The realization of incremental revenues from awarded business is inherently subject to a number of risks and uncertainties, including the accuracy of customer estimates relating to the number of vehicles to be produced in new and existing product programs and the timing of such production.production, as well as the fluctuation in exchange rates for programs sourced in currencies other than our reporting currency. It is also possible that our customers may delay or cancel a product program that has been awarded to us. Our revenues, operating results and financial condition could be adversely affected relative to our current financial plans if we do not realize substantially all the revenue from our new and incremental business backlog.

We are also involvedsubject to currency translation risk as we are required to translate the financial statements of our foreign subsidiaries to U.S. dollars. We report the effect of translation for our foreign subsidiaries with a functional currency other than the U.S. dollar as a separate component of stockholders' equity. Unfavorable changes in various legal proceedings incidental tothe exchange rate relationship between the U.S. dollar and the functional currencies of our business. Although we believe that none of these matters is likely toforeign subsidiaries could have a materialan adverse effectimpact on our results of operations orand financial condition, there can be no assurance as to the ultimate outcome of any such legal proceeding or any future legal proceedings.condition.

Worldwide commodity market conditions in recent years have resulted in volatility in the cost of steel and other metallic materials we use in recent years. Asproduction. During periods of general economic conditionsimprovement and increases in customer demands, we have improved and customer demand has increased,seen the cost of steel and metallic materials needed for our products has increased.increase. If we are unable to pass such cost increases on to our customers, this could have a material adverse effect on our results of operations and financial condition.

The majority of our hourly associates worldwide are members of industrial trade unions employed under the terms of collective bargaining agreements. Substantially all of our hourly associates in the U.S. are represented by the UAW. Approximately 4,2504,800 of our hourly associates at our facilities in Mexico and Brazil are also covered by collective bargaining agreements which expire annually. There can be no assurance that future negotiations with our labor unions will be resolved favorably or that we will not experience a work stoppage or disruption that could have a material adverse impact on our results of operations and financial condition. In addition, there can be no assurance that such future negotiations will not result in labor cost increases or other terms and conditions that could adversely affect our results of operations and financial condition or our ability to compete for future business.

Our success depends, in part, on the efforts of our executive officers and other key associates.associates, such as engineers and global operational leadership. In addition, our future success will depend on, among other factors, our ability to continue to attract and retain qualified personnel.personnel, particularly engineers and other employees with critical expertise and skills that support key customers and products. The loss of the services of our executive officers or other key associates, unexpected turnover, or the failure to attract or retain associates, could have a material adverse effect on our results of operations and financial condition.

The pending acquisition of MPG is expected to significantly increase the value of our goodwill and other intangible assets and is also expected to result in a change to our current organizational structure from one reporting unit to multiple reporting units. If the acquisition does result in the creation of multiple reporting units, the threshold for analyzing impairment of goodwill will be reduced from an evaluation of the carrying value of our consolidated operations and its related fair value, to an analysis performed at the reporting unit level. This could potentially provide greater risk that goodwill becomes impaired in future operating periods. Further, the expected increase to goodwill and other intangible asset balances, upon acquisition, provides a greater chance that an impairment of these assets would have a material adverse effect on our results of operations and financial condition.

Our Amended Revolving Facilityrevolving credit facility contains financial covenants related to secured and unsecured indebtedness leverage and interest coverage.  The Amended Revolving Facilityrevolving credit facility limits our ability to make certain investments, loans and guarantees, declare dividends or distributions on capital stock, redeem or repurchase capital stock and certain debt obligations, incur liens, incur indebtedness, enter into certain restrictive agreements, merge, make acquisitions or sell all or substantially all of our assets.  The indenture governing our senior unsecured notes also restricts our ability to incur debt secured by liens, engage in consolidations or mergers or sell all or substantially all of our assets, and engage in certain sale and leaseback transactions. The Amended Revolving Facilityrevolving credit facility also significantly restricts our ability to incur additional secured debt.  The Amended Revolving Facilityrevolving credit facility and the indentures governing our senior unsecured notes also include customary events of default.  Obligations under the Amended Revolving Facility,revolving credit facility, the 7.75% senior unsecured notes due 2019 (7.75% Notes), the 6.625% senior unsecured notes due 2022 (6.625% Notes), the 6.25% senior unsecured notes due 2021 (6.25% Notes) and our 5.125% senior unsecured notes due 2019 (5.125% Notes) are required to be guaranteed by most of our U.S.

 

We have significant pension and other postretirement benefit obligations to certain of our associates and retirees. Our ability to satisfy the funding requirements associated with these obligations will depend on our cash flow from operations and our ability to access credit and the capital markets. The funding requirements of these benefit plans, and the related expense reflected in our financial statements, are affected by several factors that are subject to an inherent degree of uncertainty and volatility, including governmental regulation. Key assumptions used to value these benefit obligations and the cost of providing such benefits, funding requirements and expense recognition include the discount rate, the expected long-term rate of return on pension assets, mortality rates and the health care cost trend rate. If the actual trends in these factors are less favorable than our assumptions, this could have an adverse effect on our results of operations and financial condition.

Our operations are subject to various federal, state, local and foreign laws and regulations governing, among other things, emissions to air, discharge to waters and the generation, handling, storage, transportation, treatment and disposal of waste and other materials. We believe that our operations and facilities have been and are being operated in compliance, in all material respects, with such laws and regulations, many of which provide for substantial fines and criminal sanctions for violations. The operation of our manufacturing facilities entails risks in these areas, however, and there can be no assurance that we will not incur material costs or liabilities. In addition, potentially significant expenditures could be required in order to comply with evolving environmental, health and safety laws, regulations or other pertinent requirements that may be adopted or imposed in the future by governmental authorities.

Although AAM has agreed in the merger agreement to use its reasonable best efforts to consummate and make effective the merger and the other transactions contemplated by the merger agreement, these and other conditions to the merger may not be satisfied. In addition, satisfying the conditions to the merger may take longer than, and could cost more than, expected. Any delay in completing the merger may adversely affect the benefits that AAM expects to achieve from the merger and the integration of MPG’s business.

There can be no assurance that regulatory authorities will not impose conditions, terms, obligations or restrictions and that such conditions, terms, obligations or restrictions will not have the effect of delaying the completion of the merger, imposing additional material costs on or materially limiting the revenues of the combined company following the merger or otherwise reduce the anticipated benefits of the merger if the merger were consummated successfully integrate acquisitions and joint ventures.within the expected timeframe. In addition, we cannot provide assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the merger. Additionally, the completion of the merger is conditioned on the absence of certain restraining orders or injunctions by judgment, court order or law that would prohibit the completion of the merger.

Our obligations under the merger agreement are not subject to any conditions regarding our ability to finance, or obtain financing for, the transactions contemplated by the merger agreement, and we continueare obligated under the merger agreement to expand globally,have sufficient funds available to satisfy our obligations under the merger agreement. If we are unable to satisfy the conditions required under our financing commitments or any definitive financing documentation, we may not have engaged,available the funds necessary to fund the cash portion of the merger consideration. In addition, one or more financing sources under the financing commitments may default on its obligation to provide the financing and the commitments of any such defaulting financing source may continue to engage, in acquisitions and joint ventures that involve potential risks, includingnot be replaced on a timely basis. Any such failure to successfullyhave available the necessary funds to fund the cash portion of the merger consideration could delay or prevent the completion of the merger.

We expect to incur significant costs in connection with consummating the merger. In addition, we expect to incur integration and restructuring costs following the completion of the merger as we integrate and realizethe businesses of the two companies. There can be no assurances that the expected benefits and efficiencies related to the integration of such acquisitionsthe businesses will be realized to offset these transaction, integration and joint ventures. Integrating acquired operationsrestructuring costs over time. We will also incur significant fees and expenses relating to the financing arrangements in connection with the merger, as well as significant legal, financial advisor, accounting, banking and consulting fees, fees relating to regulatory filings and notices, SEC filing fees, printing and mailing fees and other costs associated with the merger. Some of these costs are payable regardless of whether the merger is completed.

Further, upon consummation of the merger, all MPG stock options and restricted shares will be accelerated and any unvested awards will vest at the effective time of the merger. Upon closing, we will record a significant challengeone-time charge to earnings for the acceleration of these awards equal to the fair value on the closing date of the unvested portion of the awards that were accelerated and therevested as a result of the merger.

Uncertainty about the integrations successfully. Failure to successfully integrate acquired operations or to realizeeffect of the expected benefits of such acquisitionsmerger on employees, customers and suppliers may have an adverse effect on our business. These uncertainties may impair our ability to attract, retain and motivate key personnel until the merger is consummated and for a period of time thereafter, and could cause our customers, suppliers and other business partners to delay or defer certain business decisions or to seek to change existing business relationships with us. Employee retention may be particularly challenging during the pendency of the merger because employees may experience uncertainty about their future roles with the combined company. If, despite our retention efforts, key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the companies as combined, our business could be seriously harmed. Any delay in completing the merger may further increase such uncertainties and the adverse effects related thereto.

Some of the customers, clients, suppliers, potential customers or clients or strategic partners of AAM or MPG may terminate their business relationship with AAM or MPG following the merger. Potential clients, suppliers, or strategic partners may delay entering into, or decide not to enter into, a business relationship with AAM or MPG because of the merger. Further, certain of MPG's existing customer contracts may require the purchaser's consent to the change of control of MPG, and there can be no assurance that such consent will be forthcoming. If customer, supplier or client relationships or strategic alliances are adversely affected by the merger, our business and financial condition.performance following the merger could suffer.

None.

We believe that our property and equipment is properly maintained and in good operating condition. We will continue to evaluate capacity requirements in light of current and projected market conditions. We also intend to continue redeploying assets in order to increase our capacity utilization and reduce future capital expenditures to support program launches.

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

 

Our common stock, par value $0.01 per share, is listed for trading on the New York Stock Exchange (NYSE) under the symbol “AXL.”

We did not declare or pay any cash dividends on our common stock in 2013.2016. Our Amended and Restated Credit Agreementrevolving credit agreement limits our ability to declare or pay dividends or distributions on capital stock.

The information regarding our securities authorized for issuance under equity compensation plans is incorporated by reference from our Proxy Statement.

COMPANY OVERVIEW

American Axle & Manufacturing Holdings, Inc. (Holdings) and its subsidiaries (collectively, we, our, us or AAM) is a global Tier I supplier to the automotive industry. We manufacture, engineer, design and validate driveline and drivetrain systems and related components and chassis modules for light trucks, sport utility vehicles (SUVs), crossover vehicles, passenger cars crossover vehicles and commercial vehicles. Driveline and drivetrain systems include components that transfer power from the transmission and deliver it to the drive wheels. Our driveline, drivetrain and related products include axles, chassis modules, driveshafts, power transfer units, transfer cases, chassis and steering components, driveheads, transmission parts, electric drive systems and metal-formed products. In addition to locations in the United States (U.S.) (Michigan, Ohio Indiana and Pennsylvania)Indiana), we also have offices or facilities in Brazil, China, Germany, India, Japan, Luxembourg, Mexico, Poland, Scotland, South Korea, Sweden and Thailand.

 

We are the sole-source supplier to GM for certain axles and other driveline products for the life of each GM vehicle program covered by a Lifetime Program Contract (LPC)Contracts and Long Term Program Contracts (collectively, LPCs). Substantially all of our sales to GM are made under purchase orders pursuant to the LPCs. The LPCs have terms equal to the lives of the relevant vehicle programs or their respective derivatives, which typically run 5five to 7seven years, and require us to remain competitive with respect to technology, design, quality and quality.cost.

There are a number of significant trends affecting the highly competitive global automotive industry. As general economic and industry specific conditions continue to stabilize and improve, the global automotive industry continues to experience intenseIntense competition, volatility in fuel, steel, metallic and other commodity prices and significant pricing pressures.pressures remain. At the same time, the industry is intently focused on investing in future products that will incorporate the latest technology, meet changing customer demands and comply with more stringent government regulations. The continued advancement of technology and product innovation, as well as the capability to source programs on a global basis, are critical to attracting and retaining business in the global automotive industry.

The increase in sales in 2015, as compared to 2014, primarily reflects an increase of approximately 5% in production volumes for the North American light truck and SUV programs we currently support, which was partially offset by a reduction in metal market pass throughs to our customers and foreign exchange related to translation adjustments. The increase in sales in 2015 also reflects the favorable impact of new product launches, manyhigher sales supporting a global crossover program for GM and a passenger car driveshaft program for FCA, both of which support passenger car platforms.launched in the second half of 2014.