interest earned thereon shall be payable by Buyer at the Closing, by wire transfer in immediately available funds to such bank account or accounts as per written instructions of the Sellers given to the Buyer at least two (2) Business Days prior to the Closing.

(b)No later than the close of business on Wednesday, January 11, 2006, the Buyer shall pay to an escrow agent selected by the Sellers (“Escrow Agent”) $1,000,000 (the “Deposit”) in immediately available funds, pursuant to an Escrow Agreement in the form of Exhibit B. The Deposit and the interest earned on it shall be paid to the Sellers and applied to the Purchase Price at Closing. If Closing does not occur because a condition set forth in Article V of this Agreement is not satisfied or waived, the Escrow Agent shall return the Deposit to the Buyer. If Closing does not occur due to the default of the Buyer and all conditions set forth in Article V have been satisfied or waived, the Escrow Agent shall pay the Deposit to the Sellers. The Deposit shall be held by the Escrow Agent in an interest bearing money market account. The interest on the Deposit will be paid to the party to this Agreement that receives the Deposit. In the event of a dispute between the Sellers and the Buyer concerning the Deposit, the Escrow Agent shall hold the Deposit until ordered by a court having jurisdiction to pay the Deposit to the Sellers, the Buyer or into the court.

2.3.Allocation of Purchase Price. The Purchase Price, the Assumed Liabilities and all other capitalized costs shall be allocated among the Assets as set forth in Section 2.3 of the Company Disclosure Letter. The Sellers and the Buyer shall, and shall cause each of their Affiliates to, (i) prepare and file all statements or other information required to be furnished to any Taxing Authority pursuant to section 1060 of the Code and the Treasury Regulations or other applicable tax law in a manner consistent with such allocations and (ii) prepare their respective financial statements and all Tax Returns and reports required to be filed by them in a manner consistent with such allocations, and shall not take any position contrary to such allocations with any government agency or Taxing Authority without the express written consent of the other.

2.4.Trade Accounts Payable Adjustment.

(a)Not later than five Business Days prior to the Closing Date, the Sellers shall deliver to the Buyer a certificate setting forth the Trade Accounts Payable as of the close of business on the immediately preceding Business Day, certified by an officer of the Sellers (the “Trade Accounts Payable Statement”).

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(b)If the Trade Accounts Payable set forth in the Trade Accounts Payable Statement are greater than $27,200,000, the Sellers will satisfy or pay those Trade Accounts Payable, beginning with those Trade Accounts Payable that have the greatest period of delinquency, so that the aggregate amount of such Trade Accounts Payable will not exceed $27,200,000. Any payment to be made by the Sellers prior to the Closing Date of a Trade Account Payable will be excluded from the calculation of Net Working Capital as shown on the Closing Net Working Capital Statement prepared in accordance with Section 2.5(a).

2.5.Purchase Price Adjustment.

(a)As soon as practicable, but in any event not more than 60 days following the Closing Date, unless otherwise extended by the mutual agreement of the Sellers and the Buyer, the Sellers shall deliver to the Buyer a statement of Net Working Capital as of the Closing Date (the “Closing Net Working Capital Statement”), together with an Agreed upon Procedures Letter of the Sellers’ Accountants thereon to the effect that such statement fairly presents the Net Working Capital of the Business as of said date, and that such statement has been prepared in accordance with the Net Working Capital Principles (as defined below). “Net Working Capital” shall mean the sum of (a) net total Inventory, total prepaids, and unbilled tooling of the Business, excluding cash and cash equivalents and intercompany receivables, minus (b) the sum of net Trade Accounts Payable and other accrued expenses of the Business, all of which are presented on line items shown in Section 2.5(a) of the Company Disclosure Letter. The Net Working Capital set forth in the Closing Net Working Capital Statement shall be prepared applying the accounting principles and policies to be reasonably agreed by the Buyer and Sellers within 16 days after the date of this Agreement (collectively, the “Net Working Capital Principles”).

(b)The Purchase Price shall be adjusted as follows: subject to Section 2.5(d), (i) if Net Working Capital on the Closing Date as reflected on the Closing Net Working Capital Statement is less than $3,500,000 (the “Target Net Working Capital”), the difference between Net Working Capital and the Target Net Working Capital shall be paid by the Sellers to the Buyer or (ii) if Net Working Capital on the Closing Date as reflected on the Net Working Capital Statement is more than the Target Net Working Capital, the difference between Net Working Capital and the Target Net Working Capital shall be paid by the Buyer to the Sellers.

(c)Subject to Section 2.5(d), payments required pursuant to Section 2.5(b) shall be made within 60 days after the delivery by the Sellers of the Closing Net Working Capital Statement by wire transfer of immediately available funds to one or more accounts specified at least two Business Days prior to such date by the party who shall receive the funds. Any such payment shall be made together with interest thereon at the rate of 6% per annum, payable for the period commencing on the Closing Date and ending on the day immediately prior to the date such payment is made.

(d)The Buyer may dispute the accounting treatment of any amounts reflected on the Closing Net Working Capital Statement, including as not being in accordance with the Net Working Capital Principles; provided, however, that the Buyer shall notify the Sellers in writing (the “Dispute Notice”) of each disputed item, specifying the amount thereof in dispute and setting forth, in reasonable detail, the basis for such dispute, within 60 days of the Sellers’ delivery of the Closing Net Working Capital Statement. In the event of such a dispute, the Sellers and the Buyer shall attempt to reconcile their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive. If the Sellers and the Buyer are unable to reach a resolution with such effect within 30 days of the receipt by the Sellers of the Dispute Notice, the Sellers and the Buyer shall submit the accounting treatment in accordance with the Net Working Capital Principles of the items remaining in dispute for resolution to the Independent Accounting Firm, which shall, within 30 days after submission, determine and report to the parties upon such remaining disputed items, and such report shall be final, binding and conclusive on the

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parties hereto. All costs and expenses of the Independent Accounting Firm relating to the disputed items shall be allocated between the Sellers and the Buyer in the same proportion that the aggregate dollar amount of the items unsuccessfully disputed by each party bears to the total dollar amount of the items disputed hereunder. The term “Independent Accounting Firm” shall mean a nationally recognized accounting firm which is not otherwise retained by the Sellers or Buyer and their respective Affiliates as the Sellers and the Buyer shall agree.

(e)Notwithstanding any dispute pursuant to Section 2.5(d) of any amounts payable pursuant to this Section 2.5, the applicable party shall at the time specified in this Section 2.5 pay the net amount payable by it pursuant to this Section 2.5 that is not subject to any dispute. Any amount payable following resolution of a matter specified in a Dispute Notice shall be paid within five Business Days following the resolution thereof.

(f)During the periods in which (i) the Closing Net Working Capital Statement is being prepared or (ii) any dispute is raised as contemplated by Section 2.5(d), the Sellers and the Buyer shall provide each other, including their authorized agents and Representatives, with reasonable access, during normal business hours and without disruption to their day-to-day business, to their respective books, records and facilities pertaining to the Business, including any consolidated or combined returns, schedules, consolidated or combined work papers (including accountants’ work papers) and other related documents; provided, however, that with respect to consolidated, combined, unitary or similar Tax Returns of the Sellers (or any Subsidiary of the Sellers), the Buyer shall only have access to portions of such Tax Returns relevant to the Business and provided further, however, that any access to accountant’s work papers shall be subject to the policies and requirements of such accounting firm.

2.6.Assumption of Liabilities.

(a)Subject to the terms and conditions set forth herein, at the Closing the Buyer shall assume and agree to pay, honor and discharge when due only the following liabilities relating to the Assets and existing at or arising on or after the Closing Date (collectively, the “Assumed Liabilities”):

(i)any and all liabilities, obligations and commitments relating to the Business or the Assets that are reflected on the Closing Net Working Capital Statement as finally determined pursuant to Section 2.5;

(ii)any and all liabilities, obligations and commitments with respect to the IRB Loan Documents (other than any liabilities, obligations or commitments arising out of or relating to a breach with respect thereto that occurred prior to the Closing Date);

(iii)any and all liabilities, obligations and commitments under the agreements, contracts and commitments set forth in Section 1.1(d) of the Company Disclosure Letter (or not required to be set forth therein because of the amount involved) or in Section 1.1(f) (other than, except as set forth in Section 2.6(a)(v) below, any liabilities, obligations or commitments arising out of or relating to a breach with respect thereto that occurred prior to the Closing Date);

(iv)liabilities in respect of Transferred Employees to the extent assumed by the Buyer pursuant to Article VI;

(v)any warranty or product liability claim first made after the Closing Date and arising out of products of the Business manufactured or sold prior to the Closing Date, including, but not limited to, the design, manufacture, use, service, repair or sale thereof;

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(vi)all of the Sellers’ and Guarantor’s obligations to supply service parts under customer Contracts of the Business (including obligations under expired and/or terminated Contracts); and

(vii)the Transfer Taxes borne by the Buyer pursuant to Section 4.1.6.

(b)At the Closing, the Buyer shall assume the Assumed Liabilities by executing and delivering to the Sellers an assumption agreement in a form reasonably satisfactory to the Sellers (the “Assumption Agreement”).

2.7.Retained Liabilities. The Retained Liabilities shall remain the sole responsibility of and shall be retained, paid, performed and discharged solely by the Sellers. “Retained Liabilities” shall mean each and every liability of the Sellers other than the Assumed Liabilities, including, without limitation, all Environmental Liabilities arising out of (A) the operation of the Business prior to the Closing Date and (B) the Sellers’ leasing, ownership and operation of the Real Property used in the Business prior to the Closing Date.

2.8.Consents of Third Parties.

(a)Notwithstanding anything to the contrary herein, this Agreement shall not constitute an agreement to assign or transfer any instrument, contract, lease or other agreement or arrangement or any claim, right or benefit arising thereunder or resulting therefrom if an assignment or transfer or an attempt to make such an assignment or transfer without the consent of a third party would constitute a breach or violation thereof or adversely affect the rights of the Buyer or the Sellers thereunder; and any transfer or assignment to the Buyer by the Sellers of any interest under any such instrument, contract, lease or other agreement or arrangement that requires the consent or approval of a third party shall be made subject to such consent or approval being obtained. In the event any such consent or approval is not obtained (or otherwise is not in full force and effect) on or prior to the Closing Date, the Sellers shall continue to use commercially reasonable efforts to obtain any material consent or approval as quickly as reasonably practicable for 120 days after the Closing Date. Pending the obtaining of any such consent or approval as set forth above, the parties shall cooperate with each other in any reasonable, lawful and economically feasible arrangements designed to provide to the Buyer the benefits of and use of such instrument, contract, lease or other agreement or arrangement for its term (or any right or benefit arising hereunder, including the enforcement for the benefit of the Buyer of any and all rights of the Sellers against a third party thereunder), including, without limitation, by subleasing any Leased Real Property to the Buyer, subject to obtaining any required consent from the owner of such Leased Real Property; provided that the Buyer shall undertake to pay or satisfy the corresponding liabilities for the enjoyment of such benefit to the extent the Buyer would have been responsible therefor hereunder if such consent or approval had been obtained. Once the consent or approval of the assignment of such instrument, contract, lease or other agreement or arrangement is obtained, the Sellers shall promptly assign, transfer, convey and deliver such instrument, contract, lease or other agreement or arrangement, and the Buyer shall assume the obligations thereunder from and after the date of assignment to the Buyer pursuant to a special-purpose assignment and assumption agreement substantially similar in terms to those of the Assumption Agreement (which special-purpose agreement the parties shall prepare, execute and deliver in good faith at the time of such transfer, all at no additional cost to the Buyer or the Seller).

(b)Except as set forth in the next sentence, in no event will the Sellers be required to alter the terms of any agreement or pay any fee in connection with obtaining such consent or approval, unless such consent or transfer fee is provided for in such instrument, contract, lease or other agreement or arrangement as in effect on the date hereof, in which case the Sellers shall be required to pay such fee in connection therewith (to the extent required by the party entitled thereto). With respect to the leases of

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Real Property used in the Business listed or described in Section 2.8(b) of the Company Disclosure Letter, the Sellers shall be required to obtain such consent or approval and pay all such fees in connection therewith; provided, however, that the Sellers shall have the right to sublease any such properties in accordance with Section 2.8(a) to the Buyer, provided that on or prior to the Closing Date, the Sellers have obtained any required consents to such sublease. Notwithstanding anything to the contrary contained herein, in no event will the Buyer be required to pay any fee in connection with obtaining any consent or approval required for the assignment of any Contract from the Sellers to the Buyer.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1.Representations and Warranties of the Sellers. Except as set forth in the Company Disclosure Letter (in the section or subsections thereof corresponding to the section or subsection of this Agreement) delivered by the Sellers to the Buyer prior to execution of this Agreement (the “Company Disclosure Letter”), the Sellers, jointly and severally, represent and warrant to the Buyer as follows:

3.1.1.Organization; Ownership. Each Seller is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, with full power and authority to carry on its business (including its portion of the Business) and to own or lease and to operate its properties. Each Seller is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification, except where the lack of such qualification would not reasonably be expected to result in a Material Adverse Effect. Guarantor holds, beneficially and of record, all of the issued and outstanding membership and other equity or ownership interests of each Seller. Complete and accurate copies of the certificate of incorporation and bylaws of Metaldyne Precision, and the articles of organization and operating agreement of Metaldyne LLC, as currently in effect, have been provided to the Buyer.

3.1.2.Authorization, etc. Each Seller has the corporate power and authority to execute and deliver this Agreement and each of the Collateral Agreements to which it will be a party, to perform fully its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Sellers of this Agreement and the Collateral Agreements, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by all requisite corporate and stockholder action of the Sellers. The Sellers have duly executed and delivered this Agreement and on the Closing Date each Seller will have duly executed and delivered each of the Collateral Agreements to which it is a party. This Agreement is, and on the Closing Date each of the Collateral Agreements to which either Seller is a party will be, a legal, valid and binding obligation of the Sellers, enforceable against them in accordance with its terms.

3.1.3.No Conflicts, etc.

(a)The execution, delivery and performance by each Seller of this Agreement and each of the Collateral Agreements to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not (with or without the giving of notice or the lapse of time or both):

(i)conflict with or result in a material violation of or a material default under any Applicable Law applicable to either Seller or any of the Assets;

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(ii)conflict with or breach any provision of the certificate of incorporation or bylaws or other organizational documents of either Seller;

(iii)contravene, conflict with or result in a violation or breach of any terms or requirements of, or give any Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate or modify, any material Governmental Approval that is held by either Seller or that is otherwise necessary for conduct of the Business; or

(iv)result in the imposition or creation of any Lien upon or with respect to any other Assets.

(b)Subject to Section 2.8, neither Seller is required to give any notice to or obtain any consent from any Person in connection with the execution and deliver of this Agreement or the Collateral Agreements or the consummation or performance of the transactions contemplated thereby.

3.1.4.Financial Statements.

(a)The Sellers have delivered to the Buyer audited financial statements of the Business for the years ended December 31, 2003 and 2004 (the “Audited Financial Statements”), unaudited reviewed financial statements for the six months ended July 3, 2005 and June 27, 2004 (the “Unaudited Reviewed Financial Statements”), an unaudited unreviewed balance sheet of the Business as of September 30, 2005 (the “Unaudited Balance Sheet”) and related unaudited unreviewed statements of income and cash flows of the Business for the nine months then ended (the “Unaudited Unreviewed Financial Statements” and, together with the Unaudited Reviewed Financial Statements, the “Unaudited Financial Statements” and, collectively with the Audited Financial Statements, the “Financial Statements”).

(b)The Financial Statements have been prepared in all material respects in accordance with GAAP applied on a consistent basis, and fairly present the financial condition and results of operations of the Business as of the dates and for such periods, provided, however, that the Unaudited Financial Statements are subject to normal year end adjustments and lack footnotes and other presentation items. Except for (i) liabilities which are not required under GAAP to be disclosed in the Unaudited Financial Statements or referred to in the footnotes to the Unaudited Financial Statements and (ii) liabilities incurred in the Ordinary Course of Business since the Unaudited Balance Sheet Date, neither Seller has any material liability not disclosed, reserved for or otherwise reflected in the Unaudited Financial Statements.

3.1.5.Books and Records. The books of account and other financial Records of the Sellers related to the Business, all of which have been made available to the Buyer, are complete and correct in all material respects and represent actual, bona fide transactions and have been maintained in accordance with sound business practices.

3.1.6.Taxes.

(a)Each of the Sellers has duly prepared and timely filed all material Tax Returns that it was required to file. All such Tax Returns were correct and complete in all material respects and were prepared in material compliance with all applicable laws and regulations. All material Taxes owed by the Sellers (whether or not shown on any Tax Return) have been paid. No claim has ever been made by a Taxing Authority in a jurisdiction where any of the Sellers do not file Tax Returns that it is or may be subject to taxation by that jurisdiction.

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(b)Each of the Sellers has in all material respects withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party and all Forms W-2 and 1099 required with respect thereto have in all material respects been properly completed and timely filed.

(c)No Tax Return is in the process of or within the last five years has been examined by any Taxing Authority and the Sellers have no Knowledge of a Taxing Authority proposing to examine any Tax Return or assess additional Taxes for any period for which Tax Returns have been filed.

(d)Neither Seller has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

(e)None of the Assumed Liabilities is an obligation to make a payment that will not be deductible under section 280G of the Code based on facts and circumstances as of the Closing.

(f)The Buyer will not be required to deduct and withhold any amount pursuant to section 1445(a) of the Code upon the transfer of the Business to the Buyer.

3.1.7.Events Subsequent to the Unaudited Balance Sheet Date.

(a)Since the Unaudited Balance Sheet Date, there has been no Material Adverse Effect.

(b)Since the Unaudited Balance Sheet Date, the Business has not engaged in any material practice, taken any material action or entered into any material transaction outside the Ordinary Course of Business (other than the transactions contemplated by this Agreement). Without limiting the generality of the foregoing, since that date:

(i)            there has been no change made or authorized in the certificate of incorporation, bylaws or other organizational documents of either Seller;

(ii)neither Seller has granted any increase in the compensation or employee benefits payable to or to become payable to any officer, director or employee of the Sellers, other than increases required by law or in the Ordinary Course of Business or as disclosed in Section 3.1.7 of the Company Disclosure Schedule;

(iii)there has been no material damage to or destruction or loss of any Asset with a value greater than $100,000, whether or not covered by insurance;

(iv)neither Seller has entered into, terminated or received written notice of termination of (i) any license, distributorship, dealer, sales representative, joint venture, credit or similar Contract to which either Seller is a party, or (ii) any Contract or transaction involving a total commitment by either Seller of at least $100,000;

(v)there has been no sale (other than sales of Inventory in the Ordinary Course of Business), lease, license or other disposition (other than dispositions in the Ordinary Course of Business) of any Asset or property of either Seller (including the Intellectual Property Assets) or the creation of any Lien on any Asset;

(vi)there has been no cancellation or waiver of any claims or rights with a value to the Business in excess of $100,000;

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(vii)there has been no material change in the accounting methods used by the Business;

(viii)there has been no transfer or removal of any Asset or property of either Seller with an acquired value or original asset cost exceeding $10,000 from any of the Owned Real Property or Leased Real Property (other than the sales of Inventory in the Ordinary Course of Business);

(ix)there has been no Contract by either Seller to do any of the foregoing; or

(x)neither Seller has received written notice of termination or discontinuance of any customer Contract.

3.1.8.Litigation.

(a)There is no Proceeding pending or, to the Knowledge of the Sellers, threatened against either Seller in connection with the Assets or the Business or the transactions contemplated by this Agreement or the Collateral Agreements that (i) would reasonably be expected to have a Material Adverse Effect or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal, making unenforceable or otherwise interfering with the transactions contemplated by this Agreement or the Collateral Agreements. Section 3.1.8(a) of the Company Disclosure Letter lists each proceeding pending against either Seller in connection with the Assets or the Business that seeks injunctive relief or specifies damage claims in excess of $250,000. The Sellers have made available to the Buyer copies of all pleadings, correspondence and other documents relating to each Proceeding listed in Section 3.1.8(a) of the Company Disclosure Letter;

(b)There is no Order to which the Business or any of the Assets is subject, and, to the Knowledge of the Sellers, no agent or employee of any Seller is subject to any Order that prohibits such agent or employee from engaging in or continuing any conduct, activity or practice relating to the Business;

(c)No event has occurred or circumstances exist that is reasonably likely to constitute or result in (with or without notice or lapse of time) a violation of or failure to comply with any material term or requirement of any Order to which either the Seller (with respect to the Business) or any of the Assets is subject; and

(d)Neither Seller has received, at any time since December 31, 2002, any written notice from any Governmental Authority regarding any actual, alleged or potential violation of, or failure to comply with, any term or requirement of any Order to which the Sellers (with respect to the Business) or any Assets are or have been subject.

3.1.9.Compliance with Laws; Governmental Approvals.

(a)To the Knowledge of the Sellers, the Business as presently conducted does not violate in any material respect any Applicable Laws applicable to the Business or the Assets.

(b)Notwithstanding the provisions of Section 3.1.9(a) above, and in addition thereto, the Business as presently conducted does not violate in any material respect any Applicable Laws relating specifically to workplace safety and applicable to the Business or the Assets.

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(c)Section 1.1(h) of the Company Disclosure Letter sets forth (i) all Governmental Approvals (other than Environmental Permits) necessary for the conduct of the Business, (ii) the expiration dates of all such Governmental Approvals, and (iii) all pending applications therefor and renewals thereof. All such Governmental Approvals (other than Environmental Permits) listed on Section 1.1(h) of the Company Disclosure Letter have been duly obtained and are in full force and effect, except as would not, individually or in the aggregate, have a Material Adverse Effect.

3.1.10.Assets. The Sellers or their affiliates have a valid leasehold interest in all of their leases of personalty, have good title to all the Assets owned by the Sellers or their affiliates, and have a valid legal right under contract to use all other personalty used by the Sellers in the Business, including all personalty reflected on the Unaudited Balance Sheet and all personalty acquired since the Unaudited Balance Sheet Date, other than personalty disposed of since such date in the Ordinary Course of Business and in accordance with the terms of this Agreement, free and clear of any and all Liens other than Permitted Liens. The Assets which are significant to the Business are in all material respects adequate for the purposes for which such assets are currently used and are in reasonably good repair and operating condition (subject to normal wear and tear).

3.1.11.Contracts.

(a)Section 1.1(d) of the Company Disclosure Letter lists or generally describes all Contracts included in the Assets except for (i) this Agreement and the Collateral Agreements, (ii) purchase orders for the purchase of products, merchandise, raw materials or other goods or services by the Sellers issued in the Ordinary Course of Business and purchase orders for the sale of goods or services by the Sellers to customers issued in the Ordinary Course of Business and (iii) Contracts involving payments to or by the Sellers of less than $100,000.

(b)All Contracts set forth in Section 1.1(d) of the Company Disclosure Letter are in full force and effect and enforceable against the Seller which is a party thereto in accordance with their terms.

(c)Each Seller is in material compliance with all applicable terms and requirements of the IRB Loan Documents and each Contract set forth in Section 1.1(d) of the Company Disclosure Letter, and, to the Knowledge of the Sellers, each other Person that has or had any obligation or liability under any Contract set forth in Section 1.1(d) of the Company Disclosure Letter is in compliance in all material respects with all applicable terms and requirements of such Contract.

(d)To the Knowledge of the Sellers, no event has occurred or circumstance exists that (with or without notice or lapse of time) would reasonably be expected in any material respect to contravene, conflict with or result in a breach of, or give either Seller or other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or payment under, or to cancel, terminate or modify, the IRB Loan Documents or any Contract set forth in Section 1.1(d) of the Company Disclosure Letter.

(e)No event has occurred or circumstance exists under or by virtue of any Contract set forth in Section 1.1(d) of the Company Disclosure Letter that (with or without notice or lapse of time) would cause the creation of any Lien (other than Permitted Liens) affecting any of the Assets.

(f)To the Knowledge of Sellers, the Sellers are not party to any Contract that contains any covenant that prohibits Sellers from engaging in any line of business or competing with any Person, or that materially restricts Sellers’ ability to solicit, either directly or indirectly, through agents or consultants, or hire, potential officers, employees or consultants.

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3.1.12.Inventories. The aggregate Inventories (net of the aggregate reserves reflected in the Closing Net Working Capital Statement) are usable and salable in the usual and Ordinary Course of Business and are not obsolete or discontinued. All Inventories are recorded on the books of the Business at the lower of cost or market value determined in accordance with the Working Capital Principles.

3.1.13.Customers. Section 3.1.13 of the Company Disclosure Letter lists the names and addresses of all customers of each Seller that ordered goods and services from such Seller with an aggregate value for each such customer of $1,000,000 or more during the twelve-month period ended July 31, 2005.

3.1.14.Suppliers; Raw Materials. Section 3.1.14 of the Company Disclosure Letter lists the names of all suppliers from which the Business ordered raw materials, supplies, merchandise and other goods and services with an aggregate purchase price for each such supplier of $1,000,000 or more during the twelve-month period ended July 31, 2005.

3.1.15.Products; Product and Service Warranties; Product Liability; Selling Material and Policies. Except for normal customer returns and allowances made in the Ordinary Course of Business and except for those instances which would not, individually or in the aggregate, have a Material Adverse Effect, (a) the products manufactured and sold and the services provided by the Sellers in connection with the Business conform with applicable contractual commitments in all material respects, and (b) no product manufactured and sold and no service provided by the Sellers in connection with the Business is subject to any guaranty, warranty or indemnity beyond the applicable customer terms and conditions of purchase. Since January 1, 2002, the Sellers have received no written claims alleging liability on the part of either Seller in connection with the Business (and, to the Knowledge of the Sellers, there is no basis for any present or future Proceeding against them that would give rise to any such liability in connection with the Business) arising out of any injury to any individual or property as a result of the use of any product manufactured and sold or any service provided by the Sellers in connection with the Business in the manner intended, on account of a defect in the manufacture of any such product that is currently offered for sale by either Seller. Section 3.1.15 of the Company Disclosure Letter sets forth a summary of all claims from customers since January 1, 2002 that the products purchased by them from Sellers were not manufactured in accordance with applicable specifications or were otherwise defective for which the aggregate sales price of products covered by such claims (together with all claims from other customers alleging similar matters with respect to such products) exceeds $250,000.

3.1.16.Intellectual Property.

(a)Title. Section 1.1(f) of the Company Disclosure Letter lists or generally describes all Intellectual Property that is owned by either Seller and exclusively used in, held for use in or necessary for the conduct of the Business (the “Owned Intellectual Property”) other than (i) inventions, trade secrets, processes, formulas, compositions, designs and confidential business and technical information and (ii) Intellectual Property that is not registered and not material to the Business. The Sellers own or have the right to use pursuant to license, sublicense, agreement or permission all Intellectual Property Assets, free from any Liens (other than Permitted Liens). The Intellectual Property Assets comprise all of the Intellectual Property necessary for the Buyer to conduct and operate the Business as now being conducted by the Sellers. No Owned Intellectual Property is assigned or registered jointly with a person other than a Seller.

(b)Transfer. Immediately after the Closing, the Buyer will own all of the Owned Intellectual Property and, upon receipt of any necessary consents to assignment set forth on Section 1.1(f) of

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the Company Disclosure Letter, will have a right to use all other Intellectual Property Assets permitted by law, free from any Liens (other than Permitted Liens).

(c)No Infringement. To the Knowledge of the Sellers, the conduct of the Business or any product or service of Sellers does not infringe, misappropriate or otherwise violate any rights of any Person in respect of any Intellectual Property.

(d)Licensing Arrangements. Section 1.1(f) of the Company Disclosure Letter lists or generally describes all agreements other than customer and supplier purchase orders (i) pursuant to which either Seller has licensed any material Intellectual Property Assets to, or the use of any material Intellectual Property Assets is otherwise permitted (through non-assertion, settlement or similar agreements or otherwise) by, any other Person and (ii) pursuant to which either Seller has had any material Intellectual Property licensed to it, or has otherwise been permitted to use Intellectual Property (through non-assertion, settlement or similar agreements or otherwise). All of the agreements set forth in Section 1.1(f) of the Company Disclosure Letter (x) are in full force and effect in accordance with their terms and no default exists thereunder by either Seller or by any other party thereto and (y) are free and clear of all Liens other than Permitted Liens.

(e)No Intellectual Property Litigation. No written claim or demand of any Person has been made nor is there any Proceeding that is pending or, to the Knowledge of the Sellers, threatened that (i) challenges the rights of the Sellers or the validity or enforceability in respect of any Intellectual Property Assets material to the Business, (ii) asserts that any Seller is infringing, misappropriating or otherwise in conflict with, or is required to pay any additional royalty, license fee, charge or other amount with regard to, any Intellectual Property, other than maintenance and registration fees in the ordinary course of business, or (iii) claims that any material default exists under any agreement or arrangement set forth in Section 1.1(f) of the Company Disclosure Letter. None of the Owned Intellectual Property is subject to any outstanding order, ruling, decree, judgment or stipulation by or with any court, arbitrator or administrative agency, or has been the subject of any litigation within the last five years, whether or not resolved in favor of the Sellers.

(f)No Conflicts. To the Knowledge of the Sellers, the Intellectual Property Assets are valid and enforceable and all due maintenance and annuity fees have been paid and, to the Knowledge of the Sellers, are not being infringed, misappropriated or otherwise violated by any Person. No Owned Intellectual Property which are material to the Business are being used or enforced in a manner that would reasonably be expected to result in the abandonment, cancellation or unenforceability of any Intellectual Property Asset.

(g)Intellectual Property Opinions. Neither Seller nor the Guarantor has obtained any opinion of counsel regarding any third party Intellectual Property or any Intellectual Property Asset related to the Business.

(h)Owned Shared Intellectual Property. Section 1.1(f) of the Company Disclosure Letter lists or generally describes all Intellectual Property that is owned by either Seller and exclusively used in, held for use in or necessary for the conduct of the Business, as well as other businesses of Sellers, as currently conducted (“Owned Shared Intellectual Property”) other than (i) inventions, trade secrets, processes, formulas, compositions, designs and confidential business and technical information and (ii) Intellectual Property that is not registered and not material to the Business.

3.1.17.Insurance. Section 3.1.17 of the Company Disclosure Letter lists all insurance policies maintained by either Seller for the benefit of or in connection with the Assets or the Business. Section 3.1.17 of the Company Disclosure Letter lists all material claims made by the Sellers

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under any policy of insurance during the past two years with respect to the Business. All premiums due and payable for the insurance listed in Section 3.1.17 of the Company Disclosure Letter have been duly paid, and such policies or extensions or renewals thereof in such amounts will be outstanding and duly in full force without interruption until the Closing Date.

3.1.18.Real Property.

(a)Owned Real Property. Section 3.1.18(a) of the Company Disclosure Letter lists all Owned Real Property, setting forth the address and owner of each parcel of Owned Real Property including, without limitation, the properties reflected as being so owned on the Financial Statements. Each Seller has, or on the Closing Date will have, good, valid and marketable fee simple title to the Owned Real Property indicated in Section 3.1.18(a) of the Company Disclosure Letter as being owned by it, free and clear of all Liens other than Permitted Liens. There are no outstanding options or rights of first refusal to purchase the Owned Real Property, or any portion thereof or interest therein.

(b)Leases. Section 3.1.18(b) of the Company Disclosure Letter lists all Leases, setting forth the address, landlord and tenant for each Lease. The Sellers have delivered to the Buyer correct and complete copies of the Leases. Each Lease is legal, valid, binding, enforceable and in full force and effect, except as may be limited by bankruptcy, insolvency, reorganization and similar Applicable Laws affecting creditors generally and by the availability of equitable remedies. Neither the Sellers nor, to the Knowledge of the Sellers, any other party is in default, violation or breach in any material respect under any Lease, and no event has occurred and is continuing that constitutes or, with notice or the passage of time or both, would constitute a default, violation or breach in any material respect under any Lease. Each Lease grants the tenant under the Lease the exclusive right to use and occupy the demised premises thereunder. The Sellers have a good and valid title to the leasehold estate under each Lease free and clear of all Liens other than Permitted Liens. Each Seller enjoys peaceful and undisturbed possession under its respective Leases for the Leased Real Property.

(c)No Proceedings. There are no eminent domain or other similar Proceedings pending or, to the Knowledge of the Sellers, threatened affecting any portion of the Real Property. There is no writ, injunction, decree, order or judgment outstanding, nor any action, claim, suit or Proceeding pending or, to the Knowledge of the Sellers, threatened, relating to the ownership, lease, use, occupancy or operation by any Person of any Real Property, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(d)Current Use. The use and operation of the Owned Real Property in the conduct of the Business does not violate in any material respect any instrument of record or agreement affecting the Owned Real Property. There is no violation of any covenant, condition, restriction, easement or order of any Governmental Authority having jurisdiction over such property or of any other Person entitled to enforce the same affecting the Owned Real Property or the use or occupancy thereof that would have a Material Adverse Effect. No material damage or destruction, other than normal wear and tear, has occurred with respect to any of the Owned Real Property since January 1, 2002.

(e)Compliance with Real Property Laws. The Owned Real Property is in material compliance with all applicable building, zoning, subdivision and other land use and similar Applicable Laws affecting the Owned Real Property (collectively, the “Real Property Laws”), and no Seller has received any notice of violation or claimed violation of any Real Property Law. No current use by any Seller of the Owned Real Property is dependent on a nonconforming use or other Governmental Approval the absence of which would materially limit the use of any properties or assets used in connection with or otherwise material to the Business.

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3.1.19.Environmental Matters.

(a)Permits. All active material Environmental Permits are identified in Section 3.1.19(a) of the Company Disclosure Letter, the Sellers currently hold all such Environmental Permits material to the Business and renewal of Environmental Permits if currently required have been timely applied for. No Seller has received written notice from any relevant Governmental Authority that any Environmental Permit will be modified, suspended, canceled or revoked, or cannot be renewed in the Ordinary Course of Business.

(b)No Violations. Each of the Sellers and their respective Affiliates is in material compliance with all Environmental Permits and all applicable Environmental Laws pertaining to the Real Property and the Business. The Sellers have not received any written notice of any violation by either Seller of any Environmental Permit or any applicable Environmental Law relating to the conduct of the Business or the Real Property. Sellers have made available to Buyer copies of any material, investigations, studies, audits and inspections concerning Environmental Liabilities or the part of Sellers in connection with the Business or Real Property, including the Phase I and Phase II environmental reports listed on Section 3.1.19(b) of the Company Disclosure Schedule in the Sellers’ possession. The Sellers have made available to the Buyer copies of all Occupational Health and Safety (“OSHA”) correspondence and documents regarding worker accidents or injuries, including OSHA 300 logs, investigations, and written notices of violations (and the dispositions thereof) issued by OSHA or analogous state or local agencies to the Sellers since January 1, 2003 related to the Business or the Real Property.

(c)No Actions. To the Knowledge of the Sellers, neither of the Sellers or any of their respective Affiliates has taken any action in the conduct of the Business or affecting the Real Property that would reasonably be expected to result in material liability of any of them under any Environmental Law, including the treatment, generation, storage or Release of any Hazardous Substances.

(d)Investigations and Remediations. Neither Seller is financing or conducting any investigation or remediation involving any Hazardous Substances related to the conduct of the Business at any location under any Environmental Law.

(e)Orders, etc. Neither Seller is a party to any outstanding order, judgment, injunction, decree or agreement with any Governmental Authority which requires any action under any Environmental Law by either Seller.

(f)Disposal of Hazardous Substances. The Sellers have not, and, to the Knowledge of the Sellers, no other Person has, stored, discharged, buried, or disposed of Hazardous Substances resulting from, any business, commercial or industrial activities, operations or processes, on or beneath the Real Property, other than in material compliance with applicable Environmental Laws and, to the Knowledge of the Sellers, the Sellers have not disposed of or arranged for the disposal or treatment of Hazardous Substances generated by them in the conduct of the Business at any other location in a manner which would be expected to result in any material Environmental Liability being asserted against the Sellers.

3.1.20.Employees, Labor Matters, etc.

(a)Section 3.1.20(a) of the Company Disclosure Letter lists all collective bargaining agreements of the Sellers specifically relating to each company facility that is represented by a labor organization and all known or threatened current labor organizing activities that relate to the Business. The Sellers are in material compliance with all collective bargaining agreements of the Sellers regarding each company facility associated with the Business that is represented by a labor organization, including any provision requiring notice of the transactions contemplated by this Agreement. Since January 1, 2000

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there has not occurred or, to the Knowledge of the Sellers, been threatened any strike, slowdown, picketing, work stoppage, concerted refusal to work overtime or other similar labor activity with respect to any employees employed in the operation of the Business. There are no labor disputes currently subject to any arbitration or litigation and there is no representation petition pending or, to the Knowledge of the Sellers, threatened with respect to any employee employed in the operation of the Business. Each Seller has complied in all material respects with Applicable Law in effect as of the date of this Agreement pertaining to the employment of employees, including, without limitation, all such laws relating to labor relations, wages, hours, working conditions, occupational safety and health, workers’ compensation, plant closings and mass layoffs, immigration, equal employment, fair employment practices, entitlements, prohibited discrimination or other similar employment acts (collectively, “Labor Laws”). The Sellers have not received notice of the intent of any Governmental Authority responsible for the enforcement of any Labor Law to conduct an investigation with respect to any employees employed in the operation of the Business and, to the Knowledge of the Sellers, no such investigation is threatened. There exists no pending or, to the Knowledge of Sellers, threatened lawsuit, administrative proceeding or investigation involving the Business and any current or former director, officer or employee of the Business, including under any Labor Law or any claim for wrongful termination or breach of an express or implied contract of employment, other than routine employee grievances.

(b)Section 3.1.20(b) of the Company Disclosure Letter lists all written (and, to the Knowledge of the Sellers, oral) agreements (other than “at-will” employment or consulting agreements) (i) for the employment of any individual employed in the operation of the Business on a full-time, part-time, consulting or other basis and (ii) to provide to any individual employed in the operation of the Business any severance benefits upon the termination of such individual’s employment with the Sellers.

3.1.21.Employee Benefit Plans and Related Matters.

(a)Employee Benefit Plans. Section 3.1.21(a) of the Company Disclosure Letter lists each “employee benefit plan,” as such term is defined in section 3(3) of ERISA, whether or not subject to ERISA, and each bonus, incentive or deferred compensation, severance, termination, retention, change of control, stock option or other equity-based plan that (i) provides benefits or compensation in respect of any employee employed in the operation of the Business (the “Employees”) or the beneficiaries or dependents of any such Employee and (ii) is maintained or contributed to by the Sellers (collectively, the “Plans”). The Sellers have provided the Buyer complete and correct copies of all written Plans.

(b)Qualification. Each Plan intended to be qualified under section 401(a) of the Code has received a favorable determination letter from the IRS as to its qualification under the Code and, to the Knowledge of the Sellers, nothing has occurred since the date of such determination letter that could reasonably be expected to adversely affect such qualification or tax-exempt status.

(c)Compliance; Liability.

(i)Each of the Plans has been operated and administered in compliance with all Applicable Laws, except for any failure so to comply that, individually or in the aggregate, would not result in a Material Adverse Effect.

(ii)No Plan is a “multiemployer plan” within the meaning of section 4001(a)(3) of ERISA or is a “multiple employer plan” within the meaning of section 4063 or 4064 of ERISA.

3.1.22.Brokers, Finders, etc. All negotiations relating to this Agreement, the Collateral Agreements, and the transactions contemplated hereby and thereby, have been carried on with-

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out the participation of any Person acting on behalf of either Seller or its Affiliates and in such manner as not to give rise to any valid claim against the Buyer or any of its Subsidiaries for any brokerage or finder’s commission, fee or similar compensation.

3.1.23.Sufficiency of Assets.

(a)Section 3.1.23(a) of the Company Disclosure Letter lists all Assets consisting of machinery, equipment, vehicles, furniture or other tangible personal property owned by the Sellers having any original individual cost in excess of $10,000 and the location thereof.

(b)Section 3.1.23(b) of the Company Disclosure Letter lists all Assets consisting of property and assets (other than the Real Property) used in the Business that are leased by the Sellers and that involve payments by such Seller in excess of $30,000 per year. For all such leased assets, Sellers have made available to the Buyer true and complete copies of all leased and other agreements affecting such assets.

(c)The Assets, together with the services to be provided under the Collateral Agreements, (a) constitute all of the assets, tangible and intangible, of any nature whatsoever, necessary to operate the Sellers’ business in the manner presently operated by the Sellers and (b) include all of the operating assets of the Sellers.

(d)As of the date of this Agreement, the aggregate amount owing under the IRB Loan Agreement is a principal amount of $7,500,000 plus accrued and unpaid interest since December 31, 2005.

3.2.Representations and Warranties of the Buyer. Except as set forth in the Buyer Disclosure Letter (in the section or subsections thereof corresponding to the section or subsection of this Agreement) delivered by the Buyer to the Sellers prior to execution of this Agreement (the “Buyer Disclosure Letter”), the Buyer represents and warrants to the Sellers as follows:

3.2.1.Corporate Status; Authorization, etc. The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation with full corporate power and authority to execute and deliver this Agreement and the Collateral Agreements, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Buyer of this Agreement, and the consummation of the transactions contemplated hereby, have been, and on the Closing Date the execution and delivery by the Buyer of the Collateral Agreements will have been, duly authorized by all requisite corporate action of the Buyer. The Buyer has duly executed and delivered this Agreement and on the Closing Date the Buyer will have duly executed and delivered the Collateral Agreements. This Agreement is, and on the Closing Date each of the Collateral Agreements will be, a valid and legally binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms.

3.2.2.No Conflicts, etc. The execution, delivery and performance by the Buyer of this Agreement and each of the Collateral Agreements, and the consummation of the transactions contemplated hereby and thereby, do not and will not conflict with or result in a violation of or under (with or without the giving of notice or the lapse of time, or both) (i) the certificate of incorporation or bylaws or other organizational documents of the Buyer, (ii) any Applicable Law applicable to the Buyer or any of its Affiliates or any of its or their properties or assets or (iii) any contract, agreement or other instrument applicable to the Buyer or any of its Affiliates or any of its or their properties or assets, except, in the case of clause (iii), for violations and defaults that, individually and in the aggregate, have not and will not materially impair the ability of the Buyer to perform its obligations under this Agreement or under any of the

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Collateral Agreements. No Governmental Approval is required to be obtained by the Buyer in connection with the execution and delivery of this Agreement or the Collateral Agreements or the consummation of the transactions contemplated hereby or thereby.

3.2.3.Litigation. There is no action, claim, suit or proceeding pending, or to the Buyer’s knowledge threatened, by or against or affecting the Buyer in connection with or relating to the transactions contemplated by this Agreement or any action taken or to be taken in connection herewith or the consummation of the transactions contemplated hereby.

3.2.4. Brokers, Finders, etc. All negotiations relating to this Agreement, the Collateral Agreements and the transactions contemplated hereby and thereby have been carried on without the participation of any Person acting on behalf of the Buyer or its Affiliates and in such manner as to not give rise to any valid claim against the Sellers or their Affiliates for any brokerage or finder’s commission, fee or similar compensation.

3.2.5. Financing. The Buyer has, and will at the Closing Date have, funds available in amounts sufficient to pay the Purchase Price and related expenses of the transactions contemplated hereby to be paid by it hereunder.

ARTICLE IV

COVENANTS

4.1.Covenants of the Sellers.

4.1.1.Conduct of Business. From the date hereof to the Closing Date, except as expressly permitted or required by this Agreement or as otherwise consented to by the Buyer in writing, the Sellers will:

(a)carry on the Business in the ordinary course, in substantially the same manner as heretofore conducted, and use commercially reasonable efforts to preserve intact its present business organization and its relationship with customers, suppliers and others having business dealings with it;

(b)perform in all material respects all of their obligations under all Contracts of the Business or the Assets, and comply in all material respects with all Applicable Laws applicable to the Assets or the Business;

(c)subject to Section 2.4, pay Trade Accounts Payable and other obligations of the Business when they become due and payable in the Ordinary Course of Business, including without limitation the weekly payment of Trade Accounts Payable in the Ordinary Course of Business;

(d)not grant (or commit to grant) any increase in the compensation (including incentive or bonus compensation) of any employee employed in the operation of the Business or institute, adopt or amend (or commit to institute, adopt or amend) any compensation or benefit plan, policy, program or arrangement or collective bargaining agreement applicable to any such employee, except in each case in the Ordinary Course of Business;

(e)not hire or fire employees of the Business outside of the Ordinary Course of Business;

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(f)maintain in the Ordinary Course of Business the tangible Assets currently used in the operation of the Business in good repair, working order and operating condition subject only to ordinary wear and tear;

(g)maintain the books of account and records of the Business in the usual, regular and ordinary manner consistent with past policies and practice;

(h)comply in all material respects with all Applicable Laws applicable to the Business or any of the properties or Assets of the Business;

(i)use commercially reasonable efforts to maintain the good standing of the Sellers in their respective jurisdictions of incorporation and in the jurisdictions in which any Seller is qualified to do business, as a foreign corporation or otherwise, and to maintain all Governmental Approvals and other consents material to the Business;

(j)not sell any Assets other than in the Ordinary Course of Business;

(k)not make sales of inventory except in the Ordinary Course of Business;

(l)not purchase, order or otherwise acquire inventory for the Business from any unit of the Sellers outside the Ordinary Course of Business;

(m)acquire the equipment subject to the equipment leases specified in Section 4.1.1(m) of the Company Disclosure Letter and terminate all ownership and other rights of the owners/lessors of such equipment (such equipment to be “Assets” hereunder);

(n)with respect to any item that would be an “Asset” pursuant to the second parenthetical in Section 1.1(a) if the date of this Agreement were the Closing Date, take any action to cause such item not to be (i) located on or at the Real Property, (ii) in transit to or from the Real Property or (iii) held at or by a third party for purposes of repairs, cleaning, maintenance, storage or the like, other than, in each case, in the Ordinary Course of Business; and

(o)           not agree or otherwise commit to take any of the actions described in the foregoing paragraphs (a) through (n) of this Section 4.1.1.

4.1.2.Access and Information.

(a)So long as this Agreement remains in effect, each Seller will give the Buyer and its Representatives full access during normal business hours to, and furnish them with, all of such Seller’s non-privileged documents, Tax Returns, records, work papers and information with respect to the Assets, reports and records relating to the Business as the Buyer shall from time to time reasonably request. In addition, the Sellers will permit the Buyer and its Representatives reasonable access to such personnel of the Sellers during normal business hours as may be necessary or useful to the Buyer in its review of the properties, assets and business affairs of the Business and the above-mentioned documents, records and information.

(b)The Sellers will retain all books and records relating to the Business in accordance with the Sellers’ record retention policies as presently in effect. During the three-year period beginning on the Closing Date, the Sellers shall not dispose of or permit the disposal of any such books and records not required to be retained under such policies without first giving 60 days’ prior written notice to the Buyer offering to surrender the same to the Buyer at the Buyer’s expense.

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(c)So long as this Agreement remains in effect, each Seller will give the Buyer and its Representatives full access during normal business hours and furnish them with all of such Seller’s non-privileged documents, records and information with regard to the Assets and the Business, as the Buyer or its Representatives may require for the purpose of developing the post-Closing Environmental Site Assessments, compliance reviews and asbestos assessments as more fully described in Sections 4.3(a) and 4.3(b).

4.1.3.Public Announcements. Prior to the Closing, except as required by Applicable Law and in connection with obtaining the consents set forth in Section 5.3.2, the Sellers shall not, and they shall not permit any Affiliate to, make any public announcement in respect of this Agreement or the Collateral Agreements or the transactions contemplated hereby or thereby without the prior written consent of the Buyer, which consent is not to be unreasonably withheld; provided, however, that with respect to any public announcement required by Applicable Law, Sellers shall give to Buyer the right to review any such public disclosure as promptly as practicable prior to its publication to the extent practicable.

4.1.4.Further Actions.

(a)The Sellers agree to use commercially reasonable efforts to take all actions and to do or cause to be done all other things necessary, proper or advisable to consummate and make effective the transactions contemplated hereby (including using commercially reasonable efforts to obtain, or cause to be obtained, all consents material to the operation of the Business and the execution and delivery of this Agreement and the Collateral Agreements or the consummation of the sale and transfer of the Assets or the other transactions contemplated hereby or thereby) by February 28, 2006.

(b)The Sellers will, as promptly as practicable, file or supply, or cause to be filed or supplied, all applications, notifications and information required to be filed or supplied by either of them pursuant to Applicable Law in connection with this Agreement, the Collateral Agreements, the sale and transfer of the Assets pursuant to this Agreement and the consummation of the other transactions contemplated thereby, including but not limited to filings pursuant to the HSR Act.

(c)The Sellers will, and will cause each of their Affiliates to, coordinate and cooperate with the Buyer in exchanging such information and supplying such assistance as may be reasonably requested by the Buyer in connection with the filings and other actions contemplated by Section 4.2.2.

(d)The Sellers will not, and will cause each of their Affiliates not to, register or transfer to a third party the Owned Shared Intellectual Property set forth in Section 1.1(f) of the Company Disclosure Letter without the consent of the Buyer. The Sellers will, and will cause each of their Affiliates to, take commercially reasonable measures to protect the trade secrets constituting Owned Shared Intellectual Property set forth in Section 1.1(f) of the Company Disclosure Letter.

4.1.5.Further Assurances. Following the Closing, the Sellers shall, from time to time, (a) execute and deliver such additional instruments, documents, conveyances or assurances as shall be reasonably necessary, or otherwise reasonably requested by the Buyer, to confirm and assure the rights and obligations provided for in this Agreement and the Collateral Agreements and render effective the consummation of the transactions contemplated hereby and thereby, (b) provide the Buyer with access to all books, records, manuals and other materials of the Sellers relating to the Business or the Assets that are retained by the Sellers, except that the Sellers and their respective Affiliates shall not be required to provide access to any information that such party is required pursuant to Applicable Law or enforceable contract, agreement or other instrument to keep confidential, (c) make available to Buyer, at Buyer’s cost and on reasonable notice, the Sellers’ employees when reasonably requested by the Buyer and (d) execute

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such documents as the Buyer may reasonably request to enable the Buyer to file any required reports or Tax Returns relating to the Buyer.

4.1.6.Transfer Taxes. The Buyer and Sellers shall each be responsible for the timely payment of all sales, use, value added, documentary, stamp, gross receipts, registration, transfer, conveyance, real property gains or transfer, excise, recording, license and other similar Taxes and fees (“Transfer Taxes”) arising out of or in connection with or attributable to the transactions effected pursuant to this Agreement and the Collateral Agreements. The Buyer and the Sellers will cooperate with each other in attempting to minimize Transfer Taxes. Transfer Taxes shall be borne equally by the Buyer and the Sellers.

(b)As between the Sellers, on the one hand, and the Buyer, on the other hand, the party that has the primary responsibility under Applicable Law for filing any Tax Return required to be filed in respect of Transfer Taxes shall prepare and timely file such Tax Return, provided that such party’s preparation of such Tax Return shall be subject to the other party’s approval, which approval shall not be withheld unreasonably.

(c)To the extent applicable to the Assets and the transactions contemplated hereby at Closing, the Buyer will provide to Sellers any and all certificates, in a form reasonably acceptable to the appropriate tax authorities, stating that Buyer’s purchase of such Assets is exempt from any sales and use taxes and that the Buyer intends to use the Assets in a manner to exempt the transaction from sales and use taxes. With respect to such Assets, Sellers shall not collect any sales or use taxes in reliance upon these certificates and Buyer shall reimburse Sellers for any sales or use taxes that may be paid by Sellers if Buyer’s subsequent use of the Assets does not comply with the exemptions to sales and use tax laws.

4.1.7.Bulk Sales Laws. The Sellers hereby waive compliance with the bulk-transfer provisions of the Uniform Commercial Code (or any similar law) (“Bulk Sales Laws”) in connection with the transactions contemplated by this Agreement and the Collateral Agreements.

4.1.8. Exclusivity.

(a)Until the earlier of (i) the Closing or (ii) the termination of this Agreement, none of the Guarantor, the Sellers or any of their respective Affiliates will (y) directly or indirectly, solicit, initiate or encourage the submission of any proposal or offer from, discuss or negotiate with (whether such negotiations are initiated by the Guarantor, the Sellers or any of their respective Affiliates, any agent or representative of any of the foregoing Persons, or otherwise), provide any information or documentation to, any Person other than the Buyer, its Affiliates, co-investors, potential financing sources, successors and assigns, or (z) enter into an agreement with any Person, other than the Buyer, its Affiliates, co-investors, potential financing sources, successors and assigns, in each case, relating to the acquisition of all or substantially all of the capital stock or assets of the Sellers (including any acquisition structured as a merger, consolidation or share exchange).

(b)The parties recognize and acknowledge that a breach by the Guarantor, the Sellers or their respective Affiliates of this Section 4.1.8 will cause irreparable and material loss and damage to the Buyer as to which it will not have an adequate remedy at law or in damages. Accordingly, each party acknowledges and agrees that the issuance of an injunction or other equitable remedy is an appropriate remedy for any such breach.

4.1.9.Other Actions. The Sellers shall comply with the agreements set forth in Section 4.1.9. of the Company Disclosure Letter.

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4.1.10.Minerva, Ohio Site. The Sellers agree that they will, as soon as reasonably practical following Closing, and at Seller’s sole cost and expense, cause to be conducted at the Minerva, OH facility the additional Phase II property assessment activities identified in the February 2003 Ohio Voluntary Action Program (“VAP”) Phase II Environmental Site Assessment for the site, as well as such further investigation and, if necessary, remediation, as may be required following completion of those activities, in order for the Sellers’ consultant to issue a No Further Action Letter for the purpose of having Ohio EPA grant to Seller and Buyer a “covenant not to sue” under the VAP.

4.2.Covenants of the Buyer.

4.2.1.Public Announcements. Prior to the Closing, except as required by Applicable Law and in connection with obtaining the consents set forth in Section 5.2.2, the Buyer shall not, and shall not permit its Affiliates to, make any public announcement in respect of this Agreement or the transactions contemplated hereby without the prior written consent of the Sellers, which consent is not to be unreasonably withheld, provided, however, that with respect to any public announcement required by Applicable Law, the Buyer shall give to the Sellers the right to review any such public disclosure as promptly as practicable prior to its publication to the extent practicable.

4.2.2.Further Actions.

(a)The Buyer agrees to use all commercially reasonable efforts to take all actions and to do or cause to be done all other things necessary, proper or advisable to consummate and make effective the transactions contemplated hereby by February 28, 2006.

(b)The Buyer will, as promptly as practicable, file or supply, or cause to be filed or supplied, all applications, notifications and information required to be filed or supplied by the Buyer or its Affiliates pursuant to Applicable Law in connection with this Agreement, the Collateral Agreements, the Buyer’s acquisition of the Assets pursuant to this Agreement and the consummation of the other transactions contemplated thereby, including but not limited to filings pursuant to the HSR Act.

(c)The Buyer will coordinate and cooperate with the Sellers in exchanging such information and supplying such reasonable assistance as may be reasonably requested by the Sellers in connection with the filings and other actions contemplated by Section 4.1.5.

(d)The Buyer will cooperate with the Sellers in filing and recording within 60 days after the Closing Date a disclosure document required to be provided by the Sellers pursuant to the Indiana Responsible Property Transfer Law.

(e)After the Closing, the Buyer will not, and will cause each of its Affiliates not to, register or transfer to a third party the co-owned Intellectual Property set forth in Section 1.1(f) of the Company Disclosure Letter without the consent of the Sellers. The Buyer will, and will cause each of its Affiliates to, take commercially reasonable measures to protect the trade secrets constituting Owned Shared Intellectual Property set forth in Section 1.1(f) of the Company Disclosure Letter.

4.2.3.Further Assurances. Following the Closing, the Buyer shall, and shall cause its Affiliates to, from time to time, execute and deliver such additional instruments, documents, conveyances or assurances as shall be necessary, or otherwise reasonably requested by the Sellers, to confirm and assure the rights and obligations provided for in this Agreement and in the Collateral Agreements and render effective the consummation of the transactions contemplated hereby and thereby.

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4.2.4.Use of Business Names and Marks by the Buyer. To the extent the trademarks, service marks, brand names or trade, corporate or business names of the Sellers or of any of the Sellers’ Affiliates or divisions (other than the Business) are used by the Business on signage, invoices, receipts, packaging, product literature and materials, computer programs or like materials (“Marked Materials”) or appear on Inventory at the Closing, the Buyer may use such Marked Materials or sell such Inventory after the Closing for a period of 180 days without altering or modifying such Marked Materials or Inventory, or removing such trademarks, service marks, brand names, or trade, corporate or business names, but the Buyer shall not thereafter use such trademarks, service marks, brand names or trade, corporate or business names in any other manner without the prior written consent of the Sellers; provided that, notwithstanding the foregoing or any other provision of this Agreement, in no event shall the Buyer use letterhead of the Sellers or of any of the Sellers’ Affiliates or divisions.

4.2.5.Confidentiality. The Confidentiality Agreement shall terminate as of the Closing. Except as otherwise provided in this Agreement, (a) the Sellers will, and will cause their Subsidiaries (and their respective accountants, counsel, consultants, employees and agents to whom they disclose such information) to, keep confidential all information in the possession of the Sellers, or to which the Sellers are given access pursuant to Section 2.5(d), 4.2.3 or 8.2(d), after the Closing that relates to the Business or the Assets and (b) the Buyer will, and will cause its Subsidiaries (and their respective accountants, counsel, consultants, employees and agents to whom they disclose such information) to, keep confidential all information in the possession of the Buyer, or to which the Buyer is given access pursuant to Section 2.5(d), 4.1.5 or 8.2(d), after the Closing that relates to the Sellers and is not information solely related to the Business and the Assets. The provisions of this Section 4.2 shall not apply to the disclosure by any party hereto or its Subsidiaries of any information, documents or materials which are (i) or become publicly available, other than by reason of a breach of this Section 4.2 by the disclosing party or any Affiliate of the disclosing party, (ii) received from a third party not bound by any confidentiality agreement with the other party hereto, (iii) required by Applicable Law to be disclosed by such party, or (iv) necessary to establish such party’s rights under this Agreement or any Collateral Agreement, provided that, in the case of clauses (iii) and (iv), the Person intending to make disclosure of confidential information will promptly notify the party to whom it is obliged to keep such information confidential and, to the extent practicable, provide such party a reasonable opportunity to prevent public disclosure of such information.

4.2.6.Bulk Sales Laws. The Buyer hereby waives compliance with the Bulk Sales Laws in connection with the transactions contemplated by this Agreement and the Collateral Agreements.

4.2.7.Minerva, Ohio Site. Following the Closing, the Buyer shall provide Sellers or their Representatives access to the Minerva, OH, facility for the purpose of conducting the continued investigation of the site, and any other required work thereon, in furtherance of the preparation of a No Further Action Letter to enable the Sellers to obtain a “covenant not to sue” from the Ohio Environmental Protection Agency (“Ohio EPA”), as required in Section 4.1.10.

4.2.8.Other Agreements. Buyer will enter into an agreement reasonably satisfactory to Buyer and Sellers providing that Buyer will license to Sellers and Metaldyne Zell any software updates to the Co-Owned Differential Gear Software which Buyer may obtain from time to time; provided that Buyer shall have no obligation to obtain any such updates, Buyer may cease use of such software at any time, any such updates shall be provided without representation or warranty and Sellers and their Affiliates shall comply with any restrictions applicable to Buyer and the provisions of Section 4.1.4(d) with respect to such updates. Seller licensees shall have no right to sublicense any such update. Such license agreement shall contain mutually acceptable provisions with respect to reimbursement of Buyer for any out of pocket costs incurred in connection with obtaining and maintaining any such updates.

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4.3.Baseline Environmental Assessment.

(a)Michigan Sites. The Sellers and the Buyer agree that: (i) prior to Closing, Buyer and its consultant, in consultation with the Sellers and their consultant, shall develop a work plan, to commence promptly after the Closing, for Baseline Environmental Site Assessments under Part 201 of the State of Michigan’s Natural Resources and Protection Act, 1994 PA 451 (hereafter “Baseline Environmental Assessment Program”) of the Real Property located in the State of Michigan and listed or described in Section 1.1(i) of the Company Disclosure Letter; (ii) the scope of the Environmental Site Assessments conducted by the Buyer after the Closing shall be limited to those activities sufficient to enable the Buyer to obtain liability protection under the Baseline Environmental Assessment Program, and, may include, as well an environmental compliance review and visual assessment of asbestos containing materials; (iii) Sellers have the right to have representatives present at all times during Environmental Site Assessment activities on the Real Property and shall have the right to request and receive splits of any samples taken during such activities; (iv) any Environmental Site Assessment Reports prepared pursuant to this Section shall be submitted to Sellers in draft form for review and comment prior to submittal to the Michigan Department of Environmental Quality under the regulations for the Baseline Environmental Assessment Program.; (v) any reports prepared pursuant to this Section relative to any environmental compliance review or environmental assessment of asbestos shall be submitted to Sellers in draft form for review and comment; (vi) copies of all final reports relating to activities authorized under this Section shall be provided to Sellers within five business days of their completion.

(b)Indiana and Canal Fulton, Ohio Sites. As a result of its investigations to date, Buyer will not conduct a Phase II Environmental Site Assessment or further assessment of asbestos at the Real Property located in Indiana and Canal Fulton, Ohio. Buyer (and its consultants) shall complete the environmental compliance reviews of these sites upon receipt of certain documents that have been, or will be prior to Closing, requested of Sellers. If any reports are prepared pursuant to this Section relating to environmental compliance reviews or visual assessment of asbestos containing materials, such reports shall be submitted to Sellers in draft form for review and comment prior to finalization of said reports. Copies of all final reports, if any, relating to activities authorized under this Section shall be provided to Sellers within five business days of their completion.

ARTICLE V

CONDITIONS PRECEDENT

5.1.Conditions to Obligations of Each Party. The obligations of each of the parties to consummate the transactions contemplated hereby shall be subject to the fulfillment on or prior to the Closing Date of the following conditions:

5.1.1.HSR Act Notification. In respect of the notifications of the Buyer and the Sellers pursuant to the HSR Act, the applicable waiting period and any extensions thereof shall have expired or been terminated.

5.1.2.No Injunction, etc. Consummation of the transactions contemplated hereby shall not have been restrained, enjoined or otherwise prohibited by any Applicable Law, including any order, injunction, decree or judgment of any court or other Governmental Authority. No court or other Governmental Authority shall have determined any Applicable Law to make illegal the consummation of the transactions contemplated hereby or by the Collateral Agreements.

5.2.Conditions to Obligations of the Buyer. The obligations of the Buyer to consummate the transactions contemplated hereby shall be subject to the fulfillment (or waiver by the Buyer)

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on or prior to the Closing Date of the following additional conditions, which the Sellers agree to use reasonable good faith efforts to cause to be fulfilled:

5.2.1.Representations; Performance.

(a)The representations and warranties of the Sellers and the Guarantor contained in this Agreement and in the Collateral Agreements (i) shall be true and correct in all respects (in the case of any representation or warranty containing any materiality qualification) or in all material respects (in the case of any representation or warranty without any materiality qualification) at and as of the date hereof and (ii) shall be repeated and shall be true and correct in all respects (in the case of any representation or warranty containing any materiality qualification) or in all material respects (in the case of any representation or warranty without any materiality qualification) at and as of the Closing Date.

(b)Each Seller and the Guarantor shall have duly performed and complied in all material respects with all agreements and conditions required by this Agreement and each of the Collateral Agreements to be performed or complied with by it prior to or on the Closing Date.

(c)The Sellers shall have delivered the Trade Accounts Payable Statement to the Buyer five (5) Business Days prior to the Closing Date.

(d)Each Seller and the Guarantor shall have delivered to the Buyer a certificate, dated the Closing Date and signed by its duly authorized officer, certifying as to the matters set forth in Sections 5.2.1(a) and (b).

5.2.2.Consents.

(a)All consents, amendments, legal opinions, letters and other actions required in order to assign the IRB Loan Documents and to institute an Alternate Credit Facility (as such term is defined in the IRB Loan Agreement) under the IRB Loan Agreement shall have been executed or obtained, as the case may be, on terms reasonably satisfactory to the Buyer.

(b)The Sellers shall have obtained and shall have delivered to the Buyer copies of all consents and extensions, or other actions reasonably satisfactory to the Buyer, set forth in Section 5.2.2 of the Company Disclosure Letter.

5.2.3.Collateral Agreements. The Guarantor and the Sellers or one of their Affiliates, as the case may be, shall have entered into each of the following agreements with the Buyer:

(a)a transitional services agreement, in the form and substance reasonably satisfactory to the Buyer and Sellers, pursuant to which the Sellers will provide to the Buyer for a period of up to twelve months following the Closing Date certain of those goods, rights and services specified therein that are currently provided or made available to the Business by the Sellers or their Affiliates; and

(b)a supply agreement, in the form of Exhibit A, pursuant to which the Sellers will purchase from the Buyer those goods, rights and services specified therein that are currently provided or made available to the Business by the Sellers or their Affiliates.

5.2.4.Transfer Documents. The Sellers shall have executed and delivered to the Buyer at the Closing all documents, certificates and agreements reasonably necessary to transfer to the

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Buyer good and marketable title to the Assets, free and clear of any and all Liens thereon, other than Permitted Liens, including without limitation:

(a)a bill of sale, assignment and general conveyance, in form and substance reasonably satisfactory to the Buyer and Sellers, dated the Closing Date, with respect to the Assets (other than any Asset to be transferred pursuant to any of the instruments referred to in any other clause of this Section 5.2.4);

(b)a general warranty deed, dated as of the Closing Date, with respect to the Owned Real Property included in the Assets, in form and substance reasonably satisfactory to the Buyers and the Sellers, together with any necessary transfer declarations or other filings;

(c)an assignment of lease, in form and substance reasonably satisfactory to the Buyers and the Sellers, dated as of the Closing Date, with respect to each real property Lease listed on Schedule 5.2.2, together with any necessary transfer declarations or other filings, together with a consent to assignment of the Lease from the landlord thereunder (to the extent required by the Lease) and an estoppel certificate from the landlord identifying in the Lease to the assigned, setting forth the rent payable thereunder and term of the Lease and stating that there are no defaults by the tenant thereunder;

(d)certificates of title to all owned motor vehicles included in the Assets to be transferred to the Buyer hereunder, duly endorsed for transfer to the Buyer as of the Closing Date; and

(e)as to the Owned Real Property:

(i)such affidavits or assurances to the Buyer’s title insurance company as will permit the Buyer to obtain (upon the Buyer’s payment of applicable premiums) an owner’s policy of title insurance insuring title to the Owned Real Property to be in the Buyer, free and clear of all liens and encumbrances other than Permitted Liens,

(ii)such surveys, plans/specifications, warranties and property records which are in the Seller’s possession, and

(iii)keys to locks located on the Owned Real Property.

5.2.5.Indiana Responsible Property Transfer Law. Any disclosure document required to be provided by the Sellers pursuant to the Indiana Responsible Property Transfer Law shall have been provided to the Buyer on or prior to the Closing Date.

5.2.6.FIRPTA Certificate. Each Seller shall deliver to the Buyer a certification dated as of the Closing Date, in the form required by Treasury Regulations § 1.1445-2(b)(2) and signed under penalties of perjury, stating that such Seller is not a foreign person (within the meaning of section 1445 of the Code).

5.3.Conditions to Obligations of the Sellers. The obligations of the Sellers to consummate the transactions contemplated hereby shall be subject to the fulfillment (or waiver by the Sellers), on or prior to the Closing Date, of the following additional conditions, which the Buyer agrees to use reasonable good faith efforts to cause to be fulfilled.

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5.3.1.Representations, Performance, etc.

(a)The representations and warranties of the Buyer contained in this Agreement and the Collateral Agreements (i) shall be true and correct in all respects (in the case of any representation or warranty containing any materiality qualification) or in all material respects (in the case of any representation or warranty without any materiality qualification) at and as of the date hereof and (ii) shall be repeated and shall be true and correct in all respects (in the case of any representation or warranty containing any materiality qualification) or in all material respects (in the case of any representation or warranty without any materiality qualification) at and as of the Closing Date.

(b)The Buyer shall have duly performed and complied in all material respects with all agreements and conditions required by this Agreement and the Collateral Agreements to be performed or complied with by it prior to or on the Closing Date.

(c)Each Buyer shall have delivered to the Sellers a certificate, dated the Closing Date and signed by its duly authorized officer, certifying as to the matters set forth in Section 5.3.1(a) and (b).

5.3.2.Consents. The Sellers shall have obtained copies of all consents set forth in Section 5.3.2 of the Company Disclosure Letter.

5.3.3.Assumption Agreement. The Sellers shall have received from the Buyer the Assumption Agreement.

5.3.4.Collateral Agreements. The Buyer shall have entered into each of the Collateral Agreements.

5.3.5.Bank Consent. Sellers shall have received a consent under their bank credit facility to the sale of the Business.

ARTICLE VI

EMPLOYEES AND EMPLOYEE BENEFIT PLANS

6.1.Employment of the Sellers’ Employees.

6.1.1.Non-Solicitation. Beginning on the date of this Agreement and continuing for a period of two years from the Closing Date, the Sellers and the Guarantor will not, and will not permit any of their Affiliates, either directly or indirectly, through agents or consultants, to, employ any employee of the Buyer who was a Management Employee of the Business as of the date of this Agreement (other than the employment of such persons in the Business from the date hereof through the Closing Date) without obtaining the prior written consent of the Buyer to such action; provided that the Sellers may employ any such person who has been terminated by the Buyer prior to commencement of employment discussions between the Sellers and such persons.

6.1.2. Employees Represented by a Labor Organization. Effective as of the Closing Date, the Buyer will hire all employees at any Acquired Facility organized by a labor organization and assume the collective bargaining agreements listed in Section 6.1.2 of the Company Disclosure Letter (“Assumed Collective Bargaining Agreements”), as well as any duty to bargain at any such facility and the Buyer shall notify labor organizations at any Acquired Facility of its obligations in this regard prior to Closing. Such assumption will include, but not be limited to, offering employment to all

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represented employees at Acquired Facilities organized by labor organizations on terms and conditions they enjoy under the collective bargaining agreement with the Buyer.

6.1.3. Transferred Employees. Effective as of the Closing Date, the Buyer shall offer to employ, with a wage and benefits package as of the Closing Date that is comparable in the aggregate to or better than the wage and benefits package such Employees were entitled to receive from the Sellers, all of the Employees who are actively employed in the Business on the Closing Date immediately after giving effect to the transactions contemplated hereby (each such Employee who accepts such offer, together with Employees represented by a labor organization as provided at Section 6.1.2 above, being hereafter referred to as a “Transferred Employee”), it being agreed that persons who are on layoff or leave and who have a right to return to work at an Acquired Facility or who are on short-term (not more than six months) medical disability leave (including pregnancy leave) as of the Closing Date or who are on any other authorized leave (such as military, family or other leaves where return to work is subjectto statutory or contractual requirements) are to be considered Employees who are actively employed, andit is also agreed that persons on long-term medical disability or worker’s compensation as of the Closing Date and persons whose employment has terminated or will terminate prior to the Closing Date without any right to return to work are not to be considered Employees who are actively employed. Notwithstanding the foregoing, (i) the provisions of Sections 6.1.1 and 6.1.2 shall not be construed to limit the ability of the Buyer to terminate any such Employee at any time for any reason after the Closing Date except as otherwise prohibited by law, or subject to the terms and conditions of any Assumed Collective Bargaining Agreement, and (ii) the Buyer shall not be obligated to provide any benefits that are comparable to any stock based benefits or any defined benefit pension plan benefits, except in connection with Assumed Collective Bargaining Agreements. From and after the Closing Date, the Buyer shall also assume responsibility to provide Transferred Employees with disability benefits in the same manner and to the same extent as such Transferred Employees would have been entitled to receive under the Sellers’ disability plans and the Buyer shall assume the responsibility to provide Transferred Employees with continuing benefits and coverage required, if any, under section 4980B of the Code and part 6 of Subtitle B of Title I of ERISA. Notwithstanding any other provision of this Article VI, subject to Section 6.1.4, after the Closing Date the Buyer shall not be prohibited from amending or terminating any benefit or compensation plan, program, practice, policy, agreement or arrangement covering any Transferred Employee (subject to any applicable terms and conditions of any Assumed Collective Bargaining Agreement). From and after the Closing, the Buyer shall be solely responsible for any and all liabilities, obligations and responsiblities in respect of the Transferred Employees, and their beneficiaries and dependents, relating to or arising in connection with or as a result of (i) the employment or the actual or constructive termination of employment of any such Transferred Employee by the Sellers (including, without limitation, in connection with the consummation of the transactions contemplated by this Agreement), (ii) the participation in or accrual of benefits or compensation under, or the failure to participate in or to accruecompensation or benefits under, any Plan (other than any stock based Plan or any Plan that is a defined benefit pension plan) or other employee or retiree benefit or compensation plan, program, practice, policy, agreement or arrangement of the Sellers or (iii) accrued but unpaid salaries, wages, bonuses, incentive compensation, vacation or sick pay or other compensation or payroll items (including, without limitation, deferred compensation), except, in any such case, to the extent any such liability, obligation or responsibility (x) is specifically retained by the Sellers pursuant to this Article VI or (y) relates to services rendered and arose prior to the Closing Date and is not reflected on the Closing Net Working Capital Statement in a manner consistent with the prior practice of the Sellers. Notwithstanding any other provision of this Agreement, the Sellers shall retain all liability for defined benefit pension benefits accrued by Transferred Employees as of the Closing Date, and shall retain all responsibility and liability arising out of or relating to the Metaldyne Corporation Pension Plan (MascoTech) (the “Seller Pension Plan”). On or as soon as practicable following the Closing Date, the Buyer shall establish a defined benefit pension plan (the “Buyer Pension Plan”) to provide for such defined benefit pension benefits as are required to be provided to Transferred Employees from and after the Closing Date pursuant to any Assumed Collective

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Bargaining Agreement; provided, however, that the Buyer Pension Plan shall provide credit with respect to Transferred Employees for service credited under the Seller Pension Plan for purposes of eligibility, vesting and benefit accrual, and shall also provide that the benefit accrued with respect to any Transferred Employee under the Buyer Pension Plan shall be reduced by the benefit accrued with respect to such Transferred Employee under the Seller Pension Plan.

6.1.4.Responsibility Under the Worker Adjustment and Retraining Notification Act (WARN). The Buyer shall not, during the sixty (60) day period after the Closing Date, change the terms and conditions of the employment of the Transferred Employees such that such changes would result in the employees becoming eligible for notice or notice pay under the federal law known as the Worker Adjustment and Retraining Notification Act (“WARN”). Except as to this condition, the parties agree that the Sellers shall be responsible for any required WARN notices under WARN up until the date and time of Closing and the Buyer for WARN notices after the date and time of Closing. If and when such notice is required for Transferred Employees at any time (if ever) due to actions or inactions of the Buyer but is not given, the Buyer shall be responsible to indemnify the Sellers for the Sellers’ portion of any pay in lieu of notice required under WARN to be paid by the Sellers.

6.2.Worker’s Compensation Claims.

(a)The Sellers shall retain liability for all suits, claims, proceedings and actions pending as of or commenced after the Closing Date resulting from actual or alleged harm or injury to Transferred Employees where the incident or accident giving rise to such liability occurred prior to the Closing Date. The Buyer shall assume liability for all suits, claims, proceedings and actions commencedby or on behalf of a Transferred Employee on or after the Closing Date where the incident or accident giving rise to such liability occurs on or after the Closing Date. The Buyer shall make all necessary arrangements to provide worker’s compensation insurance and cover claims for Transferred Employees arising on or after the Closing Date and to ensure the management of such claims.

(b)Buyer will offer to hire any Employee at a wage and benefits package that would meet the requirements of Section 6.1.3 who is on worker’s compensation leave as of the Closing Date and who is not otherwise a Transferred Employee as of the Closing Date, upon the date that both the following conditions are met (i) the employee is able to return to work, and (ii) there is a position with the Buyer that the Employee can fill for which the Employee is reasonably qualified and for which the Employeecan perform the essential functions, with or without reasonable accommodation. In the case of Employeeswho are on worker’s compensation leave at an Acquired Facility but whom are covered by a Assumed Collective Bargaining Agreement, the Buyer will hire such Employees as of the Closing Date and provide such leave manner and reinstatement in the manner provided by the Assumed Collective Bargaining Agreement. In either case, effective upon being hired, such Employees shall be deemed to be a Transferred Employee for purposes of this Agreement. Notwithstanding the foregoing, the provisions of this Section 6.2(b) shall not be construed to limit the ability of the Buyer to terminate any such Employee at any time for any reason after the Closing Date except as otherwise prohibited by law, or subject to the terms and conditions of any Assumed Collective Bargaining Agreement.

6.3.Welfare Benefit Plans.

6.3.1.Transferred Employees. Payment of claims for all Transferred Employees and their dependents and beneficiaries (the “Covered Employees”) and their respective eligible dependents under the welfare benefit plans (as defined in section 3(1) of ERISA) maintained by the Sellers or their Affiliates for the benefit of Employees prior to the Closing Date (the “Seller Welfare Plans”) shall be cut off and terminated as of the Closing Date, provided that the Sellers shall remain liable for all claims incurred and made by Covered Employees prior to the Closing Date that remain unpaid as of the

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Closing Date. Subject to the satisfaction of any conditions, limitations or waiting periods referred to in the last sentence of this Section, the welfare benefit plans (as defined in section 3(1) of ERISA) maintained by the Buyer or its Affiliates (the “Buyer Welfare Plans”) shall provide coverage and benefits to such Covered Employees (and the eligible dependents of such Covered Employees) in substantially the same manner as provided by the Sellers prior to the Closing Date. The Buyer Welfare Plans shall be liable for claims incurred or made by Covered Employees on or after the Closing Date. The Covered Employees shall be entitled to apply deductibles and out of pocket payments expended for covered medical and dental expenses under the Seller Welfare Plans in the plan fiscal year ending December 31, 2005 to the deductibles and out of pocket maximums under the Buyer Welfare Plans, if any, for the plan fiscal year which ends on December 31, 2005. If requested by the Buyer, the Sellers shall furnish the Buyer with a schedule within a reasonable period of time following the Closing Date setting forth the deductibles and out of pocket maximums incurred under the Seller Welfare Plans for each Covered Employee. The Seller Welfare Plans shall be liable only for claims incurred and actually made prior to the Closing Date. The Seller Welfare Plans shall continue to operate in their usual and customary manner for all periods between the date that this Agreement is executed and the Closing Date. No pre-existing condition limitations, exclusions or waiting periods applicable with respect to life and accident, death and dismemberment insurance, disability, sickness and accident and medical benefits under the Buyer Welfare Plans shall apply to the Covered Employees to the extent that such limitations, exclusions or waiting periods exceed those in effect under the Seller Welfare Plans as of the Closing Date.

6.3.2.Cooperation. To the extent that the Buyer or the Sellers are unable to, with reasonably diligent effort and at reasonable expense, perform their obligations in the manner contemplated by this Article VI, the Buyer and the Sellers shall cooperate in order to achieve the most economic transfer reasonably practicable and the Buyer on the one hand and the Sellers on the other agree to indemnify each other for any incremental expenses incurred by the other as a result of any accommodation by either such party from the respective responsibilities assigned to the parties by this Section 6.3.2.

6.4.Information; Cooperation. If after the Closing, in order properly to prepare documents or reports required to be filed with Governmental Authorities or financial statements, it is necessary that the Buyer or the Sellers be furnished with additional information relating to the Business and such information is in possession of any party hereto, such party will use its reasonable efforts to furnish, or cause to be furnished, such information to the party requesting information. Notwithstanding the above, to the extent that the Buyer or the Sellers are unable to, with reasonably diligent effort and at reasonable expense, perform their obligations in the manner contemplated by this Article VI, the Buyer and the Sellers shall cooperate in order to achieve the most economic transfer reasonably practicable and the Buyer on the one hand and the Sellers on the other agree to indemnify each other for any incremental expenses incurred by the other as a result of any accommodation by either such party from the respective responsibilities assigned to the parties by this Article VI.

ARTICLE VII

TERMINATION

7.1.Termination. This Agreement may be terminated:

(a)at any time prior to the Closing Date by the written agreement of the Buyer and the Sellers;

(b)at any time prior to the Closing Date by either the Sellers or the Buyer by written notice to the other party if any court of competent jurisdiction in the United States or federal, state or local government or regulatory body in the United States shall have issued an order, decree or

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ruling or taken such action that permanently restrains, enjoins or otherwise prohibits the transactions contemplated hereby and such order, decree, ruling or other action shall have become final and non-appealable;

(c)at any time prior to the Closing Date by either the Sellers or the Buyer by written notice to the other party if the transactions contemplated hereby shall not have been consummated pursuant hereto by 5:00 p.m. New York City time on February 28, 2006, unless such date shall be extended by the mutual written consent of the Sellers and the Buyer;

(d)at any time prior to the Closing Date by the Buyer by written notice to the Sellers if the representations and warranties of the Sellers shall not have been true and correct in all material respects as of the date when made, unless such failure shall be due to the failure of the Buyer to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing;

(e)at any time prior to the Closing Date by the Sellers by written notice to the Buyer if the representations and warranties of the Buyer shall not have been true and correct in all material respects as of the date when made, unless such failure shall be due to the failure of the Sellers to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by them prior to the Closing.

7.2.Effect of Termination. In the event of the termination of this Agreement pursuant to the provisions of Section 7.1, this Agreement shall become void and have no effect, without any liability to any Person in respect hereof or of the transactions contemplated hereby on the part of any party hereto, or any of its directors, officers, employees, agents, consultants, representatives, advisers, stockholders or Affiliates, except as specified in Section 9.4 and except for any liability resulting from such party’s breach of this Agreement.

ARTICLE VIII

GUARANTY

8.1.Guaranty of Sellers’ Obligations.

(a)The Guarantor hereby unconditionally guarantees to the Buyer the due and prompt payment and performance of all obligations of the Sellers under this Agreement and the Collateral Agreements (collectively, the “Guaranteed Obligations”). In case of the failure of the Sellers to timely pay or perform any Guaranteed Obligation, the Guarantor hereby agrees to cause any such payment to be made punctually when and as the same shall become due and payable, and to cause the timely performance of any such Guaranteed Obligations, all in accordance with the terms of this Agreement and the Collateral Agreements.

(b)The Guarantor hereby agrees that its Guaranteed Obligations hereunder shall be continuing, absolute and unconditional, and shall remain in full force and effect until all of the Guaranteed Obligations under this Agreement have been completely discharged, irrespective of (1) the extension by the Buyer of the time for payment or performance by the Sellers or the Guarantor of any of their obligations arising under this Agreement or the Collateral Agreements; (2) the modification or amendment of any duty, covenant, agreement or obligation of the Sellers or the Guarantor contained in this Agreement or the Collateral Agreements; (3) any failure, omission, delay or lack on the part of the Buyer to enforce, assert or exercise any right, power or remedy conferred on the Buyer under this Article VIII; (4) lack of presentment, notice of default or protest; (5) lack of corporate power or due authorization, execution or

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delivery by the Sellers; and (6) any other circumstances which might otherwise constitute a legal or equitable discharge or defense of a guarantor; provided that in no event shall this paragraph extend the scope of the Guaranteed Obligations set forth in Section 8.1(a) above. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Sellers, any right to require a legal proceeding first against the Sellers, and all demands whatsoever, and covenants that the Guaranteed Obligations contained in this Article VIII will not be discharged except by complete performance of the obligations of the Sellers contained in this Agreement or the Guaranteed Obligations contained in this Article VIII.

(c)The Guarantor further agrees that if at any time all or any part of any payment theretofore applied by the Buyer to any Guaranteed Obligation is or must be rescinded or returned to Sellers for any reason whatsoever, including, without limitation, the insolvency, bankruptcy or reorganization of the Sellers, such Guaranteed Obligation shall for the purposes of this Article VIII, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence notwithstanding such application, and this Article VIII shall continue to be effective or to be reinstated, as the case may be, as to such Guaranteed Obligation as thought such application had not been made.

(d)Notwithstanding any other provisions hereof, the Guarantor shall be entitled to the benefit of and may assert as a defense against any claim under this guarantee, any defense, set-off or counterclaim which the Sellers could have asserted other than defenses based upon or relating to Sellers’ insolvency, bankruptcy or similar laws or lack or corporate power or due authorization or delivery by the Sellers.

8.2.Subrogation. The Guarantor shall be subrogated to all rights of the Buyer against the Sellers in respect of any amount paid by the Guarantor pursuant to the provisions of this Article VIII; provided that any such rights of the Guarantor shall be subordinate to any rights of the Buyer against the Sellers.

8.3.Representations and Warranties. The Guarantor represents and warrants to the Buyer as follows:

(a)The Guarantor holds, beneficially and of record, all of the issued and outstanding membership and other equity or ownership interests of each of the Sellers.

(b)The Guarantor is duly authorized, under all applicable provisions of law, to execute and deliver this Agreement and to perform its obligations hereunder, all corporate and stockholder action necessary therefor has been duly and effectively taken that the execution and delivery of this Agreement and performance in accordance with its terms will not result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, deed of trust, note, note agreement, consent or other agreement or instrument to which the Guarantor is a party, or its certificate of limited partnership or its limited partnership agreement, and this Agreement is a valid and legally binding instrument for the purposes herein expressed, enforceable in accordance with its terms (except as enforceability may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting creditors’ rights generally).

(c)All consents, licenses, approvals, orders and authorizations of, and declarations filings and registrations with, any governmental or regulatory authority, bureau or agency required to be obtained by the Guarantor in connection with the execution, delivery, performance, validity or enforceability of this Agreement have been duly obtained or made and are in full force and effect.

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8.4.Liquidation, Winding Up, etc. If the Guarantor shall liquidate, wind up or dissolve itself or if the Guarantor sells all or substantially all of its assets, the Guarantor hereby covenants and agrees that upon any such liquidation, winding up, dissolution or sale, the guarantee given in this Agreement and the due and punctual performance and observance of the Guaranteed Obligations shall be expressly assumed by supplemental agreements including provisions in substantially the form attached hereto as Exhibit C, by the corporation, corporations or other entity which shall have acquired all or substantially all of the assets of the Guarantor.

ARTICLE IX

DEFINITIONS; MISCELLANEOUS

9.1.Definition of Certain Terms. The terms defined in this Section 9.1, whenever used in this Agreement (including in the Company Disclosure Letter and Buyer Disclosure Letter), shall have the respective meanings indicated below for all purposes of this Agreement. All references herein to a Section, Article, Exhibit or section of the Company Disclosure Letter or Buyer Disclosure Letter are to a Section, Article or Exhibit or section of the Company Disclosure Letter or Buyer Disclosure Letter or to this Agreement, unless otherwise indicated.

Acquired Facility: any facility whose ownership and/or operation is transferred to the Buyer by this Agreement.

Affiliate: of a Person, another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first Person. “Control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a Person, whether through the ownership of voting securities, by contract or credit arrangement, as trustee or executor, or otherwise.

Agreement: this Asset Purchase Agreement, including the Company Disclosure Letter and Buyer Disclosure Letter.

Applicable Law: all applicable provisions of all (i) constitutions, treaties, statutes, laws (including the common law), rules, regulations, ordinances, codes or orders of any Governmental Authority, (ii) Governmental Approvals and (iii) orders, decisions, injunctions, judgments, awards and decrees of or agreements with any Governmental Authority.

Assets: as defined in Section 1.1.

Assumed Collective Bargaining Agreements: as defined in Section 6.1.2.

Assumed Liabilities: as defined in Section 2.6(a).

Assumption Agreement: as defined in Section 2.6(b).

Audited Financial Statements: as defined in Section 3.1.4(a).

Baseline Environmental Assessment Program: as defined in Section 4.3.

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Benefit Liabilities: liabilities, obligations, commitments, costs and expenses, including reasonable fees and disbursements of attorneys and other advisors, including any such expenses incurred in connection with the enforcement of any applicable provision of this Agreement.

Bulk Sales Laws: as defined in Section 4.1.7.

Business: as defined in the first WHEREAS clause of this Agreement.

Business Day: a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required to close.

Buyer: as defined in the first paragraph of this Agreement.

Buyer Disclosure Letter: as defined in Section 3.2.

Buyer Indemnitees: as defined in Section 9.2(a).

Buyer Pension Plan: as defined in Section 6.1.3.

Buyer Welfare Plans: as defined in Section 6.3.1.

Closing: as defined in Section 2.1.

Closing Date: as defined in Section 2.1.

Closing Net Working Capital Statement: as defined in Section 2.5(a).

Code: the Internal Revenue Code of 1986, as amended.

Collateral Agreements: the agreements and other documents and instruments describe in Section 5.2.3.

Company Disclosure Letter: as defined in Section 3.1.

Confidentiality Agreement: the Confidentiality Agreement dated as of July 25, 2005.

Contracts: all contracts, agreements, instruments, leases, subleases, deeds of trust, conditional sales contracts, franchises, licenses, commitments or other binding arrangements, together with all modifications and amendments thereto, including any that are executory and unexpired as of the Closing Date.

Covered Employees: as defined in Section 6.3.1.

CPR: as defined in Section 9.9.4.

Deposit: as defined in Section 2.2(b)

Dispute: as defined in Section 9.9.4.

Dispute Notice: as defined in Section 2.5(d).

$: lawful money of the United States.

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Employees: as defined in Section 3.1.21(a).

Environmental Laws: all Applicable Laws relating to the protection of the environment and human health (to the extent related to exposure to Hazardous Substances), including those relating to generation, pollution, storage, transport, treatment, disposal, use and Release of any Hazardous Substances.

Environmental Liabilities: any liability or obligation, including, without limitation, liability for investigatory costs, oversight costs, remediation and cleanup costs, governmental or private response costs and cost recovery actions, natural resource damages, property damages, personal injuries, consequential economic damages, administrative, civil or criminal penalties or forfeitures, and recoverable attorneys’ fees or other costs of defending an action, suit, proceeding or investigation asserting liability under any Environmental Law.

Environmental Permits: any federal, state and local permit, license, registration, approval or other authorization necessary under Environmental Laws for the conduct of the Business as currently conducted.

ERISA: the Employee Retirement Income Security Act of 1974, as amended.

Escrow Agent: as defined in Section 2.2(b).

Excluded Assets: as defined in Section 1.2.

Financial Statements: as defined in Section 3.1.4(a).

GAAP: generally accepted accounting principles consistently applied as in effect in the United States.

Governmental Approval: any consent, license, registration or permit issued, granted, given or otherwise made available by or under the authority of any Governmental Authority or pursuant to any Legal Requirement, which consent, license, registration or permit is related primarily to or required for the operation of the Business.

Governmental Authority: any nation or government, any state or other political subdivision thereof or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including, without limitation, any government authority, agency, department, board, commission or instrumentality of the United States, any State of the United States or any political subdivision thereof.

Guaranteed Obligations: as defined in Section 8.1(a).

Guarantor: as defined in the first paragraph of this Agreement.

Hazardous Substance: any substance, waste, pollutant, contaminant, material or chemical, including asbestos, polychlorinated biphenyls, crude oil, petroleum or petroleum products, regulated under any Environmental Law.

HSR Act: the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

Indemnified Party: as defined in Section 9.2(e).

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Indemnifying Party: as defined in Section 9.2(e).

Independent Accounting Firm: as defined in Section 2.5(d).

Intellectual Property: any and all United States and foreign (a) patents and patent applications (including, reissues, divisions, continuations, continuations-in-part and extensions and any application thereto), inventions and improvements thereto; (b) trademarks, service marks, certification marks, trade names, trade dress, logos, business and product names, slogans and registrations and applications for registration thereof; (c) copyrights (including software) and registrations thereof, (x) but excluding, in the case of clauses (a), (b) and (c), the name “Metaldyne” and (y) including, without limitation, in the case of clauses (a), (b) and (c), the names “FormTech”, “Braun” and “Burns”; and (d) inventions, processes, designs, formulae, Software, trade secrets, know-how, industrial models, confidential and technical information, manufacturing, engineering and technical drawings, product specifications and confidential business information.

Intellectual Property Assets: as defined in Section 1.1(f).

Inventories: as defined in Section 1.1(b).

IRB Loan Agreement: the Loan Agreement, by and between the City of Fort Wayne, Indiana and ND-Tech Corporation, an Indiana corporation, dated as of July 1, 1989, as amended by the First Amendment to the Loan Agreement, dated as of July 1, 1994.

IRB Loan Documents: collectively, (i) the IRB Loan Agreement, (ii) Placement and Remarketing Agreement among the City of Fort Wayne, Indiana, ND-Tech Corporation, First Chicago Capital Markets, Inc., as Placement Agent and First Chicago Capital Markets, Inc., as Remarketing Agent, dated 7/1/89, (iii) the Arbitrage Compliance Agreement among the City of Fort Wayne, Indiana, ND-Tech Corporation and Fort Wayne National Bank, dated 7/1/89 and (iv) the Tax Compliance Agreement among the City of Fort Wayne, Indiana, ND-Tech Corporation and Fort Wayne National Bank, dated 7/1/89.

IRS: the Internal Revenue Service.

Knowledge of the Sellers: knowledge of Thomas Amato, John Campbell, Steven Dickerson, Dean Teeples, David Gann, Dr. Markus Knoerr and Jeffrey Heath, after reasonable inquiry or investigation.

Labor Laws: as defined in Section 3.1.20(a).

Leased Real Property: all interests leased pursuant to the Leases.

Leases: the real property leases pursuant to which any Seller is the lessee or sublessee, other than real property leases or subleases included in Excluded Assets.

Legal Requirement: any federal, state or municipal law, ordinance, regulation, statute or treaty.

Lien: any mortgage, pledge, hypothecation, security interest, encumbrance, lien, charge or right of others of similar nature.

Losses: as defined in Section 9.2(a).

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Management Employee: any employee who serves as a manager, director, officer or professional or engineering employee of the Business.

Marked Materials: as defined in Section 4.2.4.

Material Adverse Effect: any event, occurrence, fact, condition, circumstance, change or effect which has had or would be reasonably likely to have a material adverse effect upon, or change in the business, results of operations, financial condition, assets (including intangible assets) or liabilities of the Business, taken as a whole; provided, however, that none of the following shall be deemed in themselves, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been, a Material Adverse Effect: (i) any adverse change, effect, event, occurrence, state of facts or development solely to the extent attributable to the announcement of pendency of the transactions contemplated hereby and by the Collateral Agreements (including any cancellations of or delays in customer orders, any reduction in sales, any disruption in supplier, distributor, partner or similar relationships or any loss of employees), (ii) any adverse change, effect, event, occurrence, state of facts or development attributable to conditions affecting the industries in which the Business participates which does not affect the Business disproportionately relative to other entities operating in such industries, or (iii) any material adverse change, effect, event, occurrence, state of facts or development resulting from or relating to compliance with the terms of, or the taking of any action required by, this Agreement.

Metaldyne LLC: as defined in the first paragraph of this Agreement.

Metaldyne Precision: as defined in the first paragraph of this Agreement.

Net Working Capital: as defined in Section 2.5(a).

Net Working Capital Principles: as defined in Section 2.5(a).

Order: any binding award, decision, order, injunction, judgment, decree, ruling or verdict entered, issued, made or rendered by, or assessment or arbitration award of, any Governmental Authority or arbitrator.

Ordinary Course of Business: the ordinary course of business of the Sellers consistent with past custom and practice.

Owned Intellectual Property: as defined in Section 3.1.16(a).

Owned Real Property: the real property owned by the Sellers relating to the Business, together with all other structures, facilities, improvements, fixtures, systems, equipment and items of property presently or hereafter located thereon attached or appurtenant thereto or owned by the Sellers relating to the Business and all easements, licenses, rights and appurtenances relating to the foregoing other than owned real property included in Excluded Assets.

Permitted Liens: (i) Liens reserved against in the Unaudited Balance Sheet, to the extent so reserved, (ii) Liens for Taxes not yet due and payable or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the Sellers’ books in accordance with GAAP, or (iii) other Liens arising in the Ordinary Course of Business which are immaterial and which do not, individually or in the aggregate, materially detract from the value of the property or assets to which it relates or materially impair the ability of the Buyer to use the property or assets

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which it relates in substantially the same manner as it was used prior to the Closing Date, specifically excluding, however, mortgages on the Leases or Owned Real Property.

Person: any natural person, firm, partnership, association, corporation, company, trust, business trust, Governmental Authority or other entity.

Plan: as defined in Section 3.1.21(a).

Proceeding: any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, judicial or investigative, whether public or private) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Authority or arbitrator.

Purchase Price: as defined in Section 2.2(a).

Real Property: the Owned Real Property and the Leased Real Property.

Real Property Laws: as defined in Section 3.1.18(e).

Record: information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

Release: any disposing, discharging, injecting, spilling, leaking, leaching, pumping, dumping, emitting, escaping, emptying, seeping or dispersal into the environment.

Representatives: as to any Person, its accountants, counsel, consultants (including actuarial, environmental and industry consultants) and lenders and their counsel and consultants, employees, agents and other representatives and advisers.

Retained Liabilities: as defined in Section 2.7.

Rules: as defined in Section 9.9.4.

Seller Indemnitees: as defined in Section 9.2(b).

Seller Pension Plan: as defined in Section 6.1.3.

Seller Welfare Plans: as defined in Section 6.3.1.

Sellers: as defined in the first paragraph of this Agreement.

Software: all computer software and subsequent versions thereof, including source code, object, executable or binary code, objects, comments, screens, user interfaces, report formats, templates, menus, buttons and icons and all files, data, materials, manuals, design notes and other items and documentation related thereto or associated therewith.

Subsidiary: each corporation or other Person in which a Person owns or controls, directly or indirectly, capital stock or other equity interests representing at least 50% of the outstanding voting stock or other equity interests.

Target Net Working Capital: as defined in Section 2.5(b).

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Tax: any federal, state, provincial, local, foreign or other income, alternative, minimum, accumulated earnings, personal holding company, franchise, capital stock, net worth, capital, profits, windfall profits, gross receipts, value added, sales (including, without limitation, bulk sales), use, goods and services, excise, customs duties, transfer, conveyance, mortgage, registration, stamp, documentary, recording, premium, severance, environmental (including, without limitation, taxes under section 59A of the Code), real property, personal property, ad valorem, intangibles, rent, occupancy, license, occupational, employment, unemployment insurance, social security, disability, workers’ compensation, payroll, health care, withholding, estimated or other similar tax, duty or other governmental charge or assessment or deficiencies thereof (including all interest and penalties thereon and additions thereto whether disputed or not).

Tax Return: any return, report, declaration, form, claim for refund or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

Taxing Authority: the IRS or any other federal, provincial, state, local or other taxing authority.

Trade Accounts Payable: short term obligations arising from the acquisition of goods and services from the Sellers’ suppliers as evidenced by invoices, purchase orders/requisitions, contracts, credit or debit memoranda or similar documentation (excluding any payables to Subsidiaries of the Guarantor).

Trade Accounts Payable Statement: as defined in Section 2.4(a).

Transfer Taxes: as defined in Section 4.1.6(a).

Transferred Employees: as defined in Section 6.1.3.

Treasury Regulations: the regulations prescribed pursuant to the Code.

Unaudited Balance Sheet Date: September 30, 2005.

Unaudited Financial Statements: as defined in Section 3.1.4(a).

Unaudited Reviewed Financial Statements: as defined in Section 3.1.4(a).

Unaudited Unreviewed Financial Statements: as defined in Section 3.1.4(a).

Working Capital: as defined in Section 2.5(a).

WARN: as defined in Section 6.1.4.

9.2.Indemnification.

(a)By the Sellers. The Sellers covenant and agree to defend, indemnify and hold harmless the Buyer, its Affiliates and the officers, directors, employees, agents, advisers and representatives of each such Person (collectively, the “Buyer Indemnitees”) from and against, and pay or reimburse the Buyer Indemnitees for any and all claims, liabilities, obligations, Taxes, losses, fines, royalties, proceedings, deficiencies or damages (whether absolute, accrued, conditional or otherwise and whether or not resulting from third party claims), including out-of-pocket expenses and reasonable attorneys’ and

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accountants’ fees incurred in the investigation or defense of any of the same or in asserting any of their respective rights hereunder (collectively, “Losses”), resulting from or arising out of:

(i)any inaccuracy of any representation or warranty made by any Seller in (A) this Agreement, (B) the Company Disclosure Letter, (C) any transfer instrument, (D) the certificate delivered pursuant to Section 5.2.1(d), (E) all instruments and other documents effecting the transfer of Assets or the assumption of Assumed Liabilities pursuant to this Agreement or (F) the Trade Accounts Payable Statement;

(ii)any failure of either Seller to perform any covenant or agreement set forth herein;

(iii)any Excluded Assets;

(iv)any Retained Liabilities (including, without limitation, the failure to pay any Retained Liabilities), except to the extent that such liability is an Assumed Liability;

(v)any and all Benefit Liabilities in respect of Employees except, with respect to Employees and Transferred Employees, to the extent assumed by the Buyer pursuant to Article VI; and

(vi)any claim set forth in Section 9.2(a) of the Company Disclosure Letter.

Sellers shall have no obligation to defend, indemnify or hold harmless the Buyer with respect to any Environmental Liability if any such liability relates to, arises out of or is triggered by any condition that is discovered or identified as a result of any investigation, testing or sampling conducted by or on behalf of the Buyer after the Closing, except for any such action as is required by law, provided, however, that this limitation shall not apply to (x) any investigation, testing or sampling conducted pursuant to Section 4.3 hereof; (y) any investigation, testing or sampling required in connection with the financing of the transactions contemplated hereby (including without limitation the proposed sale-leaseback of the Owned Real Property located in Troy and Royal Oak, Michigan); or (z) any condition that is discovered or identified incidentally in connection with capital improvements initiated by the Buyer in the ordinary course of business. Any Environmental Liability or condition requiring indemnification or remediation by Sellers under the terms of this Agreement shall be indemnified or remediated only to the extent required by Environmental Laws for industrial use of the Real Property to be remediated (including the use of reasonable engineering and/or institutional controls, use restrictions and covenants). The Seller shall control all remediation required of Seller under the terms of this Agreement and all negotiations with any Governmental Authority with respect to such remediation, provided that the Buyer shall be given reasonable notice of and have the right to attend all meetings between any Governmental Authority and Sellers and/or their consultant and, and further provided that neither Sellers’ remediation activities, nor any actions or restrictions agreed to with any Governmental Authority shall unreasonably interfere with Buyer’s current or future use of the applicable site for industrial purposes.

Except for indemnification claims arising from inaccuracies in the representations and warranties contained in Section 3.1.1, 3.1.2, 3.1.3, 3.1.6, 3.1.10 (insofar as it relates to title to Assets with an acquired value or original asset cost, as shown in Section 1.1(a) of the Company Disclosure Letter, in excess of $10,000) or 3.1.22, the Sellers shall not be required to indemnify the Buyer Indemnitees with respect to any claim for indemnification pursuant to Section 9.2(a)(i) (other than with respect to any claim for indemnification pursuant to Section 9.2(a)(i)(F)) unless and until the aggregate amount of all claims against the Sellers under such Section 9.2(a)(i) (other than with respect to any claim for indemnification pursuant to Section 9.2(a)(i)(F)) exceeds $1,000,000 and then only to the extent such aggregate amount

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exceeds $1,000,000. Notwithstanding the foregoing, in no event shall the Sellers’ aggregate liability for claims under such
Section 9.2(a)(i) (other than with respect to any claim for indemnification pursuant to Section 9.2(a)(i)(F)) exceed 20% of the Purchase Price paid on the Closing Date; provided, however, that with respect to inaccuracies in the representation and warranties contained in Section 3.1.1, 3.1.2, 3.1.3, 3.1.6, 3.1.10 (insofar as it relates to title to Assets with an acquired value or original asset cost, as shown in Section 1.1(a) of the Company Disclosure Letter, in excess of $10,000) or 3.1.22, the Sellers aggregate liability for claims shall not exceed the Purchase Price paid on the Closing Date.

(b)By the Buyer. The Buyer covenants and agrees to defend, indemnify and hold harmless the Sellers, their respective Affiliates and the officers, directors, employees, agents, advisers and representatives of each such Person (collectively, the “Seller Indemnitees”) from and against any and all Losses resulting from or arising out of:

(i)any inaccuracy of any representation or warranty made by any Buyer in (A) this Agreement, (B) the Buyer Disclosure Letter, (C) any transfer instrument or (D) the certificate delivered pursuant to Section 5.3.1(c);

(ii)any failure of the Buyer to perform any covenant or agreement set forth herein;

(iii)the Assumed Liabilities;

(iv)the use by the Buyer of any of the Sellers’ trade names or trademarks after the Closing Date as contemplated by Section 4.2.4; and

(v)the operation of the Business or the ownership, operation or use of the Assets following the Closing Date.

(c)Adjustments to Indemnification Payments. Any payment made by the Sellers to the Buyer Indemnitees, on the one hand, or by the Buyer to the Seller Indemnitees, on the other hand, pursuant to this Section 9.2 in respect of any claim shall be net of any insurance proceeds realized by and paid to the Indemnified Party in respect of such claim. The Indemnified Party shall use its commercially reasonable efforts to make insurance claims relating to any claim for which it is seeking indemnification pursuant to this Section 9.2. The amount of any Loss under Section 9.2(a) or 9.2(b) shall be reduced by the actual federal, state and other income or similar tax savings realized by the Buyer Indemnitees or Seller Indemnitees, as the case may be, with respect thereto.

(d)Adjustment to Purchase Price. All indemnification payments made under this Section 9.2 shall be deemed adjustments to the Purchase Price.

(e)Indemnification Procedures. In the case of any claim asserted by a third party against a party entitled to indemnification under this Agreement (the “Indemnified Party”), notice shall be given by the Indemnified Party to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and the Indemnified Party shall permit the Indemnifying Party (at the expense of such Indemnifying Party) to assume the defense of any claim or any litigation resulting therefrom, provided that (i) the counsel for the Indemnifying Party who shall conduct the defense of such claim or litigation shall be reasonably satisfactory to the Indemnified Party, (ii) the Indemnified Party may participate in such defense at such Indemnified Party’s expense, and (iii) the omission by any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its indemnification obligation under this Agreement except to the extent that such omission results in a failure of actual notice to the Indemnifying

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Party and such Indemnifying Party is damaged as a result of such failure to give notice. Except with the prior written consent of the Indemnified Party, such consent not to be unreasonably withheld or delayed, no Indemnifying Party, in the defense of any such claim or litigation, shall consent to entry of any judgment or order, interim or otherwise, or enter into any settlement that provides for injunctive or other nonmonetary relief affecting the Indemnified Party or that does not include as an unconditional term thereof the giving by each claimant or plaintiff to such Indemnified Party of a release from all liability with respect to such claim or litigation. In the event that the Indemnified Party shall in good faith determine that the conduct of the defense of any claim subject to indemnification hereunder or any proposed settlement of any such claim by the Indemnifying Party might be expected to affect adversely the Indemnified Party’s liability for Taxes or the ability of the Indemnified Party to conduct its business, or that the Indemnified Party may have available to it one or more defenses or counterclaims that are inconsistent with one or more of those that may be available to the Indemnifying Party in respect of such claim or any litigation relating thereto, the Indemnified Party shall have the right at all times to take over and assume control over the defense, settlement, negotiations or litigation relating to any such claim at the sole cost of the Indemnifying Party, provided that if the Indemnified Party does so take over and assume control, the Indemnified Party shall not settle such claim or litigation without the written consent of the Indemnifying Party, such consent not to be unreasonably withheld or delayed. In the event that the Indemnifying Party does not accept the defense of any matter as above provided, the Indemnified Party shall have the full right to defend against any such claim or demand and shall be entitled to settle or agree to pay in full such claim or demand. In any event, the Indemnifying Party and the Indemnified Party shall cooperate in the defense of any claim or litigation subject to this Section 9.2 and the records of each shall be available to the other with respect to such defense.

(f)Limitations. The obligation of the Sellers to indemnify the Buyer Indemnitees pursuant to
Section 9.2(a)(i) shall terminate when the applicable representation or warranty terminates pursuant to Section 9.3; provided, however, that any indemnification obligation of the Sellers that would otherwise terminate in accordance with this provision shall not terminate if a claim by a Buyer Indemnitee shall have been timely made or given on or prior to the applicable terminate date, and shall continue in full force and effect (solely with respect to any such claim) until such claim has been satisfied or otherwise resolved under this Article IX. To the extent any provision of this Agreement specifically limits or excludes the Sellers’ indemnification obligation for certain matters, the Sellers shall have no indemnification obligation for such matters under any other provisions of this Agreement.

9.3.Survival of Representations and Warranties, etc. The representations and warranties contained in this Agreement shall survive the execution and delivery of this Agreement, any examination by or on behalf of the parties hereto and the completion of the transactions contemplated herein, but only to the extent specified below:

(a)except as set forth in clauses (b), (c) and (d) below, the representations and warranties contained in Section 3.1 and Section 3.2 shall survive until (60) days after the date of receipt by the Buyer of audited financial statements for the fiscal year ended December 2006 (but in any event, not later than June 30, 2007);

(b)the representations and warranties contained in Sections 3.1.1, 3.1.2, 3.1.3, 3.1.10 (insofar as it relates to title to Assets with an acquired value or original asset cost, as shown in Section 1.1(a) of the Company Disclosure Letter, in excess of $10,000), 3.1.22, 3.2.1, 3.2.2 and 3.2.4 shall survive without limitation;

(c)the representations and warranties of the Sellers contained in Section 3.1.6 shall survive for a period of 60 days following the expiration of any applicable statute of limitations (as

43

extended for any reason, including without limitation by reason of waiver of such statute of limitations);

(d)the representations and warranties of the Sellers contained in Section 3.1.16 shall survive until sixty (60) days after the receipt by the Buyer of audited financial statements for the fiscal year ended December 2006 (but in any event no later than June 30, 2007), provided that if any claim is brought by the Guarantor, the Sellers or any of their respective Affiliates under indemnifications obligations of the Buyer under Section 3.1(c) of the supply agreement (entered into pursuant to Section 5.2.3(b) or any transferee of their respective rights under such agreement), and such claim is based in whole or in part on facts or circumstances which would otherwise constitute a breach of the representations and warranties of the Sellers contained in Section 3.1.16, such representations and warranties of the Sellers in Section 3.1.16 shall be deemed to survive until final determination of any such claims under the Supply Agreement; and

(e)the representations and warranties of the Sellers contained in Section 3.1.19 shall survive for a period of 36 months following the Closing Date.

9.4.Exclusive Remedy. The indemnification provisions in this Agreement shall be the exclusive remedy available to the Buyer Indemnitees or the Seller Indemnitees, as the case may be, for any breach of the representations, warranties, covenants or other provisions or this Agreement, other than (i) equitable remedies (included, but not limited to, injunctive relief and specific performance) and (ii) remedies for fraud. No party shall be entitled to the indemnification provided for hereunder if it had knowledge at any time of the matter that is later the subject of a claim for indemnity.

9.5.No Special Damages. In no event shall any party be liable under this Section IX or otherwise in respect of this Agreement for exemplary, special, punitive, indirect, remote or speculative damages except to the extent any such party suffers such damages to an unaffiliated third party in connection with a third party claim, in which event such damages shall be recoverable.

9.6.Expenses. The Sellers, on the one hand, and the Buyer, on the other hand, shall bear their respective expenses, costs and fees (including attorneys’, auditors’ and financing commitment fees) in connection with the transactions contemplated hereby, including the preparation, execution and delivery of this Agreement and compliance herewith (the “Transaction Expenses”), whether or not the transactions contemplated hereby shall be consummated.

9.7.Severability. If any provision of this Agreement, including any phrase, sentence, clause, section or subsection, is inoperative or unenforceable for any reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to any extent whatsoever.

9.8.Notices. All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered personally, (b) mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, (c) sent by next-day or overnight mail or delivery or (d) sent by telecopy or telegram.

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(i)if to the Buyer, to

Forming Technologies, Inc.

c/o Jacobson Partners

595 Madison Avenue

New York, New York 10022

Attention: Benjamin R. Jacobson

Facsimile: (212) 758-4567

with copies to:

Stroock & Stroock & Lavan LLP

180 Maiden Lane

New York, New York 10038

Attention: Bradley G. Kulman, Esq.

Facsimile: (212) 806-5400

(ii)if to the Guarantor, to

Metaldyne Corporation

47659 Halyard Drive

Plymouth, Michigan 48170

Attention: Thomas Amato

Attention: General Counsel

Facsimile: (734) 451-4124

with a copy to:

Cahill Gordon & Reindel LLP

80 Pine Street

New York, New York 10005

Attention: Jonathan Schaffzin, Esq.

Facsimile: (212) 269-5420

(iii)if to the Sellers, to

Metaldyne Company LLC

Metaldyne Precision Forming — Fort Wayne, Inc.

47659 Halyard Drive

Plymouth, Michigan 48170

Attention: Thomas Amato

Attention: General Counsel

Facsimile: (734) 451-4124

with a copy to:

Cahill Gordon & Reindel LLP

80 Pine Street

New York, New York 10005

Attention: Jonathan Schaffzin, Esq.

Facsimile: (212) 269-5420

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or, in each case, at such other address as may be specified in writing to the other parties hereto.

All such notices, requests, demands, waivers and other communications shall be deemed to have been received (w) if by personal delivery on the day after such delivery, (x) if by certified or registered mail, on the seventh Business Day after the mailing thereof, (y) if by next-day or overnight mail or delivery, on the day delivered and (z) if by telecopy or telegram, on the next day following the day on which such telecopy or telegram was sent, provided that a copy is also sent by certified or registered mail.

9.9.Miscellaneous.

9.9.1.Headings. The headings contained in this Agreement are for purposes of convenience only and shall not affect the meaning or interpretation of this Agreement.

9.9.2.Entire Agreement. This Agreement (including the Company Disclosure Letter and Buyer Disclosure Letter) and the Collateral Agreements (when executed and delivered) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof.

9.9.3.Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall together constitute one and the same instrument.

9.9.4.Governing Law, etc. This Agreement shall be governed in all respects, including as to validity, interpretation and effect, by the internal laws of the State of New York, without giving effect to the conflict of laws rules thereof. Except as provided by Section 2.5(d) of this Agreement, any dispute or disputes arising out of or relating to this Agreement, including but not limited to indemnification under, or the breach, termination or validity thereof (“Dispute”), shall be finally resolved by arbitration in accordance with the International Institute for Conflict Prevention and Resolution (“CPR”) Rules for Non-Administered Arbitration then in effect (the “Rules”), as set forth in this paragraph. If a Dispute arises, and if the Dispute cannot be settled through direct discussions between representatives of the Sellers and Guarantor and representatives of the Buyer within thirty calendar days following receipt of notice of a Dispute, the parties agree first to endeavor to settle the Dispute in an amicable manner by mediation under the Mediation Procedure established by the CPR, then in effect, before resorting to arbitration. If a Dispute cannot be resolved through such mediation process within thirty calendar days following the appointment of the mediator, the Dispute will be settled finally by arbitration under the Rules, by a sole arbitrator, chosen by agreement of the parties within twenty calendar days of the receipt by a party of a copy of the notice of arbitration from the other party. In the event the parties cannot reach such agreement within such twenty calendar day period, the arbitrator shall be appointed by the CPR in accordance with the Rules. Any arbitrator appointed by CPR shall be a retired judge or a practicing attorney with no less than fifteen years of experience with large commercial cases and an experienced arbitrator. The arbitration will be governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq. The parties shall be entitled to conduct limited discovery, consisting only of (i) production by the parties of documents relevant to the claims and defenses of any party and (ii) five single days deposition conducted by the Buyer and two single days deposition conducted by the Sellers and Guarantor. The arbitration hearing on the merits shall be held no later than four months after the appointment of the arbitrator unless the parties otherwise agree or the arbitrator extends such time period for good cause shown. The arbitrator shall not be empowered to award damages in excess of compensatory damages and each party expressly waives and forgoes any claim or right to punitive, exemplary or similar damages unless a statute requires that compensatory damages be increased in a specified manner. The award shall be in writing and shall state the findings of fact and conclusions of law on which it is based. The award of the arbitrator shall be final and binding on the parties and judgment upon the award may be entered and enforced

46

in any court having jurisdiction thereof. The Buyer, the Sellers and the Guarantor hereby irrevocably submit to the jurisdiction of the courts of the State of New York and the Federal courts of the United States of America located in the State, City and County of New York, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the enforcement of such judgment or award, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any of such document may not be enforced in or by said courts. The Buyer, the Sellers and the Guarantor hereby consent to and grant any such court jurisdiction over the person of such parties and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 9.7, or in such other manner as may be permitted by law, shall be valid and sufficient service thereof. Unless the parties otherwise agree in writing, the mediation and arbitration will be held in New York, New York. Each party shall bear its own costs and expenses (including fees and disbursements of counsel) and the Buyer, on the one hand, and the Sellers and the Guarantor, on the other hand, shall each bear one-half of the costs and expenses payable to the mediator and arbitrator.

9.9.5.Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns.

9.9.6.Assignment. This Agreement shall not be assignable or otherwise transferable by any party hereto without the prior written consent of the other party hereto, provided that the Buyer may assign this Agreement (a) to any Affiliate of the Buyer, (b) as security for any obligation arising in connection with the financing of the transactions contemplated hereby or (c) subsequent to the Closing, to any transferee of all or substantially all of the assets of the Business that executes a written assumption of the obligations of the Buyer under this Agreement and the Collateral Agreements. At the request of the Buyer, the Sellers shall execute customary consents to collateral assignment documents with the Buyer’s lenders in connection with any assignments permitted by Section 9.9.6(b).

9.9.7.No Third Party Beneficiaries. Except as provided in Section 9.2 with respect to indemnification of Indemnified Parties hereunder, nothing in this Agreement shall confer any rights upon any Person or entity other than the parties hereto and their respective heirs, successors and permitted assigns.

9.9.8.Amendment; Waivers, etc. No amendment, modification or discharge of this Agreement, and no waiver hereunder, shall be valid or binding unless set forth in writing and duly executed by the party against whom enforcement of the amendment, modification, discharge or waiver is sought. Any such waiver shall constitute a waiver only with respect to the specific matter described in such writing and shall in no way impair the rights of the party granting such waiver in any other respect or at any other time. Neither the waiver by any of the parties hereto of a breach of or a default under any of the provisions of this Agreement, nor the failure by any of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall be construed as a waiver of any other breach or default of a similar nature, or as a waiver of any of such provisions, rights or privileges hereunder. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies that any party may otherwise have at law or in equity. The rights and remedies of any party based upon, arising out of or otherwise in respect of any inaccuracy or breach of any representation, warranty, covenant or agreement or failure to fulfill any condition shall in no way be limited by the fact that the act, omission, occurrence or other state of facts upon which any claim of any such inaccuracy or breach is based may also be the subject matter of any other representation, warranty, covenant or agreement as to which there is no inaccuracy or breach. The representations and warranties of the Sellers and the Guarantor shall not be affected or deemed waived by reason of any investigation made by or on behalf of the Buyer (including but not limited to by any of its advisors, consultants or representatives)

47

or by reason of the fact that the Buyer or any of such advisors, consultants or representatives knew or should have known that any such representation or warranty is or might be inaccurate.

9.9.9.Sellers’ Obligations. The liability of the Sellers hereunder shall be joint and several. Where in this Agreement provision is made for any action to be taken or not taken by either Seller, Sellers jointly and severally undertake to cause such Seller to take or not take such action, as the case may be.

[Signature Pages Follow]

48

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

FORMING TECHNOLOGIES, INC.
By:	/s/ Richard W. Moore
	Name: Richard W. Moore
	Title: Assistant Secretary
METALDYNE CORPORATION
By:	/s/ Jeffrey M. Stafeil
	Name: Jeffrey M. Stafeil
	Title: Executive Vice President and Chief Financial Officer
METALDYNE COMPANY LLC
By:	/s/ Jeffrey M. Stafeil
	Name: Jeffrey M. Stafeil
	Title: Executive Vice President and Chief Financial Officer
METALDYNE PRECISION FORMING — FORT WAYNE, INC.
By:	/s/ Jeffrey M. Stafeil
	Name: Jeffrey M. Stafeil
	Title: Executive Vice President and Chief Financial Officer

49

Exhibit C

(a)Metaldyne Corporation (the “Company”) hereby assigns, transfers and sets over (collectively the “Assignment”) to Assignee, from and after the Closing Date, all of the Company’s right, title, benefit, privileges and interest in and to, and all of the Company’s burdens, obligations and liabilities arising from and after the Closing Date, under and pursuant to the Asset Purchase Agreement, by and between Forming Technologies, Inc., a Delaware corporation (“Forming Technologies”), Metaldyne Company LLC, Metaldyne Precision Forming — Fort Wayne, Inc., and the Company, dated as of January 7, 2006, as may be amended from time to time (the “Asset Purchase Agreement”), including without limitation, the Guaranteed Obligations (as such term is defined in the Asset Purchase Agreement) of the Company thereunder.

(b)The Assignee, from and after the Closing Date, hereby accepts the assignment and assumes and agrees to observe and perform all of the duties, obligations, terms, provisions and covenants, and to pay and discharge all of the liabilities of the Company to be observed, performed, paid or discharged, arising from and after the Closing Date, pursuant to the Asset Purchase Agreement including, without limitation, the Guaranteed Obligations (as such term is defined in the Asset Purchase Agreement)

of the Company thereunder.

(c)This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns.

(d)The Company and the Assignee acknowledge and agree that Forming Technologies is an intended third party beneficiary to the Agreement and that Forming Technologies shall be entitled to enforce its rights as a third party beneficiary under this Agreement accordingly. The Company and Assignee each hereby covenant to provide an executed copy of this Agreement to Forming Technologies promptly upon the execution hereof.

These provisions may not be amended or modified without the written consent of Forming Technologies.

C-1

Amendment

March 10, 2006

Reference is made to that certain Asset Purchase Agreement, dated as of January 7, 2006, as amended (the “Asset Purchase Agreement”), among Metaldyne Company LLC, a Delaware limited liability company, Metaldyne Precision Forming — Fort Wayne, Inc., an Indiana corporation and Metaldyne Corporation, a Delaware corporation (each a “Seller” and collectively, the “Sellers”), and FormTech Industries LLC, a Delaware limited liability company (successor by conversion to Forming Technologies, Inc.) (“Purchaser”). Capitalized terms used but not otherwise defined in this Amendment shall have the meanings ascribed to them in the Asset Purchase Agreement.

The Purchaser and the Sellers hereby agree that:

(i)The “owned vehicles” schedule attached to Section 1.1(a) of the Company Disclosure Letter is hereby deleted and replaced by the “owned vehicles” schedule attached to this Amendment.

(ii)Section 1.1(b) of the Company Disclosure Letter is amended to include the following:

MK Chambers Company

2251 Johnson Mills Rd

North Branch, MI 48461

Springco

12500 Elmwood Ave.

Cleveland, OH 44111

Atco Industries

7200 Fifteen Mile Road

Sterling Heights, MI 48312

Great Lakes Production Support

24600 Wood Ct.

Macomb, MI 48042

(iii)Section 4.2.8 of the Asset Purchase Agreement is hereby amended and restated in its entirety as follows:

Section 4.2.8    Other Agreements. Buyer and Sellers (or an affiliate of Sellers) shall enter into the agreement attached hereto as Exhibit D.

(iv)If the transaction contemplated by the Asset Purchase Agreement is consummated and the Purchase Price is received by the Sellers by or before 11:59 p.m. on March 10, 2006, then the reference to “$3,500,000” in Section 2.5(b) of the Asset Purchase Agreement shall

be replaced with “$5,700,000.”  For the avoidance of doubt, if the Closing occurs after 12:01 a.m. on March 11, 2006, then such reference to “$3,500,000” shall remain unchanged.

(v)Schedule A to the Supply Agreement is hereby amended by adding the following “Note”:

(3)In addition to the unit prices set forth in the table above, as soon after the Closing Date as Buyer and Sellers agree to the logistics for FOB delivery at Royal Oak, but in no event later than 60 days after the Closing, the unit prices set forth above shall no longer apply and shall be replaced in their entirety with the pricing schedule set forth on Schedule 1 hereto. Additionally, footnote (2) of Schedule A to the Supply Agreement shall be eliminated once the prices on Schedule 1 go into effect.

(vi)The conditions set forth in Section 5.2.2(b) of the Asset Purchase Agreement have been satisfied.

(vii)Notwithstanding anything to the contrary in this Agreement or Section 1.2 of Company Disclosure Letter, the Buyer and Sellers hereby agree as follows:

(A)  Fuji ANW30 Serial #14764, installed in January 2005, and all associated machine tooling with respect thereto (i.e., all durable and perishable tools) constitutes an Excluded Asset hereunder (the “Fuji 14764”). The Sellers have taken possession of Fuji 14764 as of the Closing Date. The Sellers have also taken possession of one (1) Fuji ANW30 that had been held in a Fuji warehouse in January 2006 (such Fuji ANW30, the “Warehoused Fuji”). The Warehoused Fuji constitutes an Excluded Asset hereunder. The Fuji ANW30 #14765, installed in January 2005, constitutes an Asset to be purchased by the Buyer hereunder;

(B) any other Fuji located on Owned Real Property or Leased Real Property as of the Closing Date shall be included in the “Assets” purchased by the Buyer hereunder; and

(C) any other Fuji not located on Owned Real Property or Leased Real Property as of the Closing Date shall be “Excluded Assets.”

Except as expressly provided herein, this Amendment shall not constitute a consent to or modification of any other provision, term or condition of the Asset Purchase Agreement. All terms, provisions, covenants, representations, warranties, agreements and conditions contained in the Asset Purchase Agreement, as amended hereby, are ratified and confirmed in all respects and shall remain in full force and effect.

This Amendment shall be governed in all respects, including as to validity, interpretation and effect, by the internal laws of the State of  New York, without giving effect to the conflict of laws rules thereof. Section 9.9.4 of the Asset Purchase Agreement shall be deemed applicable to this Amendment.

2

This Amendment may be executed in several counterparts, each of which shall be deemed an original and all of which shall together constitute one and the same instrument.

[Signature Page Follows]

3

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

FORMTECH INDUSTRIES LLC
By:	FormTech Industries Holdings LLC, its
Managing Member
By:	/s/ Richard McDermott
	Name: Richard McDermott
	Title: Chief Executive Officer
METALDYNE CORPORATION
By:	/s/ Jeffrey M. Stafeil
	Name: Jeffrey M. Stafeil
	Title: Executive Vice President and Chief Financial Officer
METALDYNE COMPANY LLC
By:	/s/ Jeffrey M. Stafeil
	Name: Jeffrey M. Stafeil
	Title: Executive Vice President and Chief Financial Officer
METALDYNE PRECISION FORMING — FORT WAYNE, INC.
By:	/s/ Jeffrey M. Stafeil
	Name: Jeffrey M. Stafeil
	Title: Executive Vice President and Chief Financial Officer

4

Schedule 1

Part Number	Adjusted Price
4984 B, E	$	5.4797
F 6860 B, F	3.9425
F 4638 G	8.4625
F 5594 D	6.6885
F 6352 A	7.9681
F 8169 B	4.6154
F 7724 D	4.9007
F 8124 B	3.8829
F 8179 B	4.6484
F 8285	1.8050
F 8472	8.7451
F 8476 A	9.1972
7259 A, B	4.7165

The above is based upon Farmington Hills continuing to provide their Requirement Schedule daily to Royal Oak by 11:00 a.m. the previous workday. Farmington Hills would be responsible to pick up all their parts at the Royal Oak location. Royal Oak will accommodate a scheduled one-hour pick-up window by Farmington Hills with pick list. Items that do not make the truck must be delivered by Royal Oak at their expense if line shutdown at Farmington Hills is at risk. Return of empty racks would be Farmington Hills’ responsibility.

5

EX-12.1

Exhibit 12.1

METALDYNE CORPORATION
Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends

	Year Ended January 1 2006				Year Ended January 2 2005				Year Ended December 28 2003				Year Ended December 29 2002				Year Ended December 31 2001
	(In thousands)
EARNINGS (LOSS) BEFORE INCOME TAXES AND FIXED CHARGES:
Income (loss) from continuing operations before income taxes and cumulative effect of accounting change, net		$	(87,041	)		$	(61,112	)		$	(96,850	)		$	(103,121	)		$	(70,533	)
(Deduct) add equity in undistributed (earnings) loss of less-than-fifty percent owned companies		11,011				(1,451		)		20,712				1,410				8,930
Add interest on indebtedness, net		89,650				81,818				75,283				90,778				147,920
Add amortization of debt expense		3,206				3,880				2,480				4,770				11,620
Add preferred stock dividends and accretion		22,737				19,900				—				—				—
Estimated interest factor for rentals (d)		18,738				15,451				11,888				11,788				8,525
Earnings before income taxes and fixed charges		$	58,301			$	58,486			$	13,513			$	5,625			$	106,462
FIXED CHARGES:
Interest on indebtedness, net		$	89,650			$	81,818			$	75,283			$	90,778			$	147,920
Amortization of debt expense		3,206				3,880				2,480				4,770				11,620
Add preferred stock dividends and accretion		22,737				19,900				—				—				—
Estimated interest factor for rentals (d)		18,738				15,451				11,888				11,788				8,525
Total fixed charges		134,331				121,049				89,651				107,336				168,065
Preferred stock dividends (a)		—-				—-				10,320				13,090				6,430
Combined fixed charges and preferred stock dividends		$	134,331			$	121,049			$	99,971			$	120,426			$	174,495
Ratio of earnings to fixed charges		—		(b)		—		(b)		—		(b)		—		(b)		—		(b)
Ratio of earnings to combined fixed charges and preferred stock dividends		—		(c)		—		(c)		—		(c)		—		(c)		—		(c)

(a)Based on the Company’s effective tax rate, represents the amount of income before provision for income taxes required to meet the preferred stock dividend requirements of the Company and its 50% owned companies.

(b)Results of operations for the years ended January 1, 2006, January 2, 2005, December 28, 2003, December 29, 2002 and December 31, 2001 are inadequate to cover fixed charges by $76,030, $62,563, $76,138, $101,711 and $61,603, respectively.

(c)Results of operations for the years ended January 1, 2006, January 2, 2005, December 28, 2003, December 29, 2002 and December 31, 2001 are inadequate to cover fixed charges and preferred stock dividends by $76,030, $62,563, $86,458, $114,801 and $68,033, respectively.

(d)Deemed to represent one-third of rental expense on operating leases.

EX-23.1

Exhibit 23.1

Consent of Independent Registered Accounting Firm

The Board of Directors
Metaldyne Corporation:

We consent to the incorporation by reference in the Registration Statements on Form S-3 (Registration Nos 33-59222 and 33-55837), Form S-4 (Registration No. 333-99569) and Form S-8 (Registration Nos. 33-42230 and 333-64531) of Metaldyne Corporation of our report dated March 31, 2006 with respect to the consolidated balance sheets of Metaldyne Corporation as of January 1, 2006 and January 2, 2005, and the related consolidated statements of operations, stockholders’ equity and other comprehensive income, and cash flows, for each of the years in the three-year period ended January 1, 2006, and the related financial statement schedule, which report appears in the January 1, 2006, annual report on Form 10-K of Metaldyne Corporation. Our report refers to the Company’s changes in methods of accounting for conditional asset retirement obligations pursuant to FASB Interpretation No. (FIN) 47, Accounting for Conditional Asset Retirement Obligations an interpretation of Statement on Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations in 2005 and for redeemable preferred stock to conform with Statement of Financial Accounting Standards No. 150, Accounting for Certain Instruments with Characteristics of both Liabilities and Equity in 2004.

/s/ KPMG LLP

Detroit, Michigan
March 31, 2006

EX-31.1

Exhibit 31.1

CERTIFICATION OF TIMOTHY D. LEULIETTE
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
FORM 10-K FOR THE YEAR ENDED JANUARY 1, 2006
OF METALDYNE CORPORATION

I, Timothy D. Leuliette, certify that:

1.I have reviewed this annual report on Form 10-K of Metaldyne Corporation;

2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 31, 2006	/s/ TIMOTHY D. LEULIETTE
	Timothy D. Leuliette
	Chairman, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF JEFFREY M. STAFEIL
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
FORM 10-K FOR THE YEAR ENDED JANUARY 1, 2006
OF METALDYNE CORPORATION

I, Jeffrey M. Stafeil, certify that:

1.I have reviewed this annual report on Form 10-K of Metaldyne Corporation;

2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 31, 2006	/s/ JEFFREY M. STAFEIL
	Jeffrey M. Stafeil
	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(CHAPTER 63, TITLE 18 U.S.C. SECTION 1350(A) AND (B))

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chapter 63, Title 18 U.S.C. Section 1350(a) and (b)), each of the undersigned hereby individually certifies in his capacity as an officer of Metaldyne Corporation (the “Company”) that the Annual Report of the Company on Form 10-K for the year ended January 1, 2006 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company at the end of and for the periods covered by such Report.

Date: March 31, 2006	/s/ TIMOTHY D. LEULIETTE
	Timothy D. Leuliette
	Chairman, President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(CHAPTER 63, TITLE 18 U.S.C. SECTION 1350(A) AND (B))

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chapter 63, Title 18 U.S.C. Section 1350(a) and (b)), each of the undersigned hereby individually certifies in his capacity as an officer of Metaldyne Corporation (the “Company”) that the Annual Report of the Company on Form 10-K for the year ended January 1, 2006 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company at the end of and for the periods covered by such Report.

Date: March 31, 2006	/s/ JEFFREY M. STAFEIL
	Jeffrey M. Stafeil
	Executive Vice President and Chief Financial Officer