UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC. |
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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SEC 1913 (02-02) | | Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. |
Notice of Annual Meeting
of Stockholders and
Proxy Statement
Thursday, May 2, 2019
8:00 a.m. Eastern Time
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| David C. Dauch
One Dauch DriveChairman of the Board and
Detroit, Michigan 48211-1198
www.aam.comChief Executive Officer
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Dear Fellow Shareholders:
For AAM, 2018 was a pivotal year. We celebrated our first full year as a larger, more diverse global supplier. We launched several new key products and furthered our global growth and diversification efforts. Most importantly, we continued to prepare AAM for the future with advanced technologies focused on key trends that will help our customers address the needs of the changing global automotive landscape.
Key milestones we achieved in 2018 include:
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– | Delivered on our key strategic objectives of profitable growth, diversification, outstanding financial performance, and technology leadership |
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– | Launched our first e-AAM electric driveline system into regular production |
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– | Achieved record sales for AAM |
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– | Continued to fund significant capital and R&D investments in order to drive organic growth to meet our strategic goals |
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– | Met key integration milestones including synergy attainment on recent acquisitions |
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– | Continued to reduce our leverage by prepaying $200 million of Senior Notes |
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– | Won several new business awards, including our 5th global EcoTrac® disconnecting all-wheel-drive program |
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– | Named Supplier of the Year by General Motors for the second year in a row |
At AAM, corporate responsibility is an integral part of our business strategy. Our Environmental, Social and Governance (ESG) program is fundamental to our global business operations and is aligned with our strategic objectives. ESG is a journey, and we will continue to build upon our foundational programs as we move forward. Also, in response to shareholder feedback and to make continuous improvement, we strengthened the governance of our sustainability program with board-level oversight and with AAM leadership focused on ESG performance as a top company goal for 2019.
AAM's future continues to look bright. We are looking forward to another year of outstanding results, further diversification from a product, customer and geographic perspective and enhancement of our global sustainability program. I am excited about our future and hope you are too.
Thank you for your loyal and continued support of AAM.
David C. Dauch
Chairman and Chief Executive Officer
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| Samuel Valenti III Lead Independent Director |
Dear Fellow Shareholders:
AAM is committed to engaging in constructive and meaningful communications with our shareholders. Our Board and management team greatly value the opinions and feedback of our shareholders, which is why we have proactive, ongoing engagement throughout the year focused on corporate governance, corporate responsibility and executive compensation.
The Board was pleased with the favorable outcome of the vote on our say-on-pay proposal in 2018 (97% as compared to 38% in 2017), which we believe reflects the Board's responsiveness to shareholder feedback relating to executive compensation. Our engagement meetings this year covered a wide range of topics, including board refreshment and diversity, environmental, social and governance topics and incentive compensation metrics/goal rigor. The Board was actively involved in the process and thoughtfully considered the feedback we heard from you. As a result, we took several important actions:
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– | Enhanced the experience, leadership and diversity of our Board with the appointments of Herbert K. Parker and Sandra E. Pierce in November 2018. These appointments were the result of active recruitment of women and minority candidates. |
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– | Formalized our commitment to Board diversity by adopting a policy that requires director searches to include qualified women and minorities in future candidate pools for nomination to our Board. |
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– | Adopted proxy access by-laws. |
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– | Strengthened the governance of our sustainability program by assigning oversight responsibility to the Nominating/Corporate Governance Committee by amending its charter. This level of oversight reflects the importance of our sustainability program to AAM's overall business strategy. |
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– | Continued to align the metrics and rigor of our incentive plans to drive achievement of AAM's business strategy. |
On behalf of the Board, I would like to express our sincere appreciation for the trust you have placed in us. Know that your Board remains focused on delivering value to you, today and long into the future.
Thank you for investing in AAM.
Samuel Valenti III
Lead Independent Director
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
May 5, 20162, 2019
American Axle & Manufacturing Holdings, Inc. (AAM)
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Meeting Information | | Voting Information |
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Time and Place | Date | 8:00 a.m., local time, on Thursday, May 5, 20162, 2019 | | Please vote your shares as soon as possible, even if you plan to attend the annual meeting. |
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Attend in Person | AAM World Headquarters Auditorium | | Your broker will not be able to vote your shares on the election of directors and most of the other matters presented at the meeting unless you give your broker specific instructions to do so. We strongly encourage you to vote. |
| One Dauch Drive | |
| Detroit, MI 48211 | |
| | AAM World Headquarters Auditorium, One Dauch Drive, Detroit, Michigan | |
Record Date | March 5, 2019 | | You may vote via the internet, by telephone, or by mail. |
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| You may vote if you owned shares on the record date. | | See "Voting and Meeting Information" beginning on page 72 of this proxy statement for more information. |
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Annual Meeting Agenda / Items of Business |
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(1) Elect two1. Election of three members of the Board of Directors to serve until the Annual Meeting of Stockholders in 2019;
(2)2022
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2. Advisory vote to approveon named executive officer compensation;(3) Ratifycompensation
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3. Ratification of the appointment of Deloitte & Touche LLP as AAM’sindependent public accounting firm for 2019 |
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4. Other business properly presented at the meeting |
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Attending in Person |
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* You do not need to attend the annual meeting to vote if you submit your proxy in advance. |
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* To attend the annual meeting you will need to: |
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- provide proof of your stock ownership as of the record date |
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- provide government-issued photo identification (such as a driver's license) prior to entering the meeting |
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* Doors open at 7:30 a.m. |
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* Meeting starts at 8:00 a.m. |
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Our Notice of Internet Availability of Proxy Materials or this proxy statement and proxy card are being distributed on or about March 21, 2019. You are receiving these proxy materials in connection with the solicitation by the Board of Directors of AAM of proxies to be voted at AAM's 2019 Annual Meeting of Stockholders.
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Important Notice Regarding the Availability of Proxy Materials for the May 2, 2019 Stockholder Meeting: Our 2019 proxy statement and 2018 annual report and Form 10-K are available free of charge at www.envisionreports.com/axl. |
TABLE OF CONTENTS
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Proxy Summary | | Ratification of Independent Registered Public Accounting Firm |
| Proxy Summary | | | Proposal 3 - Ratification of Independent Registered Public Accounting Firm |
| | | | | Policy for Pre-Approval of Audit and Non-Audit Services |
Election of Directors | | | Independent Registered Public Accounting Firm's Fees |
| Proposal 1 - Election of Directors | | | Report of the Audit Committee |
| Corporate Governance | | | |
| Compensation of Directors | | Additional Information |
| Beneficial Stock Ownership | | | Voting and Meeting Information |
| Related Person Transactions Policy | | | Annual Report |
| Section 16(a) Beneficial Ownership Reporting Compliance | | | Electronic Delivery of Proxy Materials |
| | | 2020 Stockholder Proposals and Nominations |
Advisory Vote on Executive Compensation | | | Cost of Solicitation |
| Proposal 2 - Advisory Vote on Executive Compensation | | | |
| Compensation Discussion and Analysis | | | |
| | Named Executive Officers | | Appendix |
| | Executive Summary | | | Appendix A - Non-GAAP Reconciliation |
| | Compensation of Executive Officers | | | Appendix B - Director Independence Standards |
| | Direct Compensation Elements | | | |
| | Indirect Compensation Elements | | | |
| | Other Compensation Matters | | | |
| Compensation Committee Report | | | |
| Executive Compensation Tables | | | |
| CEO Pay Ratio | | | |
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2019 AAM Proxy Statement | 1
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Voting Matters and Board Recommendations: | Votes Required | Board Vote Recommendation | More Information |
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Proposal 1 | Election of three members of the Board of Directors to serve until the Annual Meeting of Stockholders in 2022 | Majority of votes cast | FOR each nominee | Page 14 |
| Each nominee brings a strong and diverse background and set of skills to the Board and has demonstrated sound judgment and integrity. | | | |
Proposal 2 | Advisory vote on named executive officer compensation | Majority of votes cast | FOR | Page 34 |
| AAM's executive compensation program is market-based, performance driven and aligns with shareholder interests. | | | |
Proposal 3 | Ratification of the appointment of Deloitte & Touche LLP as independent public accounting firm for the year ending December 31, 2016;2019 | Majority of votes cast | FOR | Page 69 |
| All independence standards have been met and sound practices are employed to ensure independent financial governance. | | | |
How You Can Vote
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By Internet | | By Telephone | | By Mail | | In Person |
Go to www.envisionreports.com/axl and follow the instructions. You will need the control number on your proxy card or voter instruction form. | | Call the number shown on your proxy card or voter instruction form. You will need the control number on your proxy card or voting instruction form. | | Complete, sign and date the proxy card or voting instruction form and return it in the envelope provided. | | Attend to other business properly presented at the meeting.annual meeting and cast your ballot. |
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2019 AAM Proxy Statement | 2
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AAM's Board has a diverse mix of knowledge, experience, skills and perspectives that, when taken together, enhances the quality of the Board's deliberations and decisions and drives AAM's business strategy and governance. In November 2018, AAM further enhanced the experience, leadership and diversity of our Board through the appointment of Herbert K. Parker and Sandra E. Pierce, whose biographies follow the Board's proposal for the election of directors. These appointments are the result of active recruitment of women and minority candidates. The Board currently consists of 10 members.
Board Skills and Qualifications
Board Composition
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Independence | Tenure | Age | Diversity |
90% | 7 | 64 | 30% |
Independent | Average Years of Service | Average Age | Women or Minority |
The current composition of our Board reflects the Board's commitment to identify, evaluate and nominate candidates who have personal integrity, leadership skills and qualifications, and provide a diverse mix of backgrounds and characteristics (such as race and gender) that, when taken together, best serve AAM and our shareholders. Longer-tenured directors bring a deep understanding of AAM and provide continuity as new members join the Board. Newer members bring new perspectives, expertise and diversity as the Board is refreshed to address changes in the business over time.
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2019 AAM Proxy Statement | 3
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Business & Financial Highlights |
Driving Long-Term Shareholder Value
AAM is a global Tier 1 supplier to the automotive, commercial and industrial markets, with broad capabilities across multiple product lines. Our mission is to deliver efficient, powerful and innovative solutions for our customers while leading the industry in quality, operational excellence and technology to maximize shareholder value. Our Board believes that AAM is well positioned to deliver long-term shareholder value by utilizing the following fundamental elements of our business:
2018 Financial and Performance Highlights
By the end of 2018, we reached a record $7.27 billion in sales on the strength in our core markets and key product segments. We also generated $1.18 billion in Adjusted EBITDA and achieved a record-setting $772 million in cash from operations.
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2019 AAM Proxy Statement | 4
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2018 AAM Highlights |
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| Delivered on our key strategic objectives of profitable growth, diversification, outstanding financial performance and technology leadership. | | | Record Annual Sales – Over $7 Billion for the first time in AAM History |
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Record Date | Strong cash flow generation and Over $200 Million insenior debt payments | | You may vote if you were an | AAM stockholder at the close of business on March 8, 2016.recognized as Fortune 500 Company
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Meeting Admission | | Admission may be limited to AAM stockholders as of the record date and holders of valid proxies. Please be prepared to present identification for admittance. Stockholders holding stock |
| Formed joint venture with Liuzhou Wuling in brokerage accounts will need to bring a copy of a brokerage statement reflecting stock ownership as of the record date. Cameras and recording devices will not be permitted.China | | | Met key Integration Milestones, including Synergy Attainment |
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Proxy Materials | | |
| QUANTUMTM technology wins Altair and SAA Lightweighting Awards | | | 5th New Business Award for our EcoTrac® Disconnecting AWDTechnology |
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| Sold Aftermarket divisionof our Powertrain business unit for $50 million | | | Named GM Supplier of the Year for 2nd consecutive year |
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2019 AAM Proxy Statement | 5
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Active Engagement with our Shareholders
Our Board and management team greatly value the opinions and feedback of our shareholders, which is why we have proactive, ongoing engagement with our shareholders throughout the year focused on corporate governance, executive compensation and corporate responsibility. This outreach is in addition to the ongoing communication between our shareholders and our Chairman & Chief Executive Officer, Vice President & Chief Financial Officer and Investor Relations team on AAM's financial performance and strategic objectives.
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Why we engage |
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Provide transparency into our business strategy, corporate governance practices and executive compensation programs | Determine which issues are important to our shareholders and communicate each others' views on those topics | Identify emerging issues that may impact our business and influence our practices |
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How we engage |
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Investor Communication Program | | We provide institutional investors with many opportunities to give feedback to senior management by participating in conferences, one-on-one and group meetings, investor visits to our manufacturing facilities and technical centers, and day-to-day interactions with individual investors throughout the year.
In June 2018, AAM hosted an Investor Day at the New York Stock Exchange where our CEO and senior management gave an update on our business and strategic plans. |
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Proactive Shareholder Outreach Program | | As part of our annual shareholder outreach program, we also engage with shareholders in conference calls or meetings outside the proxy season. These exchanges, which we initiate, cover our executive compensation program, risk management, ESG, strategic planning and corporate governance practices. Soliciting shareholder feedback is a key component of this program, which we do at least annually. As appropriate, we also engage with shareholders during proxy season.
Our Board members, CFO and Investor Relations Director participate in these outreach meetings. |
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Board Involvement | | The Chair of our Compensation Committee has participated in certain shareholder meetings. Our CFO conveys shareholders' feedback to the full Board and the Compensation Committee or Nominating/Corporate Governance Committee, depending on the subject of the feedback. The Board also receives any feedback we obtain from proxy advisory firms, such as ISS and Glass Lewis, as part of our outreach program.
The Board gives management feedback on key aspects of AAM's investor relations communication plan and shareholder outreach program. |
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2019 AAM Proxy Statement | 6
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Board Responsiveness to Shareholder Feedback
As part of our annual shareholder outreach program, we contacted our 25 largest shareholders representing over 70% of outstanding shares and were able to speak with shareholders representing over 30%. The Chair of our Compensation Committee participated in this engagement, along with our CFO and Investor Relations Director. The discussion topics included those shown below.
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Shareholder Engagement Topics |
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þ | Sustainability program | þ | Incentive compensation metrics and goal rigor |
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þ | Board diversity | þ | Selection process for Board candidates |
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þ | Board evaluation process | þ | Board oversight of risk |
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þ | Board refreshment | þ | Separation of Chairman and CEO roles |
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þ | Shareholder rights | þ | Classified Board |
We shared the content of these discussions with our full Board and its Committees. As a result of these shareholder meetings and Board discussions that followed, our Board and its Committees took a number of actions in 2018 and 2019 as highlighted below.
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– | Enhanced the experience, leadership and diversity of our Board with the appointments of Herbert K. Parker and Sandra E. Pierce in November 2018. These appointments were the result of active recruitment of women and minority candidates. |
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– | Formalized our commitment to Board diversity by adopting a policy that requires director searches to include women and minorities in the initial group of qualified candidates for every open Board seat. In February 2019, the Board amended our Corporate Governance Guidelines to include this policy. |
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– | Strengthened the governance of our sustainability program by assigning oversight responsibility to the Nominating/Corporate Governance Committee of the Board. |
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– | Increased the transparency of our sustainability program by continuing to improve the disclosure of ESG matters in our annual report to shareholders, corporate website and proxy statement. These efforts will continue on a longer-term basis as part of the sustainability journey, which is integral to our overall business strategy. |
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– | Adopted proxy access by-laws. |
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– | Continued to align the metrics and rigor of our incentive compensation plans to drive achievement of our business strategy. Our shareholders expressed support of our incentive compensation program and our transparency regarding the decision-making process through enhanced proxy statement disclosures. |
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2019 AAM Proxy Statement | 7
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Environmental, Social and Governance Initiatives
At AAM, corporate responsibility is an integral part of our business strategy. Since our inception, AAM has believed being focused on sustainability is beneficial to our shareholders, associates, suppliers, customers, communities and the environment. With our cultural values and strategic principles as a foundation, AAM associates are empowered to act according to the highest standards of ethics and integrity, and with respect for the cultures in which we do business, while serving local communities and having a positive impact on the environment.
AAM's Environmental, Social and Governance (ESG) program is fundamental to our global business operations and is aligned with our strategic objectives. ESG is a journey, and we will continue to build upon our foundational programs as we move forward. We also communicate with our shareholders about ESG topics and solicit their feedback. In response to shareholder feedback and to make continuous improvement, we strengthened the governance of our sustainability program with board-level oversight and with AAM leadership focused on ESG performance as a top company goal for 2019. Some of our key ESG initiatives are summarized below.
Environmental Stewardship
AAM is dedicated to the protection and conservation of the environment. We are helping to ensure a green future through product innovation, social responsibility, global compliance, and the reduction of energy use, waste and pollution.
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– | Technology Leadership: AAM contributes to a better global environment through the development of innovative mobility solutions that improve fuel efficiency and reduce CO2 emissions. We have electedmade significant investments in research and development to furnish materialsdevelop and advance products that reduce mass, increase efficiency, lower emissions and advance electrification. These technologies will help automakers meet global environmental emissions regulations while also increasing fuel efficiency. |
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– | Global Environmental Policy: AAM's global operations are aligned to support our commitment to the environment. About 90% of all of our products are manufactured in facilities that are certified to ISO 14001-2015. During the last three years, we have more than tripled the number of manufacturing facilities that have earned the ISO 50001 Energy Management certification. We will continue to add more locations to the list of certified facilities and deploy best practices throughout our global operations. |
Social Responsibility
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– | People-First Culture: We are focused on recruiting, developing and retaining the best and brightest talent globally. We provide our global associates with the tools to develop technically and grow professionally into the leaders that will guide AAM into the future. We strive to ensure inclusive hiring processes and work environments and support diversity and inclusion initiatives of our associates. Our human rights policy is designed to support universal human rights and the dignity of our associates and people in our communities and global supply chain. |
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– | Safety Focus: Our most valuable asset is our global team of associates and we work hard each day to keep them safe at each of our facilities. With safety as a top priority, we designed and implemented our S4 system and safety culture, which is focused on developing, engaging, monitoring and continuously educating our associates on standardized procedures that keep them safe. Every AAM location uses the S4 system. |
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– | Community Involvement: AAM and our associates have a long tradition of supporting the communities in which we live and work. We continued to have a positive impact during 2018 through a wide variety of corporate initiatives and individual activities. |
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– | AAM committed significant resources to revitalize key Detroit neighborhoods near AAM's world headquarters as part of the City of Detroit Strategic Neighborhood Fund. Contributions from AAM and other Detroit organizations will be used to bring much-needed physical improvements to neighboring communities. Our associates will have the opportunity to participate in volunteer activities and make a difference in these vibrant but under-served neighborhoods. |
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– | In Mexico, the Richard E. Dauch Education and Development Institute opened next to AAM's Guanajuato Manufacturing Complex. A joint initiative between AAM and the local government, the Institute will train current and future AAM associates with the latest technology and manufacturing |
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2019 AAM Proxy Statement | 8
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process excellence. For the benefit of the surrounding community, we designed the Institute to make the facility and its resources available for additional training and educational opportunities.
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– | We continued our work with charitable organizations committed to supporting local families, youth outreach, education, wellness and social equality, which include the Boy Scouts of America, the United Way, the Boys and Girls Clubs of Southeastern Michigan and St. Jude Children's Hospital. |
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– | Across the globe, AAM supported opportunities for the 2016 Annual Meeting of Stockholders via the Internet. On March 24, 2016, we mailed a notice of Internet availabilityour associates to most stockholders containing instructions on howgive back to access the proxy materials on the Internet instead of receiving paper copiestheir communities and those in the mail.need through charitable donations and numerous volunteer programs. |
Strong Governance
In response to shareholder feedback and consistent with our focus on continuous improvement, we recently enhanced the governance of our ESG program.
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– | Sustainability Working Group: In 2018, our corporate Policy Committee, which is chaired by the CEO, established a Sustainability Working Group to focus on and achieve objectives related to our sustainability program. The Sustainability Working Group is led by AAM's President (Environmental Factors), Vice President, Human Resources (Social Factors) and Vice President & General Counsel (Governance Factors) and is supported by cross-functional teams of subject matter experts and leaders. |
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– | Board and Committee Oversight: In 2019, the Charter of the Nominating/Corporate Governance Committee was expanded to include oversight of our sustainability policies, programs and reporting. This level of oversight reflects the importance of our sustainability program to AAM's long-term business strategy and objectives. |
We recently published our first Sustainability Review, a baseline-setting document, which describes key focus areas of our ESG program. For more information on AAM's ESG program and policies, please visit www.aam.com/Sustainability.
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2019 AAM Proxy Statement | 9
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Executive Compensation Philosophy
AAM is committed to a compensation philosophy that supports our business strategy and performance, aligns with stockholder interests, and pays competitively. |
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| Supports Business Strategy | Market Competitive | Aligned with Shareholder Interests |
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| – 86% of CEO compensation is variable and at risk– Rigorous performance goals as key drivers of enterprise value creation such as EBITDA, relative TSR and cash flow– Programs utilize metrics that emphasize company performance and are aligned with business strategy | – Important Notice Regarding Internet AvailabilityAttract and retain executive talent– Benchmark pay against a peer group of Proxy Materialssimilarly sized companies– Target direct compensation at the 50th percentile– Ensure incentive plans reward for desired behaviors and pay outcomes align with results | – Mix of annual and long-term incentive programs balances focus between short-term results and long-term share appreciation– 66% of LTI is performance-based– Cap on payout of performance shares based on relative TSR if absolute TSR is negative– CEO stock ownership requirement of 6 times base salary |
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The foundation of our compensation philosophy is a best practice approach to compensation governance that includes a clawback policy, an anti-hedging policy, an annual risk assessment of compensation programs and practices, double-trigger equity vesting and severance provisions, and the exclusion of excise tax gross-ups.
2018 Executive Compensation Highlights
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– | AAM's 2018 say-on-pay proposal received a favorable vote of 97% of votes cast. To gain this level of support, we engaged with our shareholders and implemented changes in response to their feedback. |
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– | We increased the May 5, 2016 Stockholder Meeting: Therigor of our annual and long-term incentive compensation targets for awards granted in 2018 and continued this practice to drive management performance at the highest levels. |
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– | In April 2018, AAM amended the legacy Supplemental Executive Retirement Plan (SERP) and the Executive Deferred Compensation Plan to freeze further benefit accruals and new participation in the plans. Based on a benchmark analysis of executive retirement plan benefits, we adopted the Executive Retirement Savings Plan, a deferred compensation plan that reduces executive retirement benefits, provides cost savings to the Company as compared to the SERP, and further aligns our programs with prevailing market practices. |
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– | In April 2018, AAM adopted the Executive Officer Severance Plan in order to provide severance other than in a change in control to executive officers with the purpose of retaining our executives and allowing them to focus on our business strategy. In addition, AAM amended its employment agreements with Mr. Dauch and Mr. Simonte to align severance payable under their employment agreements with the Severance Plan. |
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2019 AAM Proxy Statement and 2015 Annual Report and Form 10-K are available atwww.envisionreports.com/axl.| 10
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By Order
Pay for Performance Alignment
Our compensation programs are designed to balance short-term performance with long-term growth. To align executive pay with AAM's performance, a significant amount of the Board of Directors,
David E. Barnes
General Counsel, Secretary &
Chief Compliance Officer
March 24, 2016
2016 ANNUAL MEETING OF STOCKHOLDERS
PROXY STATEMENT
TABLE OF CONTENTS
our CEO's and other NEOs' compensation is performance based and is at risk.
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Compensation Program Metrics Link to Strategic Business Objectives
The Compensation Committee utilizes both short- and long-term financial metrics relative to our business objectives, as well as relative total shareholder return (TSR) as a long-term incentive (LTI) metric. The following chart demonstrates how our incentive compensation metrics correlate to our strategic business objectives. No.
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Strategic Business Objective | Alignment | Incentive Metric |
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Continue to strengthen the balance sheet; provide funding for organic growth, research and development, and other capital priorities | | - 2018 LTI Performance Shares (50% metric of performance-based LTI) |
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Develop innovative technology, including electrification. Reinvest in research and development | - 2018 LTI Performance Shares (50% metric of performance-based LTI) |
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Create sustainable value for shareholders |
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Achieve profitable growth, along with the ability to be flexible as the market changes, and reduce leverage | - 2018 Annual Incentive Program (100% metric)
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Deliver integration synergies from recent acquisitions |
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2019 AAM Proxy Statement | 11
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Goal Rigor
The Committee annually reviews performance metrics, targets and payouts to ensure that they are challenging stretch goals designed to align with our strategy and long-range plan and also to mitigate risk. The 2018 annual and long-term incentive metrics were designed to reward growth and sustain profitability.
In addition, the 2018 incentive metrics were modified to drive significant focus on EBITDA for the short-term metric and free cash flow and relative TSR, weighted equally, for the long-term metrics.
2018 Annual Incentive Compensation
The Committee selected adjusted EBITDA as the sole metric for the 2018 annual incentive award to drive significant focus on this metric. Superior EBITDA performance is critical to our strategy of generating cash, reducing leverage and providing funding for organic and strategic growth. The performance levels for 2018 annual incentive awards reflect stretch goals that are designed to reward growth and sustain profitability as shown below.
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– | Target performance was set at a level significantly higher than 2017 actual adjusted EBITDA performance. |
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– | Achievement of target performance would result in the highest adjusted EBITDA performance in AAM history. |
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– | Target performance is higher than the performance of a majority of our peer group companies. |
Although 2018 actual adjusted EBITDA performance was a record-setting achievement for AAM, the pre-established performance target was not achieved. As a result of this goal rigor, our NEOs received a below-target payout.
2018 Long-Term Incentive Compensation
Based on feedback from shareholders and alignment with our strategy, the Committee also modified the 2018 LTI performance metrics to include free cash flow and relative TSR, weighted equally. The performance levels set for 2018 required our management team to continue to perform at a high level, achieve integration synergies, implement productivity improvements, successfully launch new product programs and create long-term value. The Committee increased the rigor of the threshold, target and maximum performance levels as shown below.
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– | Free cash flow target performance for 2018 - 2020 was set at a level higher than the previous three years' performance. |
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– | Achievement of target performance would result in the highest free cash flow in AAM history. |
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– | Relative TSR payout is capped if absolute TSR is negative. |
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2019 AAM Proxy Statement | 12
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2016 - 2018 Performance Share Awards
Payouts under the LTI performance share awards granted in 2016 were based on two equally weighted, three-year performance metrics – adjusted relative TSR and EBITDA margin. Awards based on relative TSR resulted in a zero payout to senior management because the threshold performance level was not achieved. This result reflects the Compensation Committee's commitment to align LTI pay with the interest of our shareholders through rigorous goal-setting. Our shareholders did not realize value on our stock over this time period. Consequently, and by design, our senior management team received no value from these awards.
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Payout capped if 3-year absolute TSR is negative. | | |
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The performance targets for the EBITDA performance share awards were determined in consideration of AAM's historical EBITDA margins for 2013 - 2015 as noted below. The maximum performance level was set to drive performance significantly above our peers and encourage EBITDA margin growth. Over this period, management delivered a result well in excess of targets and prior actual performance, which supported an above-target payout. This outstanding financial performance allowed us to reduce debt and position AAM for strategic actions.
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Average Adjusted EBITDA Performance from 2013 - 2015 | |
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PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATIONPeer Average Adjusted EBITDA Performance from 2013 - 2015 | | 10.7% |
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2015 COMPENSATION OF NON-EMPLOYEE DIRECTORS |
472019 AAM Proxy Statement | 13
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Election of Directors
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PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2016 | |
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PROXY STATEMENT
Annual Meeting of Stockholders
To Be Held May 5, 2016
INTERNET AVAILABILITY OF PROXY MATERIALS
American Axle & Manufacturing Holdings, Inc. (AAM or the Company) is providing proxy materials electronically via the Internet, instead of mailing printed copies of those materials to each stockholder. On March 24, 2016, we mailed to our stockholders (other than those who previously requested e-mail or paper delivery) a Notice of Availability of Proxy Materials containing instructions on how to access our proxy materials, including our proxy statement and 2015 annual report on Form 10-K. The Notice of Availability of Proxy Materials provides instructions on how you may submit your proxy over the Internet or by telephone.
This electronic delivery process is designed to expedite stockholder receipt of proxy materials, lower the cost of the Annual Meeting of Stockholders (annual meeting), and conserve natural resources. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice of Availability of Proxy Materials. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials by e-mail unless you elect otherwise. If you received a printed copy of proxy materials by mail and would like to view future proxy materials over the Internet, you can do so by accessing the Internet at www.envisionreports.com/axl.
QUESTIONS AND ANSWERS ABOUT VOTING AND THE ANNUAL MEETING
Why am I receiving this proxy statement?
You received these proxy materials because you owned shares of AAM common stock on March 8, 2016 (record date). AAM’s Board of Directors (Board) is soliciting your proxy to vote your shares at the annual meeting. By use of a proxy, you can vote whether or not you attend the meeting. This proxy statement includes information that we are required to provide to you and is designed to assist you in voting your shares.
Who is entitled to vote?
Holders of AAM common stock on the record date are entitled to one vote per share. You are a holder of record if your shares are held directly in your name with AAM’s transfer agent, Computershare Trust Company, N.A. If your shares are held in the name of a broker, bank, trustee or other record holder, you are a street name holder. If you hold shares in more than one account, each notice, proxy and/or voting instruction card you receive that has a unique control number must be voted so that all your shares are voted.
How do I vote?
You may vote by any of the following methods:
In person — attending the annual meeting and casting a ballot.
By mail — using the proxy and/or voting instruction card provided.
By telephone or over the Internet — following the instructions on your notice card, proxy and/or voting instruction card.
If you vote by telephone or over the Internet, have your notice card or proxy and/or voting instruction card available. The control number on your card is necessary to process your vote. A telephone or Internet vote authorizes the named proxies to vote in the same manner as if you marked, signed and returned the card by mail. If you hold shares in street name, refer to the voting instructions provided by your broker, bank, trustee or other record holder.
How many shares may vote at the meeting?
As of March 8, 2016, we had 76,484,312 shares of common stock outstanding and entitled to vote. Under AAM’s by-laws, a majority of these shares must be present in person or by proxy to hold the annual meeting and take any action during the meeting.
Can I change my vote?
You may change your vote at any time before the annual meeting by:
revoking it by written notice to AAM’s Secretary at the address on the cover of this proxy statement;
voting in person at the annual meeting; or
delivering a later-dated proxy vote by mail, telephone or over the Internet.
What are the Board’s recommendations on how I should vote my shares?
The Board recommends that you vote your shares as follows:
Proposal 1 — FOR the election of the two nominees with terms expiring at the 2019 annual meeting;
Proposal 2 — FOR approval, on an advisory basis, of the compensation of AAM’s named executive officers as described in the Compensation Discussion and Analysis, tables and related narrative; and
Proposal 3 — FOR ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2016.
What are my choices when voting?
Proposal 1 — You may vote for or withhold your vote on one or more of the nominees.
Proposal 2 — You may vote for or against the proposal to approve the compensation of our named executive officers, or you may abstain from voting your shares.
Proposal 3 — You may vote for or against the proposal to ratify the appointment of the Company’s independent registered public accounting firm, or you may abstain from voting your shares.
What vote is required to approve each proposal?
Proposal 1 — A plurality of the votes cast to elect a director, which means that nominees with the most affirmative votes will be elected to fill the available seats.
Proposal 2 — An affirmative vote of a majority of the shares voted in person or by proxy must be cast in favor of the advisory vote to approve the compensation of AAM’s named executive officers.
Proposal 3 — An affirmative vote of a majority of the shares voted in person or by proxy must be cast in favor of the ratification of the appointment of the Company’s independent registered public accounting firm.
Proposals 2 and 3 are advisory votes only and, as discussed in more detail in each proposal, the voting results are not binding on AAM. However, with respect to proposal 2, the Board and the Compensation Committee will consider the outcome of the vote in making future determinations concerning the compensation of our named executive officers. With respect to proposal 3, the Audit Committee will consider whether the appointment of Deloitte & Touche, LLP is in the best interests of the Company if the appointment is not ratified.
Who will count the votes?
Representatives of Computershare Trust Company, N.A., AAM’s transfer agent, will count the votes and serve as our inspector of election. The inspector of election will attend the annual meeting.
What if I “withhold” my vote or “abstain”?
Votes withheld and abstentions will be counted as present for purposes of determining whether a majority of shares is present to establish a quorum and hold the annual meeting. Abstentions will not be counted in the tally of votes for or against any proposal. A withheld vote has the same effect as an abstention.
What if I do not vote and do not attend the annual meeting?
If you are a holder of record and you do not vote your shares at the annual meeting or by proxy, your shares will not be voted. If you sign and return your proxy card without specific voting instructions, your shares will be voted as recommended by the Board.
Under New York Stock Exchange (NYSE) rules, brokers have discretionary power to vote your shares only on “routine” matters. Brokers do not have discretionary power to vote your shares on “non-routine” matters. If you hold shares in street name, and you do not give your bank, broker, trustee or other holder of record specific voting instructions for your shares, your record holder can only vote your shares on the ratification of the Company’s independent registered public accounting firm (proposal 3), a “routine” matter.
Without your specific instructions, your record holder cannot vote your shares on the election of directors or the advisory vote on named executive officer compensation. If you do not instruct your record holder how to vote on these proposals, the record holder will not vote your shares. Shares not voted will be broker non-votes and will not be counted in determining the outcome of the vote for proposals 1 and 2. Broker non-votes will have no impact on the outcome of these proposals. We urge you to give your record holder voting instructions on each proposal being presented at the annual meeting.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board proposes that Elizabeth A. Chappell, Herbert K. Parker and John F. Smith be re-elected to the Board as Class II directors for terms expiring at the annual meeting in 2019. Ms. Chappell has served on AAM's Board since 2004 and currently serves as Chair of the Compensation Committee and as a member of the Nominating/Corporate Governance Committee and Strategy & Technology Committee. Mr. Smith has served on AAM's Board since 2011 and currently serves as Chair of the Strategy & Technology Committee and as a member of the Audit Committee.2022.
The Board is divided into three classes. Directors serve for staggered three-year terms. The Board believes that the staggered election of directors helps to maintain continuity and ensures that a majority of directors at any given time will have in-depth knowledge of the Company.
The Board unanimously approved the nominations of Ms. Chappell, Mr. Parker and Mr. Smith based on their demonstrated effectiveness as members of our Board and the Committeescommittees on which they serve, their relevant experience and expertise, and their sound judgment and integrity. Each nominee brings a strong and unique background and set of skills to the Board.
Collectively, the Board has high levels of competence and experience in a variety of areas, including manufacturing, engineering, finance, international business, management, law, risk management, strategic business development and the global automotive industry. A summary of the principal occupation, professional background and specific knowledge and expertise that qualify each nominee and returning director to serve on our Board is provided in the following pages of this proxy statement.
The Board unanimously recommends a vote FOR each of the nominees.
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þ | The Board unanimously recommends a vote FOR each of the nominees. |
Nominees for Director
Class II— Directors to hold office until the 20192022 Annual Meeting of Stockholders
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| Elizabeth A. Chappell | Executive Chairwoman, RediMinds, Inc. |
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| | ELIZABETH A. CHAPPELL | Current and Past Positions | Key Qualifications and Experience |
| – Executive Chairwoman (co-founder)Age 58RediMinds, Inc. (data strategy, engineering and innovation firm) since December 2017
Ms. Chappell has served as
– President and& Chief Executive Officer of the Detroit Economic Club since 2002. Previously, she served as 2002 - 2017 – Executive Vice President, Corporate Communications & Investor Relations for Compuware Corporation. From 1995 to 2000, Ms.Chappell was Corporation 1997 - 2001 – President and& Chief Executive Officerof a consulting firm she founded The Chappell Group, Inc. For 1995 - 2000 – Various executive positions with increasing responsibility with AT&T for 16 years | Based on her professional background and prior AAM Board experience, the following qualifications led the Board to conclude that Ms. Chappell held executive positions at AT&T. From 1999 to 2009, Ms. Chappell servedshould serve on the Board of DirectorsAAM's Board: her leadership experience as President & CEO of the Handleman Company. She also serves on a numberDetroit Economic Club; the breadth of her community outreach and corporate citizenship experience in her professional, civic boards, including the Michigan State University Capital Campaign, Citizens Research Council, Detroit Regional Chamber, the United Way Board and Tocqueville Committee,charitable endeavors; and the Charter One Regional Advisory Board (Midwest). Ms. Chappell is a former board member of the Karmanos Cancer Institute, Michigan Economic Growth Authority and Hospice of Michigan. Ms. Chappell’s demonstrated leadership skills, entrepreneurial business experience and service on various boards enhance her contributions to the Boardsubject matter knowledge in the areas of investor relations, community outreach and corporate citizenship, marketing and communications, executive compensationbusiness development and strategic business development.risk management. |
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| Current Directorships (non-profit) |
| Director sinceAge: 61
| Previous Directorship | 2004– Detroit Regional Chamber– Michigan Israel Business Accelerator (MIBA)– Michigan State University Capital Campaign– United Way of Southeastern Michigan
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| Director Since: 2004 | | JOHN F. SMITH– Handleman CompanyAge 651999 - 2009
Mr. Smith is principal of Eagle Advisors LLC, a consulting firm that specializes in strategy development and performance improvement. From 2000 to 2010, Mr. Smith held positions of increasing responsibility with General Motors
– Compuware Corporation in sales and marketing, product planning and corporate strategy, most recently as Group Vice President, Corporate Planning and Alliances. During his 42-year career in the automotive industry, Mr. Smith also served as General Manager of Cadillac Motor Car, President of Allison Transmission, and Vice President, Planning at General Motors International Operations in Zurich, Switzerland. Mr. Smith serves on the boards of CEVA Holdings LLC (where he serves on the Executive Committee) and Arnold Magnetics. Mr. Smith also serves as an advisor to VNG.CO, a developer of compressed natural gas refueling stations, and Enginetics LLC, a fuel-injection technology start-up company. Mr. Smith is a member of the National Advisory Board of Boy Scouts of America and Chairman of the Board of Trustees of St. John's Providence Health System in Michigan. He served on the boards of Smith Electric Vehicles Corp. (June 2012 1997 - December 2013) and Plasan Carbon Composites (December 2013 - December 2014). Mr. Smith's extensive experience in manufacturing, finance, business development, international operations, sales and marketing, product development and mergers and acquisitions is aligned with AAM's key business objectives, including continued global business growth and diversification.2002
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| Director since 2011Committees: |
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RETURNING DIRECTORS
Class III — Directors to hold office until the 2017 Annual Meeting of Stockholders
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| | JAMES A. McCASLIN
Age 67
Mr. McCaslin retired from Harley Davidson, Inc. in April 2010. Mr. McCaslin joined Harley Davidson in 1992 and held various senior executive leadership positions, includingHerbert K. Parker
| Retired Executive Vice President and Chief Operating Officer of Harley-Davidson Motor Company from 2001 to 2009. From 1989 to 1992, he held manufacturing and engineering positions with JI Case, a manufacturer of agricultural equipment. Previously, he held executive positions in manufacturing and quality with Chrysler Corporation, Volkswagen of America and General Motors Corporation, where he began his 40-year career in manufacturing. From 2003 to 2006, he served on the Board of Directors of Maytag Corporation. Mr. McCaslin has served on a number of civic boards, including Boys and Girls Clubs of Greater Milwaukee, Manufacturing Skill Standards Council and Kettering University. Mr. McCaslin’s extensive operational expertise and experience in multiple manufacturing industries provide the Board with a valued resource in support of AAM's operational objectives, which include engineering, quality and technology leadership, operational excellence and global geographic and product diversification. | | Director since
2011 Harman International Industries |
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| | WILLIAM P. MILLER II CFA | Past Positions | Key Qualifications and Experience |
| Positions at Harman International Industries, Inc.: Age 60– Executive Vice President, Operational ExcellenceMr. Miller, CharteredJanuary 2015 - March 2017
– Executive Vice President and Chief Financial Analyst, is HeadOfficer2008 - January 2014 Positions at ABB, Inc. and related ABB companies: – Chief Financial Officer, North America2006 - 2008 – Chief Financial Officer, Automation Technologies Division2002 - 2005 – Various finance positions of Asset Allocation forincreasing responsibility throughout Asia, Europe and North America1980 - 2002 | Based on his professional background and public company board and audit committee experience, the Saudi Arabian Investment Company. Separately, since 2003, Mr. Miller has been a member offollowing qualifications led the Board of Directors ofto conclude that Mr. Parker should serve on AAM’s Board: his leadership and financial experience as the Chicago Mercantile Exchange, serving on the Audit Committee, Finance Committee and Market Regulation Oversight Committee. From April 2011 to October 2013, he was the Senior Managing Director & Chief Financial Officer of Financial MarketsHarman International Industries, Inc. From 2005 to 2011, he was employed byand of ABB; his responsibilities for mergers and acquisitions, information technology, internal audit and tax; the Ohio Public Employees Retirement System, where he served as Deputy Chief Investment Officer. Previously, he was Senior Risk Manager forbreadth of his management experience over global operating activities, capital allocation structures and developing and implementing strategic plans; and his subject matter knowledge in the Abu Dhabi Investment Authority and an Independent Risk Oversight Officer and Chief Compliance Officer for Commonfund Group. Mr. Miller also served as Director, Trading Operations and Asset Mix Management with General Motors Investment Management Corp. and as a financial analyst with the U.S. Departmentareas of Transportation. Mr. Miller also served on the Public Company Accounting Oversight Board’s Standing Advisory Group, the Institutional Investor Advisory Board for Golub Capital, the Board of Directors of the Dubai Mercantile Exchange and the Board of Directors of the Dubai International Financial Exchange. Mr. Miller’s expertise in finance, investments, risk management, compliance, international business, audit and accounting, provides the Board with valuable guidance in assessingstrategic planning and managing risks and in fulfilling the Board’s financial oversight role.risk management. |
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| Director since– 2005Stamford, Connecticut YMCA
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| Age: 61 | Other Public Company Directorships |
| Director Since: 2018 | – TriMas Corporation since March 2017– Apogee Enterprises, Inc. since May 2018– nVent Enterprises Plc. since May 2018 |
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| | SAMUEL VALENTI III
Age 70
Mr. Valenti serves as Chairman and Chief Executive Officer of Valenti Capital LLC and World Capital Partners, investment firms located in Bloomfield Hills, Michigan. Since 2002, Mr. Valenti has served as Chairman of the Board of TriMas Corporation, a manufacturer of highly engineered precision products for industry. In June 2015, Mr. Valenti became Co-Chair of the Board of Directors of Horizon Global Corporation, a designer, manufacturer and distributor of custom-engineered towing, trailer and cargo management products. Until 2008, Mr. Valenti had a 40-year career with Masco Corporation, a Fortune 500 manufacturer of home building and home improvement products, serving as Vice President - Investments from 1974 to 1998. From 1988 to 2008, Mr. Valenti was President and a member of the Board of Directors of Masco Capital Corporation. Mr. Valenti is a member of the Business Leaders for Michigan and serves as Chairman of the Renaissance Venture Capital Fund. Mr. Valenti has demonstrated leadership skills, breadth of management experience in diversified manufacturing businesses, and highly recognized subject matter expertise in mergers and acquisitions, finance, economics and asset management.
| | Director since 2013 |
Class I — Directors to hold office until the 2018 Annual Meeting of Stockholders
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| | DAVID C. DAUCH
Age 51
David C. Dauch is Chief Executive Officer of AAM, a position he has held since September 2012. Mr. Dauch was appointed Chairman of the Board in August 2013. From September 2012 through August 2015, Mr. Dauch served as AAM's President & CEO. Prior to that, Mr. Dauch served as President & Chief Operating Officer (2008 - 2012) and held several other positions of increasing responsibility from the time he joined AAM in 1995. Prior to joining AAM, Mr. Dauch held several positions at Collins & Aikman Products Company, where he received the President’s Award for leadership and innovation. Mr. Dauch also served on the Collins & Aikman Board of Directors from 2002 to 2007. Presently, he serves on the boards of Business Leaders for Michigan, the Detroit Regional Chamber, the Great Lakes Council Boy Scouts of America, the Boys & Girls Club of Southeast Michigan, the National Association of Manufacturers (NAM), the Original Equipment Suppliers Association (OESA), Amerisure Mutual Holdings, Inc. and the Amerisure Companies (since December 2014) and Horizon Global Corporation (since June 2015). Mr. Dauch also serves on the Miami University Business Advisory Council. Mr. Dauch’s leadership of AAM’s global business and operations provides the Board with strategic vision and insight that are vital to AAM’s strategic plans for the future. John F. Smith | | Director since
2009 Principal, Eagle Advisors LLC |
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| | WILLIAM L. KOZYRA | Current and Past Positions | Key Qualifications and Experience |
| – Principal, Eagle Advisors LLC (strategy development and performance improvement consulting) since 2011Age 58
Mr. Kozyra is Chairman ofPositions at General Motors:
– Group Vice President, Corporate Planning and Alliances (most recent position)2000 - 2010 – General Manager, Cadillac Motor Car1997 - 1999 – President, Allison Transmission1994 - 1996 – Vice President, Planning; International Operations, Zurich Switzerland1989 - 1993 | Based on his professional background and prior AAM Board experience, the following qualifications led the Board and Chief Executive Officer of TI Automotive Ltd., a global supplier of automotive fluid storage, carrying and delivery technology. He has served as TI Automotive's CEO since June 2008. Prior to conclude that Mr. Kozyra was President and CEO of Continental AG North America for 10 years. He was also a member of the Executive Board, Continental AG (DAX), Hanover, Germany, with responsibility for Continental AG's NAFTA businesses. Previously, at ITT Automotive, he served as Vice President and General Manager, Brake and Chassis Systems North America. Prior to joining ITT Automotive, he was Vice President and General Manager of Bosch Braking Systems' Brake Products Division. Mr. Kozyra is a member of the Board of Directors of the Motor & Equipment Manufacturers Association (MEMA), the Ford Motor Company Top 100 Supplier Forum, the Board of Trustees of the Notre Dame Preparatory School, the Boy Scouts of America Executive Board in Detroit, Michigan, the Board of Advisors of the University of Detroit and the University of Detroit Alumni Council and the Society of Automotive Engineers. Mr. Kozyra has 36 years ofSmith should serve on AAM's Board: his leadership experience in the global automotive industryindustry; the breadth of his management experience with General Motors international operations; and demonstrated leadership skills and technical backgroundhis subject matter knowledge in the areas of manufacturing, engineering, quality systemsfinance, innovation and sales, alltechnology, strategic planning and risk management. |
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| Current Directorship (non-profit) |
| – Boy Scouts of which are aligned with AAM's business objectives.AmericaNational Advisory Board
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| Age: 68 | Other Public Company Directorships |
| Director Since: 2011 | – TI Fluid Systems plc (TI Automotive)since October 2017 – CEVA Holdings LLC since 2013 |
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| Audit | Previous Directorships |
| Technology (Chair) | – Covisint Corporation -- September 2016 - July 2017– Arnold Magnetics -- January 2015 - September 2016– Plasan Carbon Composites -- December 2013 - December 2014– Smith Electric Vehicles Corp. -- June 2012 - December 2013 |
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Returning Directors
Class III — Directors to hold office until the 2020 Annual Meeting of ContentsStockholders
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| | PETER D. LYONS
Age 60
Mr. Lyons, an attorney, is a partner and Co-Head of the Global Public MergersJames A. McCaslin
| Retired President & Acquisitions Group of Freshfields Bruckhaus Deringer US LLP, which he joined in September 2014. Based in the New York office of Freshfields, Mr. Lyons represents leading U.S. and global companies in acquisitions and sales of public and private companies, asset acquisition and disposition transactions, and joint ventures. Prior to joining Freshfields, Mr. Lyons was a partner with Shearman & Sterling LLP and a member of the Mergers & Acquisitions Group based in New York, New York. Mr. Lyons practiced law at Shearman & Sterling for 35 years. Mr. Lyons has been recognized and recommended as an Mergers & Acquisitions practitioner by Chambers Global, Chambers USA, The Legal 500 US, and IFLR1000. Mr. Lyons received his law degree from Georgetown University Law Center and his Bachelor of Arts degree from the University of Virginia. From 2003 to 2014, while a partner at Shearman & Sterling, Mr. Lyons served as lead counsel to AAM and as a key advisor to the Board on legal matters. Mr. Lyons has extensive experience advising global companies and corporate boards as well as highly recognized subject matter expertise in mergers and acquisitions and other corporate transactions, corporate governance and other areas of significance to the Board. | | Director since 2015Chief Operating Officer, Harley-Davidson Motor Co. |
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| | Past Positions | Key Qualifications and Experience |
| Positions at Harley-Davidson (Retired 2010):
– President & Chief Operating Officer2001 - 2009
– Various senior executive positions1992 - 2001
Other Manufacturing Company Positions:
– Manufacturing and Engineering executiveJI Case (agricultural equipment) 1989 - 1992
– Manufacturing and Quality executiveChrysler Corporation Volkswagen of America General Motors Corporation 1966 - 1989
| Based on his professional background and prior AAM Board experience, the following qualifications led the Board to conclude that Mr. McCaslin should serve on AAM's Board: his leadership experience as President & COO of Harley-Davidson Motor Company; the breadth of his manufacturing and engineering experience at global manufacturing companies; and his subject matter knowledge in the areas of engineering, innovation and technology, manufacturing and risk management. |
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| Age: 70 | |
| Director Since: 2011 | Previous Public Company Directorship | |
| Committees: | 2003 - 2006 |
| Compensation (Chair) |
| Nominating/Corp Gov |
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| William P. Miller II CFA | Head of Asset Allocation, Saudi Arabian Investment Company |
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| | Current and Past Positions | Key Qualifications and Experience |
| – Head of Asset AllocationSaudi Arabian Investment Company since October 2013
– Senior Managing Director &Chief Financial Officer Financial Markets International, Inc. April 2011 - October 2013
– Deputy Chief Investment OfficerOhio Public Employees Retirement System 2005 - 2011
Abu Dhabi Investment Authority 2003 - 2005
– Independent Risk Oversight Officer and Chief Compliance OfficerCommonfund Group 1996 - 2002 | Based on his professional background and prior AAM Board and Audit Committee experience, the following qualifications led the Board to conclude that Mr. Miller should serve on AAM's Board: his leadership qualities developed from his experience as Head of Asset Allocation for the Saudi Arabian Investment Company and as an officer with oversight responsibilities for investments, risk and compliance since 1996; the breadth of his experience in serving on the boards of the Chicago Mercantile Exchange and the Dubai Mercantile Exchange; and his subject matter knowledge in the areas of finance, investments, audit and accounting, innovation and technology, regulatory matters and risk management. |
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| Age: 63 |
| Director Since: 2005 | Advisory Boards (Previous) |
| Committees: | Previous Directorships | – Public Company Accounting Oversight Board Standing Advisory GroupInstitutional Investor Advisory Board
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| Audit (Chair) | – Chicago Mercantile Exchange2003 - May 2017 – Dubai Mercantile Exchange2011 - March 2017 |
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| Sandra E. Pierce | Senior Executive Vice President Huntington Bank |
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| | Current and Past Positions | Key Qualifications and Experience |
| – Chair, Huntington Bank Michigan and Sr. Vice President, Private Client Group & Regional Banking Director since August 2016
– Vice Chair, First Merit Corporation and Chair and Chief Executive Officer, First Merit Michigan (acquired by Huntington Bank)2013 - 2016
– President and Chief Executive Officer, Charter One, Midwest Regional Executive (RBS Citizens, N.A.)2005 - 2012
– Various banking and executive positions with increasing responsibility with JPMorgan Chase, Michigan (successor to Bank One, First Chicago NBD and NBD Bank, N.A.) 1978 - 2005 | Based on her professional background and public company board experience, the following qualifications led the Board to conclude that Ms. Pierce should serve on AAM’s Board: her leadership experience as Senior Executive Vice President - Private Client Group & Regional Banking Director, and Chair of Huntington Bank Michigan, and as chief executive officer of FirstMerit Michigan and Charter One; the breadth of her corporate marketing and community development experience in her professional, civic and charitable endeavors; and her subject matter knowledge in the areas of strategic planning, finance, public relations, business development, compensation/benefits and risk management.
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| Age: 60 | Other Public Company Directorships | Current Directorships (non-profit) |
| Director Since: 2018 | – Penske Automotive Group since 2012 | – Federal Reserve Bank of Chicago, Detroit Branch– Business Leaders for Michigan, Vice-Chair– Detroit Regional Chamber– Detroit Riverfront Conservancy– Henry Ford Health System, Chair– United Way (Southeast Michigan) |
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| Committees: | Private Company Directorships |
| Audit | since January 2013 – ITC Holding Corp (subsidiary of Fortis, Inc.)since January 2017
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| Samuel Valenti III | Chairman & Chief Executive Officer, Valenti Capital LLC and World Capital Partners |
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| | Current and Past Positions | Key Qualifications and Experience |
| – Chairman & Chief Executive OfficerValenti Capital LLC and World Capital Partners (investment firms) since 2000
Positions at Masco Corporation (1968 - 2008)
– President, Masco Capital Corporation1988 - 2008
– Vice President - InvestmentsMasco Corporation 1974 - 1998 | Based on his professional background and prior AAM Board experience, the following qualifications led the Board to conclude that Mr. Valenti should serve on AAM's Board: his leadership experience as an executive of Masco for 40 years; the breadth of his management experience in diversified manufacturing businesses; and his subject matter expertise in the areas of strategic planning, finance, economics and asset management, and risk management. |
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| Age: 73 | Other Public Company Directorship | Current Directorships (non-profit) and Leadership Roles
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| Director Since: 2013 | – TriMas Corporation since 2002 |
| Lead Independent Director | Previous Directorships | – Business Leaders for Michigan– Renaissance Venture Capital Fund (Michigan) Advisory Board Chairman
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| Committees: | – Horizon Global Corporation2015 - May 2018 – Masco Capital Corporation1988 - 2008 |
| Audit |
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| Nominating/Corp Gov |
| Executive |
Class I — Directors to hold office until the 2021 Annual Meeting of Stockholders
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| David C. Dauch | Chairman of the Board & Chief Executive Officer, AAM |
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| | Current and Past Positions at AAM | Key Qualifications and Experience |
| since August 2013
since September 2012
– President & Chief Executive OfficerSeptember 2012 - August 2015
– President & Chief Operating Officer2008 - 2012
– Various positions of increasing responsibility1995 - 2008 | Based on his professional background and prior AAM Board experience, the following qualifications led the Board to conclude that Mr. Dauch should serve on AAM's Board: his leadership experience as an officer of AAM since 1998; the breadth of his management experience within, and knowledge of, AAM's global operations; and his subject matter knowledge in the areas of innovation and technology, manufacturing, strategic planning and risk management. |
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| Age:54 | Other Company Directorship | Current Directorships (non-profit) and Leadership Roles |
| Director Since: | – Amerisure Companies since 2014 |
| 2013 (Chairman) | Previous Directorship | – Business Leaders for Michigan– Detroit Regional Chamber– Great Lakes Council Boy Scouts of America– Boys & Girls Club of Southeastern Michigan– National Association of Manufacturers (NAM)– Original Equipment Suppliers Association (OESA)– Miami University Business Advisory Council– General Motors Supplier Council– FCA NAFTA Supplier Advisory Council |
| 2009 | – Horizon Global CorporationJune 2015 - May 2018 |
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| William L. Kozyra | President & Chief Executive Officer, TI Fluid Systems plc |
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| | Current and Past Positions | Key Qualifications and Experience |
| – President & Chief Executive OfficerTI Fluid Systems plc (TI Automotive) (fluid storage, carrying and delivery systems) since 2008
– President & Chief Executive OfficerContinental AG North America 1998 - 2008
– Member of Executive BoardContinental AG (DAX) 2006 - 2008
– Vice President & General ManagerBrake Products Division of Bosch Braking Systems 1995 - 1997 | Based on his professional background and prior AAM Board experience, the following qualifications led the Board to conclude that Mr. Kozyra should serve on AAM's Board: his leadership experience as an officer of TI Automotive since 2008; the breadth of his international experience with global companies in the automotive industry; and his subject matter knowledge in the areas of engineering, manufacturing, innovation and technology, strategic planning and risk management. |
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| Age:61 | Other Public Company Directorships | Current Directorships (non-profit) and Leadership Roles |
| Director Since: 2015 |
| Committees: | – TI Fluid Systems plc (TI Automotive)since 2008 | – General Motors Supplier Council– Ford Motor Company Top 100 Supplier Forum– Notre Dame Preparatory School– Boy Scouts of America, Detroit– University of Detroit Alumni Council– Society of Automotive Engineers |
| Compensation |
| Nominating/Corp Gov |
| Technology |
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| Peter D. Lyons | U.S. Regional Managing Partner, Freshfields Bruckhaus Deringer US LLP |
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| | Current and Past Positions | Key Qualifications and Experience |
| – Attorney, U.S. Regional Managing PartnerFreshfields Bruckhaus Deringer US LLP New York, NY since September 2014
– Partner, Mergers & Acquisitions Group Shearman & Sterling LLPNew York, NY 1979 - 2014
| Based on his professional background and prior AAM Board experience, the following qualifications led the Board to conclude that Mr. Lyons should serve on AAM's Board: his experience as an attorney of a major law firm since 1979; the breadth of his experience in advising global businesses on complex legal matters and transactions; and his subject matter knowledge in the areas of corporate governance, mergers and acquisitions, international business and risk management. |
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| Age: 63 | | |
| Director Since: 2015 | |
| Committees: | |
| Compensation | |
| Nominating/Corp Gov | |
Corporate Governance Highlights
At AAM, we believe that strong corporate governance contributes to long-term shareholder value. We are committed to sound governance practices, including those described below.
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Independence | | Accountability |
– 9 of 10 independent directors (except our CEO)– Lead Independent Director– Committees comprised of only independent directors (except Executive Committee)– Independent directors meet regularly in executive session without management present | | – Proactive shareholder engagement program– Majority vote for directors In uncontested elections,– Annual Board and committee evaluations– Commitment to Board refreshment |
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Sound Practices | | Risk Management |
– In 2019, the Board adopted a policy to include women and minority candidates in the selection process– In 2019, the Board assigned oversight responsibility for AAM's sustainability program to the Nominating/ Corporate Governance Committee– Director orientation and education– Stock ownership requirements for directors and executive officers– Hedging or pledging AAM stock is prohibited | | – Active Board oversight of AAM's overall risk management structure– Individual Board committees oversee risks related to their areas of responsibility– AAM has robust risk management processes throughout the company– The Board and its committees receive regular updates from management on top enterprise risks, and the steps management has taken or will take to mitigate these risks |
Active Engagement with our Shareholders
Our Board and management team greatly value the opinions and feedback of our shareholders, which is why we have proactive, ongoing engagement with our shareholders throughout the year focused on corporate governance, executive compensation and corporate responsibility. This outreach is in addition to the ongoing communication between our shareholders and our Chairman & Chief Executive Officer, Vice President & Chief Financial Officer and Investor Relations team on AAM's financial performance and strategic objectives.
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Why we engage |
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Provide transparency into our business strategy, corporate governance practices and executive compensation programs | Determine which issues are important to our shareholders and communicate each others' views on those topics | Identify emerging issues that may impact our business and influence our practices |
CORPORATE GOVERNANCE
Corporate Governance Guidelines
The Board has adopted Corporate Governance Guidelines that meet or exceed the requirements of the NYSE listing standards. AAM’s Corporate Governance Guidelines are available on our website at http://investor.aam.com. |
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How we engage |
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Investor Communication Program | | We provide institutional investors with many opportunities to provide feedback to senior management by participating in conferences, one-on-one and group meetings, investor visits to our manufacturing facilities and technical centers, and day-to-day interactions with individual investors throughout the year.
In June 2018, AAM hosted an Investor Day at the New York Stock Exchange where our CEO and senior management gave an update on our business and strategic plans. |
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Proactive Shareholder Outreach Program | | As part of our annual shareholder outreach program, we also engage with shareholders in conference calls or meetings outside the proxy season. These exchanges, which we initiate, cover our executive compensation program, risk management, ESG, strategic planning and corporate governance practices. Soliciting shareholder feedback is a key component of this program, which we do at least annually. As appropriate, we also engage with shareholders during proxy season.
Our Board members, CFO and Investor Relations Director participate in these outreach meetings.
Our shareholder outreach activities during 2018 - 2019 are described in the Proxy Summary and the Compensation Discussion & Analysis. |
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Board Involvement | | The Chair of our Compensation Committee has participated in certain shareholder meetings. Our CFO conveys shareholders' feedback to the full Board and the Compensation Committee or Nominating/ Corporate Governance Committee, depending on the subject of the feedback. The Board also receives any feedback we obtain from proxy advisory firms, such as ISS and Glass Lewis, as part of our outreach program.
The Board gives management feedback on key aspects of AAM's investor relations communication plan and shareholder outreach program. |
Director Independence
AAM’s Corporate Governance Guidelines provide that at least a majority of the members of the Board meet the independence criteria of the NYSE listing standards. Currently, eight of our nine directors are independent from the Company. Only David C. Dauch, who serves as AAM's Chief Executive Officer, is not independent due to his employment with AAM.
The Board has establishedadopted Director Independence Guidelines to assist in determining the independence of our directors for purposesunder the independence standards of the NYSE independence standards.New York Stock Exchange (NYSE). The Director Independence Guidelines are included in AAM’s Corporate Governance Guidelines, which are available on our website at http://investor.aam.com. The Board annually reviews and determines, on the recommendation of the Nominating/Corporate Governance Committee, whether any director has a material relationship with the Company that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. No director qualifies as independent unless the Board determines that the director has no direct or indirect material relationship with the Company.
As a resultIn February 2019, the Board reviewed the independence of this evaluation,each then-sitting director, applying the independence standards set forth in our Corporate Governance Guidelines. Based on these independence standards and the relevant facts and circumstances, the Board determined that the following nominees and returning directors have no director other than Mr. Dauch, our CEO, has a material relationshipsrelationship with AAM and are independent: Elizabeth A. Chappell, William L. Kozyra, Peter D. Lyons, James A. McCaslin, William P. Miller II, John F. Smith and Samuel Valenti III.
In making these independence determinations, the Board considered Ms. Chappell’s position as President & CEOthat each director other that Mr. Dauch is independent. Mr. Dauch is not independent because of the Detroit Economic Club, in light of the sponsorship fees AAM pays to this non-profit organization. The annual fees paid by AAM to the Detroit Economic Club are significantly below the threshold amount established under the NYSE independence standards and our Director Independence Guidelines, which is the greater of two percent of the outside entity’s annual gross revenues or $1 million.his employment with AAM.
Board Leadership Structure
The Board's current leadership structure includesOur Board consists of a combined Chairman and CEO role, complemented with a leadLead Independent Director chosen from our independent director. In August 2013,directors. This structure, along with our sound governance practices, provides effective and independent oversight of the Company.
The Chairman and CEO role brings to the Board appointed David C. Dauch asthe experience and expertise of both the Company and the automotive industry. The skills and experience of our CEO are well-suited for the role of Chairman, putting the Board in the best position to identify and assess key industry drivers and important changes in the competitive landscape so that the Board can develop effective strategies. In light of the Board.opportunities and challenges facing
AAM and the importance of the Chairman role, the Board believes that it isshareholders are best served by having Mr. Dauch serve in the best interest of the Company to combine the rolescombined role of Chairman and CEO at this time because it provides the Company with unified leadership and direction. The Board believes the Company's CEO is best situated to serve as Chairman because he is the director most familiar with the Company's business and industry, and is in a position to effectively identify strategic priorities and lead the discussion and execution of strategy. CEO.
While the Company'sour independent directors bring experience, oversightdiverse experiences and expertise from various perspectives outside the Company, the CEO'sAAM, Mr. Dauch's in-depth knowledge of our business enables him to identify important areas of focus for the Board and effectively recommend appropriate agendas. The Board believes that the combined role of Chairman and CEO facilitates information flow between management and the Board, provides clear accountability and promotes efficient decision making, all of which are essential to effective governance.
Lead Independent Director
Our Board leadership structure is further enhanced by a Lead Independent Director. The Lead Independent Director plays an Independent Lead Director. In April 2014, the Board selected Mr. McCaslin to serveimportant role in this role. The Independent Lead Director's responsibilities are to:
preside at executive sessions of the independent directors, which are held at the end of each scheduled Board meeting;
call special executive sessions of independent directors, as appropriate;
serve as chair of the Nominating/Corporate Governance Committee;
serve as liaison betweenour governance structure, working with both the independent directors and the Chairman & CEO;CEO to ensure the Company is well positioned with sound strategy, robust risk management and effective governance. The Lead Independent Director's key responsibilities are to:
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– | preside at executive sessions of independent directors; |
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– | call special executive sessions of independent directors, as appropriate; |
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– | serve as liaison between the independent directors and the Chairman & CEO; |
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– | inform the Chairman & CEO of issues arising from executive sessions of the independent directors; and |
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– | with Board approval, retain outside advisors who report to the full Board on matters of interest to the Board. |
Mr. Valenti currently serves as Lead Independent Director.
Board Meetings
Under AAM's by-laws, regular meetings of the independent directors;Board are held at least quarterly. Our practice is to schedule certain Board meetings at an AAM manufacturing or technical center so our directors have an opportunity to observe different aspects of our business first-hand. During 2018, the Board held four regularly scheduled meetings.
Directors are expected to attend all Board meetings, meetings of committees on which they serve, and the annual meeting of stockholders. Directors are expected to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities. All continuing directors attended 100% of the Board and applicable committee meetings during 2018, except one director missed one Board meeting and another missed two committee meetings that were held on the same day. Overall attendance at Board and committee meetings was 97%. All directors then in office attended the 2018 annual meeting of stockholders. No director attended less than 88% of Board and committee meetings on which he or she served in 2018.
Board Committees
The Board has delegated some of its authority to five committees: the Executive Committee, the Audit Committee, the Compensation Committee, the Nominating/Corporate Governance Committee and the Technology Committee. Each of the Audit, Compensation and Nominating/Corporate Governance Committees has adopted a charter that complies with current NYSE rules relating to corporate governance. Copies of these committee charters are available at http://investor.aam.com.
The Board approval, retain outside advisors and/or consultants who report directlyapproved the rotation of certain directors' committee memberships effective January 2019. The Board believes that periodic rotation of committee membership is generally desirable to ensure that committees regularly benefit from diverse views.
With respect to the Audit Committee, the Board appointed Mr. Parker and Ms. Pierce as new members based on each of their professional experience and expertise. Based on Mr. Parker's prior experience as a chief financial officer, the Board determined that Mr. Parker is a financial expert according to SEC rules. In addition, the Board considered Mr. Parker's concurrent service on the audit committees of three other public companies since his retirement from Harman International Industries, Inc. in March 2017. The Board concluded that, as a retiree, Mr. Parker's simultaneous service on the other audit committees would not impair his ability to effectively serve on AAM's Audit Committee. Mr. Parker has adequate time to fulfill his responsibilities as a member of the Audit Committee and our Board.
Committee membership as of March 21, 2019, the number of meetings held during 2018, and each committee's primary responsibilities are summarized below. Every committee other than the Executive Committee regularly reports on its activities to the full Board on matters of interest to the full Board.
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Audit Committee |
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2018 Meetings: 4
Members:
William P. Miller II (Chair) * Herbert K. Parker* Sandra E. Pierce John F. Smith* Samuel Valenti III
*Financial Expert | – Oversees the independent auditors' qualifications, independence and performance |
– Oversees the quality and integrity of our financial statements |
– Oversees the performance of our internal audit function |
– Discusses with management the Company's risk assessment and risk management framework |
– Approves audit and non-audit services provided by the independent auditors |
| – Oversees the Company's hedging and derivatives practices |
*Financial Expert | – Provides oversight of the Company's ethics and compliance programs |
| – Oversees our cybersecurity risk management program and receives quarterly reports by our Chief Information Officer |
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Compensation Committee |
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2018 Meetings: 5
Members: James A. McCaslin (Chair) William L. Kozyra Peter D. Lyons Sandra E. Pierce Samuel Valenti III | – Recommends the CEO's compensation to the Board and establishes the compensation of other executive officers |
– Recommends incentive compensation and equity-based plans to the Board |
– Approves executive officer compensation to ensure that is designed to support achievement of the Company's business strategy and objectives while considering competitive market practices and shareholder interests |
– Recommends non-employee director compensation to the Board |
– Oversees management's risk assessment of the Company's policies and practices regarding compensation of executive officers and other associates |
| – Evaluates and approves corporate goals and objectives for executive officer compensation and evaluates performance in light of these criteria |
| – Oversees the preparation of the Compensation Discussion and Analysis (CD&A) and produces a Committee report for inclusion in our annual proxy statement |
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Nominating/Corporate Governance Committee |
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2018 Meetings: 4
Members: Elizabeth A. Chappell (Chair) William L. Kozyra Peter D. Lyons James A. McCaslin Herbert K. Parker Samuel Valenti III
| – Identifies qualified individuals to serve on the Board and committees |
– Reviews our Corporate Governance Guidelines and Code of Business Conduct and recommends changes as appropriate |
– Oversees succession planning for executive officers and other key executive positions and supports the Board's succession/contingency planning process for the CEO |
– Oversees evaluation of the Board and its committees |
– Reviews committee charters and recommends any changes to the Board |
– Oversees our sustainability program policies, strategies and performance and reviews sustainability/corporate responsibility matters with management |
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Technology Committee |
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2018 Meetings: 3
Members: John F. Smith (Chair) Elizabeth A. Chappell William L. Kozyra James A. McCaslin William P. Miller II | – Advises the Board and management on the Company's strategy for innovation and technology |
– Maintains awareness of market demands for technology advancements relative to product, processes and systems |
– Oversees and advises management regarding product, process and systems technologies |
– Reviews technology opportunities as potential ways to increase productivity, efficiency, quality and warranty performance and to support the Company's goals and objectives |
| – Conducts strategy discussions with the full Board |
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Executive Committee |
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2018 Meetings: 1
Members: David C. Dauch (Chair) James A. McCaslin Samuel Valenti III | – Acts on matters requiring Board action between meetings of the full Board |
– Has authority to act on certain significant matters, limited by our by-laws |
– All members other than Mr. Dauch are independent |
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Board Oversight of Risk Management
The Board directlybelieves that strong and through its committees, is responsible for overseeing the management of potential risks affecting the Company. In connection with our overalleffective internal controls and risk management process,processes are essential for achieving shareholder value. The Board has oversight for risk management with a focus on the Board regularly reviews information provided by senior management aboutmost significant risks facing the Company’sCompany, including strategic, operational, financial and compliance risks. In addition, the chairs of the Audit, Compensation, Nominating/Corporate GovernanceThe Board's risk oversight process builds upon management's risk assessment and Strategy &mitigation processes, which include an enterprise risk management program, regular internal management disclosure and compliance committee meetings, a global ethics and compliance program and comprehensive internal audit processes.
Technology CommitteesThe Board implements its risk oversight function both as a full Board and through delegation to Board committees, which regularly report to the full Board. The Board has delegated the oversight of specific risks to Board committees that align with their functional responsibilities, as summarized in the table below.
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Responsible Party | Primary Areas of Risk Oversight |
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Full Board | | Oversees overall risk management function and regularly receives reports from the chairs of individual Board committees on risk-related matters falling within each committee's oversight responsibilities. Also receives reports from management on particular risks facing the Company, including through the review of AAM's strategic plan. |
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Audit Committee | | Monitors financial, operational, and compliance risks by regularly reviewing reports and presentations given by management, Internal Audit, Company advisors and the independent auditors.
Regularly reviews risk management practices and risk-related policies (for example, AAM's risk management process and cybersecurity strategy) and evaluates potential risks related to internal controls over financial reporting.
Oversees cybersecurity risk management and risk controls. Receives quarterly reports from our Chief Information Officer on AAM's cybersecurity program, including AAM's monitoring, auditing, implementation and communication processes, controls and procedures.
Monitors financial risks, including capital structure and liquidity risks, and reviews the policies and strategies for managing financial exposure and contingent liabilities. |
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Compensation Committee | | Monitors potential risks related to the design and administration of our compensation plans, policies and programs, including our performance-based compensation programs, to promote appropriate incentives that do not encourage executive officers to take unnecessary and/or excessive risks. |
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Nominating / Corporate Governance Committee | | Monitors potential risks related to our governance practices by, among other things, reviewing succession plans and performance evaluations of the Board and CEO and monitoring legal developments and trends regarding corporate governance practices. |
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Technology Committee | | Monitors risks associated with the Company's product portfolio and our innovation and technology plans. |
Identifying and Evaluating Director Candidates
Our Board believes that the most effective oversight comes from a Board that represents a diverse range of experience and perspectives that provide the collective skills, qualifications and attributes necessary to provide sound governance. To carry out its responsibilities and set the appropriate tone at the top, our Board is focused on the activitiescharacter, integrity and qualifications of their respective committees, including matters related to risk.
The Audit Committee oversees management of financial risksits members, and receives regular reports from management on the Company’s overall risk managementBoard's leadership structure and processes. composition.
The Nominating/Corporate Governance Committee manages risks associatedreviews with corporatethe Board the experience and attributes desired for effective governance in our changing industry and management succession planning. evaluates the current Board composition in light of these criteria. Although specific qualifications may vary from time to time, desired qualities and characteristics include:
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– | high ethical character and shared values with AAM; |
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– | high-level leadership experience and achievement at a policy-making level in business, educational or professional activities; |
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– | breadth of knowledge of issues affecting AAM; |
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– | special competencies, such as financial, technical, international business or other expertise, or industry knowledge; |
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– | awareness of a director's vital role in AAM's good corporate citizenship and corporate image; and |
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– | sufficient time and availability to effectively carry out a director's duties. |
The CompensationBoard as a whole should reflect a balance of knowledge, experience, skills, expertise and diversity that, when taken together, will enhance the quality of the Board’s deliberations and decisions.
The Board believes that diversity is an essential element of Board effectiveness. Consistent with this philosophy, the Board is committed to including in each search qualified candidates who reflect diverse backgrounds, including
diversity of gender and race. The Board formalized this commitment to diversity by amending its Corporate Governance Guidelines in February 2019.
Based on shareholder feedback and the Board's focus on Board diversity and refreshment, the Board enhanced the experience, leadership and diversity of the Board with the appointments of Herbert K. Parker and Sandra E. Pierce in November 2018. These appointments were the result of active recruitment of women and minority candidates. Ms. Pierce was identified as a candidate by Mr. Dauch and Mr. Parker was identified by another Board member.
In addition, for incumbent directors, the Nominating/Corporate Governance Committee oversees risks related to AAM’s compensation programs. The Strategy & Technology Committee oversees risks relatedand the full Board consider attendance, past performance on the Board and contributions to the Company's strategic planBoard and AAM’s product, processapplicable committees. These factors also were taken into consideration in nominating Ms. Chappell, Mr. Parker and systems technology. Additional review or reportingMr. Smith for re-election as Class II directors, each with a term expiring on the date of specific risks is conductedthe 2022 annual meeting of stockholders.
Our current Board, comprised of 10 directors, reflects the Board's commitment to identify, evaluate and nominate candidates who possess personal qualities, qualifications, skills, and diversity of backgrounds, and provide a mix of tenures that, when taken together, best serve our company and our shareholders. Diversity in tenure creates a good mix of perspectives. Longer-tenured directors bring a deep understanding of the Company and continuity as appropriate ornew directors join the Board. Newer members bring new perspectives, expertise and diversity as requested by the Board or a committee.is refreshed to address changes in the business over time.
Stockholder EngagementThe current mix of top skills and qualifications of our Board members and key features of the Board's composition are depicted below.
Director Qualifications, Skills and Experience
Board Composition
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Independence | Tenure | Age | Diversity |
90% | 7 | 64 | 30% |
Independent | Average Years of Service | Average Age | Women or Minority |
Communicating with the Board
Our Board and management team value the opinions and feedback of our stockholders,shareholders, and we engage with stockholders throughout the year on a variety of issues, including our executive compensation program and corporate governance. StockholdersShareholders and other interested parties who wish to communicate with us on these or other matters may contact our Investor Relations Department by email at investorrelations@aam.com or by mail at One Dauch Drive, Detroit, Michigan 48211-1198 (corporate address).
StockholdersShareholders or other interested parties may communicate with the Board through the Secretary of AAM by e-mail at AAMBoardofDirectors@aam.com or by mail at the corporate address above. The Board has instructed the Secretary to review all such communications and to exercise his discretion not to forward correspondence to the Board that is inappropriate, such as advertising and business solicitations, routine business matters and personal grievances. However, any director may at any time requestinstruct the Secretary to forward any communication received by the Secretary on behalf of the Board.
Code of Business ConductCorporate Governance and ESG Policies
AAMBecause we believe corporate governance is integral to creating long-term shareholder value, our Board has adopted a Codecompany-wide corporate governance policies, which are periodically reviewed and revised as appropriate to ensure that they reflect the Board's corporate governance objectives.
Please visit the Governance section of Business Conduct that is designedour website (http://investor.aam.com/governance) to assist AAM associates, executive officerslearn more about our corporate governance practices and membersto access the following materials:
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– | Corporate Governance Guidelines |
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– | Code of Ethics for the CEO, CFO and other Senior Financial Executives (Code of Ethics) |
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– | Charters of our Board Committees |
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– | Code of Business Conduct |
A written copy of the Board in conducting AAM’s business with the highest standards of ethics and integrity. AAM has also adopted a Code of Ethics applicable to our CEO, CFO and other Senior Financial Executives (Code of Ethics). The Board annually reviews the Code of Business Conduct and makes updates as appropriate. AAM’s Code of Business Conduct and Code of Ethics are available on our website at http://investor.aam.com. A written copy also may be obtained by any stockholder without charge upon request to the AAM Investor Relations Department by email at investorrelations@aam.com or by mail at our corporate address above.
We recently published our first Sustainability Review, a baseline-setting document, which describes key focus areas of our ESG program. For more information on AAM's ESG program and policies, please visit www.aam.com/Sustainability.
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| Compensation of Directors |
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Compensation of Directors |
The Compensation Committee has authority to develop and recommend to the full Board the compensation policies and programs for non-employee directors. The Committee retains Meridian Compensation Partners LLC (Meridian) to advise when setting non-employee director compensation to ensure it is market-based, aligned with shareholder interests and consistent with our compensation principles.
AAM's compensation program for our non-employee directors is designed to meet the following objectives:
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– | recognize the significant investment of time and expertise required of directors; |
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– | align the directors' interests with the long-term interests of our shareholders; and |
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– | ensure that the compensation of directors is well perceived by our shareholders. |
2018 Annual Retainer and Committee Chair Retainers
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Annual retainer | $ | 110,000 |
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Committee chair annual retainer: | |
Audit Committee chair | 20,000 |
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Compensation Committee chair | 15,000 |
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Other committee chair | 10,000 |
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Lead director annual retainer | 30,000 |
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Non-employee director compensation for 2018 remained unchanged from 2017.
Annual Equity Grant
Non-employee directors serving on the Board on the date of the 2018 annual meeting received a grant of 8,711 restricted stock units (RSUs) with a grant date value of $125,000. The RSUs are payable in stock and vest in one year, unless vesting is accelerated upon death, disability or a change in control. Non-employee directors may elect to defer settlement of the RSUs until after termination of service from the Board.
Director Stock Ownership Guidelines
Our non-employee director stock ownership guidelines provide that each non-employee director should own shares with a value equal to at least five times the director annual cash retainer. Non-employee directors are expected to meet the guidelines within five years from the date of election to the Board or February 2017, whichever is later. For purposes of meeting these guidelines, shares owned directly, deferred RSUs and unvested RSUs are counted. Each non-employee director has met, or is on track to meet, these ownership guidelines. Current stock ownership of non-employee directors is shown in the Beneficial Stock Ownership table.
Anti-hedging and Anti-pledging policy
Non-employee directors are prohibited from entering into transactions that may result in a financial benefit if our stock price declines, or any hedging transaction involving our stock, including the use of financial derivatives, short sales or any similar transactions. Pledging of AAM stock is also prohibited.
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| Compensation of Directors |
Director Compensation Table
Total 2018 compensation of our non-employee directors is shown below.
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Name | Fees Earned or Paid in Cash(1) ($) |
| Stock Awards(2) ($) |
| All Other Compensation(3) ($) |
| Total ($) |
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Elizabeth A. Chappell | 120,000 |
| 125,003 |
| 700 |
| 245,703 |
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William L. Kozyra | 110,000 |
| 125,003 |
| 700 |
| 235,703 |
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Peter D. Lyons | 110,000 |
| 125,003 |
| 800 |
| 235,803 |
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James A. McCaslin | 125,000 |
| 125,003 |
| 600 |
| 250,603 |
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William P. Miller II | 130,000 |
| 125,003 |
| 700 |
| 255,703 |
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Herbert K. Parker(4) | 18,333 |
| — |
| — |
| 18,333 |
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Sandra E. Pierce(4) | 9,167 |
| — |
| — |
| 9,167 |
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John F. Smith | 120,000 |
| 125,003 |
| 700 |
| 245,703 |
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George Thanopoulos(5) | 36,667 |
| — |
| — |
| 36,667 |
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Samuel Valenti III | 140,000 |
| 125,003 |
| 1,400 |
| 266,403 |
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(1) | Fees earned in 2018 for services whether paid currently in cash or deferred. Non-employee directors may elect to defer, on a pre-tax basis, a portion of their retainer and meeting fees and receive tax-deferred earnings (or losses) on the deferrals under AAM’s Executive Deferred Compensation Plan. |
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(2) | Reflects the full grant date fair value of RSUs granted on May 3, 2018 calculated in accordance with FASB ASC 718 (without any reduction for risk of forfeiture) as determined by applying the assumptions used in our financial statements. The grant date fair value of equity awards was calculated using the closing market price of AAM common stock on the grant date ($14.35). See Note 10 to the audited consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2018 for assumptions underlying the valuation of equity awards. |
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(3) | The Company reimburses non-employee directors for travel and related out-of-pocket expenses in connection with attending Board, committee and stockholder meetings. From time to time, the Company invites spouses of non-employee directors to attend Company events associated with these meetings. The Company pays for spousal travel and certain other expenses and reimburses non-employee directors for taxes attributable to the income associated with this benefit. Amounts reflect reimbursement of taxes on this income. |
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(4) | Mr. Parker joined the Board on November 1, 2018 and Ms. Pierce joined the Board on November 23, 2018. |
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(5) | Mr. Thanopoulos resigned from the Board on May 7, 2018. |
As of December 31, 2018, each incumbent non-employee director had the number of outstanding RSUs (including those deferred) shown below. No options were outstanding as of December 31, 2018.
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Name | Restricted Stock Units Outstanding (#) |
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Elizabeth A. Chappell | 60,157 |
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William L. Kozyra | 23,573 |
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Peter D. Lyons | 27,585 |
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James A. McCaslin | 49,057 |
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William P. Miller II | 63,407 |
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Herbert K. Parker (1) | — |
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Sandra E. Pierce (1) | — |
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John F. Smith | 49,057 |
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Samuel Valenti III | 33,044 |
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(1) Mr. Parker and Ms. Pierce did not receive a grant of RSUs.
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| Beneficial Stock Ownership |
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Beneficial Stock Ownership |
The following tables show the number of shares of AAM common stock beneficially owned by:
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– | each person known to us who beneficially owns more than 5% of AAM common stock; |
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– | each of our non-employee directors and nominees as of March 5, 2019; |
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– | each of the named executive officers shown in the Summary Compensation Table; and |
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– | all directors, nominees and executive officers as a group as of March 5, 2019. |
A beneficial owner of stock is a person who has voting power (the power to control voting decisions) or investment power (the power to cause the sale of the stock). All individuals listed below have sole voting and investment power over the shares (unless otherwise noted). The beneficial ownership calculation includes 111,742,180 shares of AAM common stock outstanding on March 5, 2019 (record date).
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| Shares Beneficially Owned |
| Percent of Shares Outstanding |
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Greater Than 5% Owners | | |
Blackrock, Inc.(1) | 16,410,999 |
| 14.70 |
|
55 East 52nd Street | | |
New York, NY 10055 | | |
The Vanguard Group(2) | 11,599,669 |
| 10.38 |
|
100 Vanguard Blvd. | | |
Malvern, PA 19355 | | |
Dimensional Fund Advisors LP(3) | 9,386,258 |
| 8.40 |
|
6300 Bee Cave Road | | |
Austin, TX 78746 | | |
Barrow, Hanley, Mewhinney & Strauss, LLC(4) | 6,146,108 |
| 5.50 |
|
6300 Bee Cave Road | | |
Austin, TX 78746 | | |
| | |
| | |
Non-Employee Directors (5) | | |
Elizabeth A. Chappell | 66,133 |
| * |
|
William L. Kozyra | 27,585 |
| * |
|
Peter D. Lyons | 32,585 |
| * |
|
James A. McCaslin | 57,557 |
| * |
|
William P. Miller II | 74,607 |
| * |
|
Herbert K. Parker | — |
| — |
|
Sandra E. Pierce | — |
| — |
|
John F. Smith | 54,057 |
| * |
|
Samuel Valenti III | 43,044 |
| * |
|
| | |
Named Executive Officers | | |
David C. Dauch(6) | 645,703 |
| * |
|
Christopher J. May | 38,668 |
| * |
|
Michael K. Simonte | 170,349 |
| * |
|
Alberto L. Satine | 34,733 |
| * |
|
Norman Willemse | 62,452 |
| * |
|
All Directors and Executive Officers as a Group (22 persons) | 1,425,508 |
| 1.3 |
|
(*) Less than 1% of the outstanding shares of AAM common stock.
| |
(1) | Based on the Schedule 13G filed on January 24, 2019 by Blackrock, Inc., reporting sole voting power over 16,130,452 shares and sole investment power over 16,410,999 shares. |
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(2) | Based on the Schedule 13G filed on February 11, 2019 by The Vanguard Group, reporting sole voting power over 111,941 shares, sole investment power over 11,487,466, shared voting power over 13,600 shares and shared investment power over 112,203 shares. |
| |
(3) | Based on the Schedule 13G filed on February 8, 2019 by Dimensional Fund Advisors LP, reporting sole voting power over 9,009,327 shares and sole investment power over 9,386,258 shares. |
|
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| Beneficial Stock Ownership |
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(4) | Based on the Schedule 13G filed on February 12, 2019 by Barrow, Hanley, Mewhinney & Strauss, LLC, reporting sole voting power over 4,286,382 shares and shared voting power over 1,859,726 shares and sole investment power over 6,146,108 shares. |
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(5) | Includes vested RSUs awarded to non-employee directors that have been deferred. For the number of RSUs held by each non-employee director, see table included in Compensation of Directors. |
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(6) | Includes 548 shares held in trusts for the benefit of Mr. Dauch’s children. |
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Related Person Transactions Policy |
The Board has adopted a written policy and procedure for the review, approval and ratification of transactions involving AAM and any “related person” as defined in the policy. This policy supplements AAM’s other conflict of interest policies in our Code of Business Conduct. The Audit Committee is responsible for reviewing, approving and ratifying all related person transactions in accordance with the policy and the Audit Committee's charter.transactions.
For purposes of this policy, a related person transaction includes any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships in which AAM is or is expected to be a participant, the amount involved exceeds $120,000, and a related person has or will have a material interest. A related person includes directors and executive officers and their immediate family members, stockholders owning more than five percent of the Company's outstanding common stock as of the last completed fiscal year, and any entity owned or controlled by any one of these persons.
The Audit Committee makes a determination whether a related person's interest in a transaction is material based on a review of the facts and circumstances. In deciding whether to approve or ratify a related person transaction, the Audit Committee will take into account, among other factors it deems appropriate, (1) whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and (2) the significance of the related person's interest in the transaction.
A member of the Audit Committee may not participate in the review or vote concerning any related person transaction in which the Audit Committee member or his or her immediate family member is involved.
The policy also provides that certain types of transactions are deemed to be pre-approved by the Audit Committee and do not require separate approval or ratification. During fiscal year 20152018 and as of the date of this proxy statement, the Company has not engaged in any reportable related person transactions.
Board and Committee Meetings
Directors are expected to attend all Board meetings, meetings of committees on which they serve, and stockholder meetings. Directors are expected to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities. During 2015, the Board held four regularly scheduled meetings and one special meeting. All continuing directors attended 100% of the Board and applicable committee meetings during 2015, except two continuing directors each missed one committee meeting. No director attended less than 75% of required meetings. Overall attendance at such meetings was approximately 99%. All incumbent directors and nominees attended the 2015 annual meeting of stockholders.
The following table shows committee membership as of March 24, 2016 and the number of committee meetings held during 2015.
COMMITTEE MEMBERSHIP AS OF MARCH 24, 2016
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| | | | | |
Name of Director | Audit Committee | Compensation Committee | Nominating/ Corporate Governance Committee | Executive Committee | Strategy & Technology Committee (1) |
David C. Dauch | | | | Chair | X |
Elizabeth A. Chappell | | Chair | X | | X |
Steven B. Hantler | | X | | | X |
William. L. Kozyra | | X | X | | X |
Peter D. Lyons | X | | X | | X |
James A. McCaslin | | X | Chair | X | X |
William P. Miller II | Chair | | | | X |
John F. Smith | X | | | | Chair |
Samuel Valenti III | X | X | X | X | X |
No. of Meetings in 2015 | 5 | 6 | 4 | — | 6 |
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Section 16(a) Beneficial Ownership Reporting Compliance |
(1) The Strategy & Technology Committee was created effective July 30, 2015 as a resultSection 16(a) of the Board's consolidationSecurities Exchange Act of the Strategy Committee1934 requires our directors and Technology Committee. The numberexecutive officers, and persons who own more than 10% of meetings held by each of these committees during 2015 is as follows: Strategy Committee, 3 meetings; Technology Committee, 2 meetings; and Strategy & Technology Committee, 1 meeting. This change in committee structure is discussed in the Strategy & Technology Committee section below.
Audit Committee
The Audit Committee assists the Board in fulfilling its oversight responsibility with respect to:
the quality and integritya registered class of our financial statements;
our complianceequity securities, to file with legal and regulatory requirements;
our independent auditors’ qualifications and independence; and
the performance of our internal audit function and independent auditors.
The Audit Committee's responsibilities are more fully described in its written charter, which is available on AAM’s website at http://investor.aam.com.
All members of the Audit Committee are independent and financially literate under NYSE listing standards and independent under our Director Independence Guidelines. The Board has also determined that Mr. Miller and Mr. Smith are "audit committee financial experts" as defined by the Securities and Exchange Commission (SEC).
Compensation Committee
The Compensation Committee's responsibilities include the following:
establishing initial reports of ownership and reviewing AAM’s compensation philosophy and programs for executive officers;
approving executive officer compensation that is designed to support achievementreports of AAM’s business strategy and objectives while considering competitive market practices and stockholder interests;
approving corporate goals and objectives for executive officer compensation and evaluating executive officer performancechanges in lightownership of our common stock. Based solely on our review of these criteria;reports, and written representations from such reporting persons, we believe that the Section 16(a) filing requirements for such reporting persons were met during 2018.
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| Advisory Vote on Executive Compensation |
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Proposal 2: Advisory vote on Executive Compensation |
AAM is seeking a non-binding advisory vote from our stockholders to approve the compensation of Contents
recommending incentive compensation and equity-based plans to the Board;
overseeing management’s risk assessment of the Company’s policies and practices regarding its compensation programs forour named executive officers and other associates;
recommending non-employee director compensation and benefits to the Board;
overseeing the preparation ofas disclosed in the Compensation Discussion and Analysis (CD&A) for inclusionand narrative and tabular disclosures in our annualthis proxy statement; and
producingstatement. In the Compensation Committee Report for inclusion in our annual proxy statement.
The Compensation Committee's responsibilities are more fully described in its written charter, which is available on our website at http://investor.aam.com.
All Compensation Committee members are independent under NYSE listing standards, including the standards applicable specifically to compensation committee members, and our Director Independence Guidelines. All Compensation Committee members are “outside directors” within the meaningCD&A, we provide a detailed description of Section 162(m) of the Internal Revenue Code and are "non-employee" directors within the meaning of SEC Rule 16b-3.
Risk Assessment of Compensation Policies and Practices
We conducted an annual risk assessment for the Compensation Committee to determine whether the risks arising from our fiscal year 2015 compensation policies and practices are reasonably likely to have a material adverse effect on the Company. The risk assessment considered, among other things, AAM’s annual and long-term incentive programs and pay mix, performance measures used to calculate payouts, and pay philosophy and governance. Our annual assessment of compensation-related risks focuses on the program for executive officers in light of their decision-making authority and influence, but also includes a review of the compensation of our other salaried associates. Our risk assessment methodology was reviewed by the Compensation Committee and its independent compensation consultant, Meridian Compensation Partners, LLC (Meridian).
We have designed our compensation programs, including incentiveour compensation plans,philosophy and objectives, the individual elements of executive pay, and how the programs are administered. We encourage you to review the CD&A, together with specific featuresthe other narrative and tabular disclosures, in considering your advisory vote on our named executive officers’ compensation (say-on-pay).
Pay for Performance Philosophy
AAM is committed to address potential risks while rewardinga compensation philosophy that supports our business strategy and performance, aligns with stockholder interests, and pays competitively. Our compensation programs are designed to balance short-term performance with long-term growth. To align executive officerspay with AAM's performance, a significant amount of our CEO's and other associates for achievingNEOs' compensation is performance based and is at risk.
Our incentive programs utilize both short- and long-term financial metrics that correlate to our strategic business objectives. The Compensation Committee annually reviews performance metrics, targets and strategic objectives through prudentpayouts to ensure that they are challenging stretch goals designed to mitigate risk and align with our budget and long-range planning performance.
Shareholder Engagement
Our Board and management team greatly value the opinions and feedback of our shareholders, which is why we have proactive, ongoing engagement with our shareholders throughout the year focused on corporate governance, executive compensation and corporate responsibility. Most recently, our shareholders expressed support of our overall executive compensation program.
2018 Changes to Executive Compensation Programs
To further align our compensation programs with our business judgmentstrategy and appropriate risk taking. The following elements have been incorporated inmarket practices, we continued to refine our programs for executive officers:by taking the following steps:
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– | We increased the rigor of our annual and long-term compensation targets for awards granted in 2018 and continued this practice to drive management performance at the highest levels. |
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– | We amended the Supplemental Executive Retirement Plan (SERP) and the Executive Deferred Compensation Plan to freeze further benefit accruals and freeze the plans to new participants. |
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– | We adopted a deferred compensation plan, the Executive Retirement Savings Plan which reduces executive retirement benefits as compared to that of the legacy SERP, a defined benefit plan. |
A balanced mix of compensation components. The target compensation mix for our executive officersAlthough your vote on this proposal is composed of base salary, annual cash incentivesadvisory and long-term equity incentives, representing a mix that is not overly weighted toward short-term cash incentives.
Multiple performance factors. Our annual incentivenon-binding, the Board and long-term incentive plans include multiple measures of performance. Our use of various performance factors diversifies the risk associated with any single aspect of performance. The performance factors and target award opportunities are established in advance by the Compensation Committee in consideration ofwill continue to carefully consider the Company's performance goals and objectives and stockholder interests.voting results when making future compensation decisions.
Long-term incentives. Our long-term incentives are 100% equity-based and have a three-year vesting schedule, which complements our annual cash incentive plan. Sixty-six percent of long-term incentive awards to executive officers are performance-based. These awards are capped at a maximum payout.
Stock ownership requirements. Our executive officers are required to maintain significant share ownership, which aligns their interests with those of our stockholders.Clawback policy. Our clawback policy authorizes the Compensation Committee to recoup past incentive compensation in the event of a material restatement of the Company's financial results due to fraud or intentional misconduct of an executive officer. |
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þ | The Board unanimously recommends a vote FOR the approval of the compensation of our named executive officers. |
Based on our risk assessment and consideration of various mitigating factors, we concluded that the Company’s compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
Role of Management in Compensation Decisions
The Compensation Committee is responsible for making compensation decisions relative to executive officers. In making these decisions, the Compensation Committee seeks and considers input from senior management. Since management has direct involvement with and in-depth knowledge of the business strategy, goals and performance of the Company, certain executive officers play an important role in the executive compensation decision-making process. Senior management participates in the Compensation Committee’s activities in the following specific respects:
The CEO provides the Compensation Committee with his evaluation of the performance of the Company’s executive officers, including the other named executive officers (NEOs). The CEO and Vice President, Human Resources make compensation recommendations for executive officers, including base salary levels and the amount and mix of incentive awards.
The CEO, Vice President & CFO and the Vice President, Human Resources develop and recommend performance objectives and targets for AAM’s incentive compensation programs. |
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| Compensation Discussion and Analysis |
The Vice President, Human Resources assists the Chair of the Compensation Committee in developing meeting agendas and oversees the preparation of meeting materials on the matters to be considered.
The CEO, President, Vice President & CFO, the Vice President, Human Resources and the General Counsel, Secretary & Chief Compliance Officer regularly attend Compensation Committee meetings. Management does not attend the executive session of the Compensation Committee.Role of Compensation Consultant
The Compensation Committee has retained Meridian as its independent compensation consultant. Meridian provides the Compensation Committee with independent advice and ongoing recommendations on compensation matters related to our executive officers and non-employee directors. Meridian also provides the Compensation Committee with competitive market data, peer group analyses and updates on compensation trends and regulatory developments.
In the course of fulfilling its responsibilities, Meridian may communicate directly with the Chair of the Compensation Committee. Meridian also meets with management to gather information, prepare materials, and review proposals to be made to the Compensation Committee. Meridian provides no other services to the Company other than those described above has no other direct or indirect business relationships with the Company or any of its subsidiaries or affiliates.
The Compensation Committee determined that Meridian is independent of management and that the services provided by Meridian to the Compensation Committee do not give rise to any conflicts of interest. In written correspondence to the Compensation Committee, Meridian provided detailed information addressing each of the six independence factors set forth in NYSE listing standards. In this correspondence and in communications with the Compensation Committee, Meridian affirmed its independence and that of its partners, consultants and employees who service the Compensation Committee on executive compensation matters.
Nominating/Corporate Governance Committee
The Nominating/Corporate Governance Committee’s primary responsibilities are to:
identify qualified individuals to serve on the Board and committees;
review our Corporate Governance Guidelines and Code of Business Conduct and recommend changes as appropriate; and
oversee and approve the process for succession planning for the CEO and other executive officers.
The Nominating/Corporate Governance Committee's responsibilities are more fully described in its written charter, which is available on our website at http://investor.aam.com. All members of the Nominating/Corporate Governance Committee are independent under NYSE listing standards and our Director Independence Guidelines.
Selection Process for Director Nominees. In consultation with the Chairman & CEO, the Nominating/Corporate Governance Committee identifies, evaluates and recommends potential candidates for membership on the Board. This committee conducts inquiries into the backgrounds and qualifications of the candidates and considers questions of independence and possible conflicts of interest. Based on the committee’s evaluation, candidates who meet the Board’s criteria may receive further consideration, which may include interviews with the committee and other directors. The committee then submits its recommendations for nominees to the Board for approval.
Before the Board nominates an incumbent director for re-election by our stockholders, the incumbent director is evaluated by the Nominating/Corporate Governance Committee and/or the Board. This evaluation is based on, among other things, each incumbent director’s contributions to the activities of the Board. After consideration of each incumbent Class II director's qualifications and independence, the committee recommended that the Board nominate Ms. Chappell and Mr. Smith for re-election as Class II directors, each with a term expiring on the date of the 2019 annual meeting of stockholders. Upon review, the Board decided to recommend Ms. Chappell and Mr. Smith for re-election at the 2016 annual meeting of stockholders.
Pursuant to AAM's by-laws, the Board may establish the size of the board by resolution, provided there is a minimum of three members. In February 2016, the Board determined that the Board shall consist of eight directors as of the date of the 2016 annual meeting.
Director Qualifications. AAM’s Corporate Governance Guidelines provide the qualifications for Board membership. Candidates for director nominees to the Board are reviewed in consideration of the current composition of the Board, the operating requirements of the Company and the interests of stockholders. Although specific qualifications may vary from time to time, desired qualities and characteristics include:
high ethical character and shared values with AAM;
high-level leadership experience and achievement at a policy-making level in business, educational or professional activities;
breadth of knowledge of issues affecting AAM;
the ability to contribute special competencies to Board activities, such as financial, technical, international business or other expertise, or industry knowledge;
awareness of a director's vital role in AAM's good corporate citizenship and corporate image; and
sufficient time and availability to effectively carry out a director's duties.
The Board as a whole should reflect the appropriate balance of knowledge, experience, skills, expertise and diversity that, when taken together, will enhance the quality of the Board’s deliberations and decisions. Although the Board has no formal policy regarding diversity, the Board believes that diversity is an essential element of Board effectiveness. In this context, diversity is defined broadly to include differences in background, skills, education, experience, gender, race, national origin and culture.
The Nominating/Corporate Governance Committee considers recommendations of potential candidates from members of our Board, our Chairman & CEO and our stockholders. For director candidates recommended by stockholders, the Nominating/Corporate Governance Committee follows the procedures described below in Other Matters, Stockholder Proposals for 2017 Annual Meeting. The committee will evaluate candidates recommended by stockholders using substantially the same criteria that are considered in evaluating director candidates recommended by our Board members or Chairman & CEO.
Succession Planning. The Nominating/Corporate Governance Committee is responsible for overseeing the Company’s succession planning process for executive officers and other key executive positions at AAM. In performing this role, this committee monitors and approves management’s succession planning process and actions and, with respect to the CEO, makes recommendations to the full Board for approval. The Board has primary responsibility for CEO succession planning and develops both long-term and contingency plans for CEO succession. The Company’s long-term and ongoing succession planning program is designed to support effective senior leadership development and succession in a manner that positions AAM to achieve its strategic, operating and financial performance goals, and enhance stockholder value.
Strategy & Technology Committee
In July 2015, the Board made a key change to its committee structure. By consolidating the Technology Committee and Strategy Committee, the Board created a new Strategy & Technology Committee and appointed all Board members to serve on this committee. This structural change reflects the Board's focus on product, process and systems technologies as an integral part of AAM's business growth strategy.
Effective July 30, 2015, the Strategy & Technology Committee assumed responsibility for the combined duties of the previously separate Technology Committee (formed in 2004) and Strategy Committee (formed in 2012). Accordingly, the Strategy & Technology Committee oversees the development and implementation of AAM’s strategic plan and provides advice to management regarding specific strategic opportunities. This committee also provides oversight and advice to management regarding product, process and systems technologies. Coordination of AAM's strategic plan with the development and acquisition of new technologies is a primary objective of this new committee. In addition, the committee conducts an interactive strategic planning process with management, which includes the committee's approval of strategic goals and objectives and review of potential corporate acquisitions, divestitures, joint ventures and strategic alliances.
Executive Committee
The Executive Committee exercises the authority of the Board during the intervals between Board meetings and does not meet on a regular basis.
COMPENSATION OF EXECUTIVE OFFICERS
Compensation Discussion and Analysis
Executive Summary |
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Compensation Discussion and Analysis |
Our executive compensation program reflects an externally competitive compensation structure based on a market study of executive compensation programs in AAM's comparative peer group. In addition to attracting and retaining key executives, our program is designed to drive Companyattract, motivate and individual performance while aligningretain high quality leaders that are necessary to manage a company of AAM's size and complexity. In designing our executive compensation program, the Compensation Committee (Committee) strives to align the incentives of our named executive officers (NEOs) with the interests of our executives with thoseshareholders by using performance metrics and challenging goals that tie directly to our business strategy. We believe consistent execution of our stockholders. In order to ensure thatstrategy will drive long-term value creation.
The Compensation Discussion and Analysis (CD&A) provides a description of our executive compensation program drivesprograms, including the Committee's underlying philosophy and decision-making process, components of compensation, and the relationship between AAM's performance and the compensation earned by our NEOs in support of our strategic principles and cultural values, we regularly compare our compensation practices and governance against market best practices and consider stockholder feedback.
Named Executive Officers
2018. Our NEOs for the fiscal year ending December 31, 2015 are:
David C. Dauch, Chairman & Chief Executive Officer;
Christopher J. May, Vice President & Chief Financial Officer;
Michael K. Simonte, President;
Alberto L. Satine, President Driveline;
Norman Willemse, President Metal Formed Products; and
Terry J. Woychowski, Former Senior Vice President, Advanced Engineering.
Mr. Woychowski's employment with the Company ended effective December 9, 2015. Mr. Woychowski is included as an NEO pursuant to SEC rules. The terms of Mr. Woychowski's separation from the Company2018 are described below in the Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table.
2015 Highlights
Senior Leadership
During 2015, the Board made executive officer appointments that enhance AAM's senior leadership team and reflect our ongoing commitment to succession planning. These key appointments were made effective August 1, 2015.shown below.
Mr. Simonte: Mr. Simonte, who was promoted to President, has been with AAM for 17 years, most recently serving as Executive Vice President & Chief Financial Officer since 2009. Mr. Simonte served as the Company's Chief Financial Officer since 2006. Mr. Simonte reports to Mr. Dauch.
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Named Executive Officers |
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David C. Dauch Chairman & Chief Executive Officer |
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Christopher J. May Vice President & Chief Financial Officer |
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Michael K. Simonte President |
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Alberto L. Satine President Electrification (title at 12/31/18) |
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Norman Willemse President Metal Forming |
Mr. May: Mr. May, who was promoted to Vice President & Chief Financial Officer, has been with AAM for over 21 years, most recently serving as Treasurer since 2011. Mr. May has held positions of increasing responsibility in corporate finance, internal audit and treasury during his career with AAM. Mr. May reports to Mr. Dauch.Mr. Satine and Mr. Willemse: The senior leadership team was also strengthened with the advancements of Mr. Satine, who was promoted to President, Driveline (most recently serving as Senior Vice President, Driveline Business Unit) and Mr. Willemse, who was promoted to President, Metal Formed Products (most recently serving as Vice President, Metal Formed Products Business Unit). Both Mr. Satine and Mr. Willemse joined AAM in 2001 and have served in leadership positions of increasing responsibility over AAM's global operations. Mr. Satine and Mr. Willemse each report to Mr. Simonte.
The Board believes these enhancements to AAM's leadership team further position AAM to meet its strategic business objectives and reinforce AAM's commitment to quality, technology leadership and operational excellence.
Performance and Pay
AAM had an outstanding year in 2015, achieving record sales and gross profit for the year. Strong sales growth, which outpaced the industry for the three-year period ending 2015, and solid operational performance resulted in increased profitability and cash flow. AAM also made measurable progress in diversifying our business. For the three-year period ending 2015, AAM's compound annual growth rate was nearly 20% for non-General Motors sales.
As discussed in more detail below, improvements in the Company's performance in 2015 resulted in higher incentive payouts as compared to 2014 payouts. The 2015 incentive payouts reflect an overall pay-for-
performance alignment. This result supports AAM's compensation objectives of rewarding performance and aligning the interests of our executive officers with those of our stockholders.
Changes to Executive Compensation Program
In 2015, we made the following key changes to our executive compensation program:
Adopted a change in control (CIC) Plan for executive officers. The CIC Plan provides eligible executive officers with severance benefits only if a qualifying termination of employment occurs within two years of a CIC (double-trigger). Severance benefits under the CIC Plan include, among other things, a cash severance payment equal to a multiple of two times base salary and annual bonus. We adopted this arrangement to reflect the competitive market practice, aid in retention and enable our executive officers to objectively consider corporate transactions that could impact their employment status. Mr. Dauch and Mr. Simonte are entitled to similar CIC severance benefits under each of their employment agreements.
Entered into an amended and restated employment agreement with Mr. Dauch that increased cash severance benefits from two times to three times his annual salary and bonus that would be payable upon a qualifying termination of employment that occurs within two years following a CIC. Mr. Dauch's cash severance benefits were increased to reflect competitive market practice.
Entered into an employment agreement with Mr. Simonte on August 1, 2015 in connection with his appointment as President.
Adopted double-trigger vesting of all equity-based long-term incentive awards in connection with a CIC to reflect best practice.
Amended and restated our 2012 Omnibus Incentive Plan to add 2.1 million shares (approved by our stockholders for issuance under the plan), which will permit us to continue to grant equity compensation to our directors, executive officers and other key executives while maintaining dilution levels within industry practice.
Amended our annual incentive plan to include operating income margin as an additional performance metric for determining payouts to executive officers beginning in 2016. Operating income margin is a key metric that reflects our overall business results. We believe investors consider operating income margin as a factor in evaluating Company performance.
Results of 2015 Say-on-Pay Vote
At our 2015 annual meeting, over 98% of the votes cast were in favor of the Company's say-on-pay proposal. The Compensation Committee (Committee) and the Board considered this favorable outcome as a reflection of our stockholders' strong support of the overall executive compensation program for our NEOs.
What we do....
Emphasize performance-based compensation
A substantial majority of total direct compensation is variable and at risk
Mix of annual and long-term incentives balances the focus between achievement of short-term results and long-term share appreciation
Annual incentive payouts are directly linked to achievement of short-term financial measures
Long-term incentive compensation is 66% performance based
Long-term incentives are designed to drive the Company's long-term success, profitability and growth
Use an independent compensation consultant and peer group analysis
Independent compensation consultant annually performs market study of pay and best practices
Compensation consultant provides independent advice to the Compensation Committee
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• | Compensation Discussion and Analysis |
2018 Financial and Performance Highlights
By the end of 2018, we reached a record $7.27 billion in sales on the strength in our core markets and key product segments. We also generated $1.18 billion in Adjusted EBITDA and achieved a record-setting $772 million in cash from operations.
2018 Achievements
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þ | Delivered on our key strategic objectives of profitable growth, diversification, outstanding financial performance, and technology leadership. | þ | Strong cash flow generation and over $200 million in senior debt payments |
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þ | Formed joint venture with Liuzhou Wuling in China | þ | Recognized as a Fortune 500 Company |
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þ | Total direct compensation targeted at 50QUANTUMTM technology wins Altair and SAA Lightweighting Awards
| þ | Met key integration milestones, including synergy attainment from recent acquisitions |
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þ | 5th percentilenew business award for our EcoTrac® disconnecting all-wheel-drive technology | þ | Named GM Supplier of pay among our peer groupthe Year for 2nd consecutive year |
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þ | Continued to fund significant capital and R&D investments in order to drive organic growth to meet our strategic goals | þ | Sold Aftermarket division of our Powertrain Business Unit for $50 million |
Mitigate undue risk in compensation programs
All incentive award payouts are cappedA risk assessment of compensation programs is performed annually |
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| Compensation Discussion and Analysis |
Clawback policy ensures accountability
Enforce stock ownership requirements for executive officers
CEO stock ownership requirements are 5 times annual base salary
Other NEO stock ownership requirements are 2 to 3 times annual base salary
Utilize double-trigger change-in-control plan
Severance payments and vesting of equity awards require both a change in control and a qualifying termination of employment
What we don't do....
No hedging or pledging of Company stock
No excise tax gross-ups
No excessive perquisites
No excessive change-in-control or executive severance provisions
Executive Compensation Philosophy andHighlights
Compensation Program Metrics Link to Strategic Business Objectives
The Committee determines the overall compensation philosophy of the Company. The Committee believes that the compensation paid to executives should be structured to provide AAM executives with meaningful rewards, while maintaining alignment with stockholder interests, our cultural values and strategic principles. Accordingly, AAM’s executive compensation program consists of a mix of base salary, annual incentive compensationutilizes both short- and long-term incentive compensation, with limited perquisites and other personal benefits. A significant portion of total direct compensation is performance-based and contingent upon the achievement of stated Company performance goals.
Compensation Objectives. The following objectives are considered in determining compensation programs and pay levels for our NEOs.
Compensation and benefit programs should attract, motivate and retain experienced executives who are vitalfinancial metrics relative to our short-term and long-term success, profitability and growth. AAM makes an effort to remain competitive by targeting pay levels of our comparative peer group while considering industry conditions and other market influences. Our compensation programs should encourage high-achieving, marketable executives to remain motivated and committed to AAM for long and productive careers.
Compensation and benefit programs should reward Company and individual performance. Our compensation programs strive to deliver competitive compensation for exceptional individual and Company performance as compared to companies in our comparative peer group. As executives progress to higher level leadership positions, a greater portion of their compensation is linked to Company performance measured against financial and operationalbusiness objectives, and to stockholder returns.
Compensation and benefit programs should foster the long-term focus required to deliver value to our stockholders. Our long-term incentive compensation program motivates executive officers to achieve our strategic objectives and deliver long-term value creation to our stockholders. Executive officers who influence long-term results have a greater proportion of their compensation tied to long-term performance.
Total compensation opportunities should reflect each executive’s level of responsibility and contribution to AAM. While the overall structure of compensation and benefit programs should be broadly similar across the Company, individual pay levels and benefit packages will reflect differences in job responsibilities, geography and marketplace considerations.
Stock ownership requirements for executive officers should align their interests with those of our stockholders. Our stock ownership requirements align our executive officers’ interests with those of stockholders and reinforce the importance of making sound long-term decisions. AAM’s executive officers are required to maintain a certain level of stock ownership based on their position.
Peer Group and Compensation Benchmarking
Determination of Comparative Peer Group
The Committee uses a comparative peer group in determining competitive pay levels and compensation structure, setting incentive pay opportunities and assessing Company performance relative to its peers in support of AAM's executive compensation philosophy and objectives. The Committee annually reviews the composition of the comparative peer group and makes adjustments to reflect changes in the Company's business as well as industry and market conditions.relative total shareholder return (TSR) as a long-term incentive (LTI) metric. The following chart demonstrates how our incentive compensation metrics correlate to our strategic business objectives.
Our current comparative peer group consists of the following companies: |
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A. O. Smith CorporationStrategic Business Objective | Flowserve CorporationAlignment | Tower International Inc. |
BorgWarner Inc. *
| Kennametal Inc. | Trinity Industries, Inc. |
Briggs & Stratton | Lear Corporation *
| USG Corporation |
Cooper-Standard Holdings, Inc. | Meritor Inc. *
| Valmont Industries, Inc. |
Dana Holding Corporation *
| Regal-Beloit Corporation | Visteon Corporation *
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Donaldson Company, Inc. | Tenneco Automotive Inc. *
| Woodward Inc. |
Federal-Mogul Corporation | Terex Corporation | Incentive Metric |
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* Included in our competitor peer group as disclosed in our 2015 annual reportContinue to shareholders.strengthen the balance sheet; provide funding for organic growth, research and development, and other capital priorities | | Free Cash Flow - 2018 LTI Performance Shares (50% metric of performance-based LTI) |
Our competitor peer group also includes Autoliv Inc. | |
Develop innovative technology, including electrification. Reinvest in research and Magna International Inc.development. | Relative TSR - 2018 LTI Performance Shares (50% metric of performance-based LTI) |
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Create sustainable value for shareholders |
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Achieve profitable growth, along with the ability to be flexible as the market changes, and reduce leverage | EBITDA - 2018 Annual Incentive Program (100% metric)
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Deliver integration synergies from recent acquisitions |
Goal Rigor
The Committee annually reviews performance metrics, targets and payouts to ensure that they are challenging, stretch goals that are aligned with our strategy and long-range plan and are also designed to mitigate risk.
The incentive metrics selected by the Committee in 2018 focused on the importance of EBITDA performance for the annual incentive and free cash flow and relative TSR, weighted equally, for the LTI awards.
Significantly, the Committee increased the rigor of our annual and long-term compensation targets for awards granted in 2018. The impact of this peer groupgoal rigor is reflected in the 2018 annual incentive award payout. Although AAM achieved record-setting adjusted EBITDA performance in 2018, our NEOs received a below-target payout based on guidance from the Committee's independentstretch goals set by the Committee.
2018 Changes to Executive Compensation Programs
AAM is committed to engaging in constructive and meaningful communications with our shareholders. We received a favorable vote of 97% for our say-on-pay proposal in 2018. We believe this outcome reflects our responsiveness to shareholder feedback relating to executive compensation. More recently, our shareholders continued to express support of our overall executive compensation consultant, Meridian Compensation Partners, LLC (Meridian). Our comparative peer group includes companies in automotiveprogram and related industriesthe alignment of our incentive compensation goals with comparable (1) revenues (between one-third and three times our revenues), (2) complexity of globalthe Company's overall business and operations and (3) market capitalization. This group also includes companies that compete with AAM for executive talent and companies included in the proxy advisory firms' peer groups. AAM's projected revenues are at approximately the medianstrategy. In consideration of the comparative peer group's projected revenues.feedback we continued to receive from our shareholders and prevailing market practices among our peers, we continued to refine our programs.
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– | We increased the rigor of our annual and LTI compensation targets for awards granted in 2018 and continued this practice to drive management performance at the highest levels. |
Compensation Benchmarking |
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| Compensation Discussion and Analysis |
The Committee targets total direct compensation at approximately the 50th percentile of our comparative peer group. The Committee believes that this approach reflects a generally accepted benchmark of external competitiveness and supports our ability to attract and retain key executives.
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– | In April 2018, AAM amended the Supplemental Executive Retirement Plan (SERP) and the Executive Deferred Compensation Plan to freeze further benefit accruals and freeze the plans to new participants. At the same time, and to further align our benefit programs with prevailing market practices, AAM adopted the Executive Retirement Savings Plan (ERSP) to become effective January 1, 2019. The ERSP, a deferred compensation plan, reduces executive retirement benefits and provides cost savings to the Company as compared to the legacy SERP, a defined benefit plan. |
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– | In April 2018, AAM adopted the Executive Officer Severance Plan (Severance Plan) in order to provide severance other than in a change in control to executive officers with the purpose of retaining our executives and allowing them to focus on our business strategy. In addition, AAM amended its employment agreements with Mr. Dauch and Mr. Simonte to align severance payable under their employment agreements with the Severance Plan. |
Pay for Performance Alignment
Total direct compensation consists of base salary plus target annual and long-term incentive compensation. Total direct compensation for each NEO may be above or below the 50th percentile of our comparative peer group based on various factors, including an individual's level of responsibility, demonstrated skills and experience, significance of position, contribution to Company performance, time in position, potential for advancement and internal pay equity considerations. The Committee generally sets performance objectives for annual and long-term incentive compensation so that targeted total direct compensation levels can be achieved only when target performance objectives are met. Consequently, actual pay may vary from targeted levels based on achieved performance against pre-established performance objectives.
Tally Sheets
Annually, the Committee reviews compensation tally sheets for each executive officer, including the NEOs. The tally sheets, which are prepared by management, provide a summary of the current amounts of each component of pay and a history of prior long-term incentive grants. The tally sheets also show estimates of potential payments and benefits that could be realized under various hypothetical termination scenarios. The tally sheets consist of information that is substantially similar to the information shown for each NEO in Potential Payments Upon Termination or Change in Control below. The Committee did not change the NEOs’ compensation based on its review of this information in 2015.
Total NEO Total Direct Compensation Pay Mix
The following chart illustrates the allocation of 20152018 total direct compensation components at target for our CEO and for our other NEOs (average) as a group as of December 31, 2015.2018. This analysis highlights the Company's emphasis on long-term and at-risk compensation.
Total NEO
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| Compensation Discussion and Analysis |
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Compensation of Executive Officers |
Executive Compensation Philosophy
For 2015,AAM is committed to a compensation philosophy that supports our business strategy and performance, aligns with stockholder interests, and pays competitively. |
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| Supports Business Strategy | Market Competitive | Aligned with Shareholder Interests |
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| – 86% of CEO compensation is variable and at risk– Rigorous performance goals as key drivers of enterprise value creation such as EBITDA, relative TSR and cash flow– Programs utilize metrics that emphasize company performance and are aligned with business strategy | – Attract and retain executive talent– Benchmark pay against a peer group of similarly sized companies– Target direct compensation at the 50th percentile– Ensure incentive plans reward for desired behaviors and pay outcomes align with results | – Mix of annual and long-term incentive programs balances focus between short-term results and long-term share appreciation– 66% of LTI is performance-based– Cap on payout of performance shares based on relative TSR if absolute TSR is negative– CEO stock ownership requirement of 6 times base salary |
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The foundation of our philosophy is a best practice approach to compensation governance that includes a clawback policy, an anti-hedging policy, an annual risk assessment of compensation programs and practices, double-trigger equity vesting and severance provisions, and the Committee set total direct compensation for Mr. Dauch and Mr. Simonte at approximately the 50thpercentileexclusion of the peer group. At the time of Mr. May's appointment as CFO, the Committee set his total direct compensation below the 50th percentile, subject to further review in 2016. The levels of total direct compensation for Mr. Satine and Mr. Willemse were determined in consideration of internal pay equity based on their positions. Accordingly, total direct compensation was set below the 50th percentile of the peer group for Mr. Satine and above the 50th percentile for Mr. Willemse.excise tax gross-ups.
Components of the AAM Compensation Program
The primary components of AAM’s executive compensation program for 2015 are summarized below:below.
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Component | Key Purpose | Characteristics |
Purpose | | |
Base Salary | * PartBased on level of competitive total compensation package
* Determined based on market comparative positions andresponsibility, experience, individual performance experience, time in position, professional development, contributions to the Company and internal pay equity considerations
| * Provides base level ofFixed cash compensation for attracting and retaining executive talentcomponent generally targeted at the peer group median |
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Annual Incentive Compensation | * Determined based on pre-established financialIncentive to drive short-term performance factors, including:
- Net income as a %aligned with strategic goals
| Cash award that is at-risk subject to the attainment of sales (50%) and- Net operating cash flow (50%) performance targets |
| * Provides an opportunity to earn a cash-based annual incentive award
* Aligns with financial performance
* Target awards vary based on position and other factors
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Long-Term Incentive Compensation | Incentive to drive long-term financial and strategic growth that creates shareholder value and supports retention of executives | |
Awarded in a combination of Performance Shares (66%) | * Performance Shares tie a substantial portion of total compensation to the Company's future achievement of pre-established performance goals over a three-year performance period, including:
- EBITDA (33% and RSUs (34%)
- Relative TSR (33%)
| * Aligns the interests of executive officers with those of shareholders by providing a mix of equity compensation tied to financial and share performance
* Combined with the Company's vesting and stock ownership requirements, as well as a clawback feature, equity-based awards balance the goals of encouraging that drive sustainable results over time and reward those results with appropriate levels of actual compensation
* Total target awards vary based on position and other factorsshareholder value |
Restricted Stock Units (34%) | * Restricted Stock Units align awards with stock price performance and encourage executive retention with vesting after a three-year period | |
Retirement Benefits and Deferred Compensation | * Includes qualifiedProvide income upon retirement | 401(k) and nonqualified defined benefit and defined contribution plans, as well as a nonqualified retirement plan and deferred compensation planplans |
| * Provides income upon retirement including tax-deferred methods for general savings | |
Perquisites | * Primarily consists of the use of a Company-provided vehicle with AAM content | * Provides a limitedLimited supplement to total direct compensation | Primary benefit is company-provided vehicles with AAM content |
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| Compensation Discussion and Analysis |
Decision-Making Process
Comprised solely of Contents
Base Salary.independent, non-employee directors, the Compensation Committee oversees the compensation and benefits programs for our executive officers, including the NEOs. In the fourth quarterits oversight of each year,our 2018 executive compensation program, the Committee reviews base salaries for executiveworked with its independent compensation consultant, and with the CEO, the President, the CFO, and the Vice President, Human Resources. The CEO and the other officers provided information and recommendations with respect to:
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– | Company performance objectives and goals, which serve as a basis for incentive compensation; |
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– | attracting, retaining and motivating executive officers; |
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– | information regarding financial performance, budgets and forecasts as they pertain to compensation; and |
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– | industry and market conditions affecting AAM's business strategy. |
Based on the recommendation of the Committee, the Board exercises its judgment to approve the compensation for the following calendar year. In determining 2015 base salaries forCEO. For all other executive officers, the Committee reviewed benchmark data comparingconsiders the CEO's recommendation for setting compensation levels. The compensation approved for the CEO and other executives is aligned with the Company's overall compensation philosophy. For 2018, the Committee made pay levelsdecisions based on a market analysis, Company performance and specific factors about each NEO, including individual performance, experience, internal equity, scope and responsibility of position, retention and other factors described in more detail below.
Role of the Compensation Consultant
The Committee has retained Meridian Compensation Partners LLC (Meridian) as its independent compensation consultant. Meridian provides the Committee with independent advice and ongoing recommendations on compensation matters related to our executive officers and non-employee directors. Meridian provides the Committee with thosecompetitive market data, peer group analyses and updates on compensation trends and regulatory developments. Meridian also worked with the Company in evaluating its incentive programs and the selection of executives holding similar positions at companiesperformance measures in response to shareholder feedback.
In the course of fulfilling its responsibilities, Meridian frequently communicates with the Chair of the Committee both prior to and following Committee meetings. Meridian also meets with management to gather information, prepare materials and review proposals to be made to the Committee. Meridian provides no other services to the Company and has no other direct or indirect business relationships with AAM or any of its subsidiaries or affiliates. Based on information provided by Meridian, the Committee assessed Meridian's independence pursuant to NYSE and SEC rules and concluded that no conflict of interest exists that prevents Meridian from independently advising the Committee.
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| Compensation Discussion and Analysis |
Peer Group and Market Analysis
The Committee annually reviews the composition of our comparative peer group. group and makes adjustments to reflect changes in our business, as well as industry and market conditions. The overall purpose of this peer group is to provide a market frame of reference for evaluating our compensation arrangements, understanding compensation trends among comparable companies and reviewing other compensation and governance-related topics. The companies are selected primarily based on the following criteria:
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– | total revenue and market capitalization; |
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– | competitors in industry segment; |
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– | complexity of global business and operations; and |
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– | competition for talent and investor capital. |
The Committee consideredchanged the recommendationscomparative peer group to benchmark executive 2018 and 2019 compensation. AAM's revenues are at approximately the median of Mr. Dauchthe comparative peer revenues. The comparative peer group from 2017 to 2019 is shown below.
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| 2017 Peers | | 2017 to 2018 Changes | | 2018 Peers | | 2018 to 2019 Changes |
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| Ametek Inc. Aptiv PLC BorgWarner Inc. Cooper-Standard Holdings Inc. Cummins Inc. Dana Incorporated Dover Corporation Federal-Mogul Corporation Flowserve Corporation Fluor Corp. Goodyear Tire & Rubber Company Lear Corporation Meritor, Inc. Illinois Tool Works Inc. Navistar International Corporation PACCAR Inc Parker-Hannifin Corporation Rockwell Automation Tenneco Inc. Terex Corporation Trinity Industries, Inc. Visteon Corporation | | ADDITIONS | | Ametek Inc. Aptiv PLC BorgWarner Inc. Cooper-Standard Holdings Inc. Cummins Inc. Dana Incorporated Dover Corporation Flowserve Corporation Fluor Corp. Goodyear Tire & Rubber Company Lear Corporation Meritor, Inc. Navistar International Corporation PACCAR Inc Parker-Hannifin Corporation Rockwell Automation Tenneco Inc. Terex Corporation Trinity Industries, Inc. Visteon Corporation | | ADDITIONS |
| | | | | More closely aligned with the size and complexity of our business, our industry and competition for talent Adient plc Cooper Tire & Rubber Company Delphi Technologies Oshkosh Corporation |
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| À | No additions for 2018 | u | À |
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| | REMOVAL | | | REMOVAL |
| | Federal-Mogul Corporation - Acquired by Tenneco
Illinois Tool Works Inc. - Removed due to size | | | No longer aligned with our size and business operations
Ametek Inc. Cummins Inc. Dover Corporation Fluor Corp. PACCAR Inc.
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| Compensation Discussion and Analysis |
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Direct Compensation Elements |
Base Salary
In determining salary levels for each of our NEOs, the Committee considers factors such as financial and operational performance, leadership, development, time in determining other NEO base salaries.position, internal equity and potential. The Committee approved 2015also considers each NEO's current base salary as compared to the salary range and median salary practices of our peer group.
The Committee determined that base salaries for the CEO and the NEOs (other than Mr. May) would remain unchanged for 2018. The Committee decided to increase Mr. May's 2018 base salary in consideration of his pay level relative to the market median. NEO base salaries as follows:of December 31, 2018 and 2017 are shown below. |
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| | Base Salary |
| | 2015 | | 2014 |
David C. Dauch | | $ | 1,150,000 |
| | $ | 1,100,000 |
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Christopher J. May (effective August 1, 2015) | | $ | 350,000 |
| | NA |
Michael K. Simonte (effective August 1, 2015) | | $ | 640,000 |
| | $ | 560,100 |
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Alberto L. Satine (effective August 1, 2015) | | $ | 510,000 |
| | $ | 450,000 |
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Norman Willemse (effective August 1, 2015) | | $ | 450,000 |
| | $ | 385,000 |
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Terry J. Woychowski (through December 9, 2015) | | $ | 463,500 |
| | $ | 463,500 |
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| | 2018 |
| | 2017 |
| % Change |
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David C. Dauch | | $ | 1,150,000 |
| | $ | 1,150,000 |
| — | % |
Christopher J. May | | $ | 550,000 |
| | $ | 500,000 |
| 10 | % |
Michael K. Simonte | | $ | 750,000 |
| | $ | 750,000 |
| — | % |
Alberto L. Satine | | $ | 610,000 |
| | $ | 610,000 |
| — | % |
Norman Willemse | | $ | 530,000 |
| | $ | 530,000 |
| — | % |
The Committee determined that base salaries for the CEO and the NEOs (other than Mr. Dauch'sWillemse) will also remain unchanged for 2019. The Committee decided to increase Mr. Willemse's 2019 base salary was adjusted to $1,150,000$575,000 effective January 1, 2015. The Committee approved this increase of 4.5%16, 2019 in consideration of the growth of the Metal Forming business unit as a result of the realignment of the Company's financial performance and Mr. Dauch's leadership in strengthening AAM's management team and advancing product technology and innovation.
For Mr. May, the Committee determined his base salary upon his appointment as CFO on August 1, 2015. The Committee initially set Mr. May's salary below the 50th percentile based on Mr. May being new to the CFO position. The Committee made this determination subject to further review in 2016. In connection with their new appointments, other NEOs received base salary increases as follows: Mr. Simonte, 11%; Mr. Satine, 10%; and Mr. Willemse, 10%. Mr. Simonte and Mr. Satine also received an annual merit increase of 3%, which is consistent with the budgeted amount for the merit program for U.S. salaried associates. Mr. Willemse also received a 6.5% increase, which reflects the annual merit increase and an adjustment for internal pay equity as discussed above.business units. The Summary Compensation Table shows the base salary earned in 20152018 for each NEO.
Incentive Compensation
Annual Incentive Compensation.
Each NEO's annual incentive compensation is based on achieved results against pre-established financial targets approved by the Committee and established under AAM’sthe AAM Incentive Compensation PlanProgram for Executive Officers. Payment of annual cash incentive awards areis permitted to the extent the Company meets or exceeds threshold performance levels and reports positive net income.levels.
During shareholder outreach, shareholders expressed support of the Committee's efforts to align performance measures with our business strategy. The Committee may make discretionary adjustments if it determinesconsidered this feedback in selecting absolute EBITDA dollars as the sole metric for determining 2018 annual incentive payouts. Strong EBITDA performance positions AAM to generate cash, reduce debt and provide funding for profitable growth and other capital priorities. The selection of EBITDA dollars as the sole performance measure emphasizes its importance to our business strategy.
The Committee set the 2018 annual incentive EBITDA target at a level that drives management to continue to perform at a high level, achieve integration synergies, implement productivity improvements and successfully launch new product programs. Recognizing the achievementimportance of strong EBITDA performance, targets for a plan year do not reflect the true performanceCommittee increased the rigor of the Company duethreshold, target and maximum performance levels. The performance levels for 2018 annual incentive awards reflect stretch goals that are designed to unanticipated circumstances specified in the plan.reward growth and sustain profitability.
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– | 2018 target performance was set at a level significantly higher than 2017 actual adjusted EBITDA performance. |
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– | Achievement of target performance would result in the highest adjusted EBITDA performance in AAM history. |
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– | Target performance is higher than the performance of a majority of our competitor peer group companies. |
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| Compensation Discussion and Analysis |
The 2015following table describes the performance levels and results for 2018.
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| Weighting |
| | Threshold (Payout 50%) | | Target (Payout 100%) | | Maximum (Payout 200%) | | 2018 Actual Performance | 2018 Actual Payout % |
Adjusted EBITDA | 100 | % | | $956 million | | $1,275 million | | $1,466 million | | $1,190.7(1) | 87% |
(1) Excludes the impact of restructuring and acquisition-related net activity of $47.8 million, debt refinancing and redemption costs of $19.4 million and goodwill impairment of $485.5. AAM sold the Powertrain aftermarket business in April 2018. Previously, in February 2018, performance goals for our annual incentive targetsplan were established. As a result of this timing, full-year EBITDA associated with this business was included in the 2018 annual incentive target. An adjustment of $6.8 million has been included to reflect the portion of the year that has been excluded from actual EBITDA results. Considering the impact of this adjustment, actual adjusted EBITDA reflects EBITDA of this business through the closing date of April 4, 2018. Accordingly, adjusted EBITDA reported in our annual report on Form 10-K for Mr. May, Mr. Simonte, Mr. Satine and Mr. Willemse were increased the year ended December 31, 2018 was adjusted by this amount for purposes of calculating performance achievements under the annual incentive plan. See Non-GAAP Reconciliation in connection with their appointments to new positions. Appendix A.
Although 2018 actual adjusted EBITDA performance was a record-setting achievement for AAM, the stretch target previously set by the Committee was not achieved. As a result of this goal rigor, our NEOs received a below-target payout of 87%. In addition, the Committee made no discretionary increases in 2018 annual incentive payouts for any NEO. The amounts paid are shown in the Summary Compensation Table.
Target Annual Incentive Award Opportunities
The table below shows the 20152018 target annual incentive opportunities for our NEOs, stated as a percentage of base salary:
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| Target Annual Incentive Opportunity |
| 2015 | 2014 |
David C. Dauch | 125% | 125% |
Christopher J. May | 54% | NA |
Michael K. Simonte | 88% | 80% |
Alberto L. Satine | 68% | 60% |
Norman Willemse | 68% | 60% |
Terry J. Woychowski | 60% | 60% |
Effective August 1, 2015,salary. In October 2017, the Committee determined that the annual incentive target opportunityopportunities for certain NEOs was increased as follows: Mr. May, from 50% to 60%; Mr. Simonte, from 80% to 100%; Mr. Satine and Mr. Willemse; each from 60% to 80%.
2015 Annual Incentive Performance
In support of the Company’s 2015 goals and objectives, the Committee approved the use of net operating cash flow and net income as a percentage of sales (NIPS), each with equal weighting, as the performance metricsNEO would remain unchanged for determining 2015 annual cash incentives. These performance metrics were selected for the following reasons:
net operating cash flow is an important financial metric for AAM due to its impact on liquidity, debt reduction and stockholder value creation;
increasing net operating cash flow is key to achieving credit rating upgrades, which has a favorable impact on the Company’s cost of future financing; and
net income is a key indicator of financial and operational performance.
Net operating cash flow is defined as net cash provided by or used in operating activities less capital expenditures net of proceeds from the sale of property, plant and equipment and from government grants.
In the fourth quarter of 2014, in conjunction with a review of the Board-approved annual budget, the Committee set 2015 performance targets for the net operating cash flow and NIPS performance metrics as follows:
2018.
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| | Net Operating Cash Flow | | Net Income as a Percentage of Sales |
| | Performance | | Payout | | Performance | | Payout |
Threshold | | $50 million | | 25% | | 1.5% | | 25% |
Target | | $175 million | | 100% | | 4% | | 100% |
Maximum | | $275 million | | 200% | | 6% | | 200% |
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| Target Annual Incentive Opportunity | |
| 2018 |
| 2017 |
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David C. Dauch | 135 | % | 135 | % |
Christopher J. May | 80 | % | 80 | % |
Michael K. Simonte | 100 | % | 100 | % |
Alberto L. Satine | 80 | % | 80 | % |
Norman Willemse | 80 | % | 80 | % |
Budgeted net operating cash flow for 2015 was $175 million. Generating positive cash flow was a critical objective for 2015. Accordingly, the threshold performance level was set at $50 million. The target performance level for net operating cash flow was based on achieving the budget and the maximum performance level was based on outperforming budgeted cash flow by $100 million. The target and threshold performance levels for NIPS were determined based on our performance relative to our competitor peer group. The target performance level for NIPS, or 4%, was set at a level to meet the performance of the median net income of our competitor peer group for the three most recent fiscal years. The maximum award opportunity for NIPS was set at a level to meet the performance in the top one-third of our competitor peer group. Target performance levels are intended to be aggressive but achievable based on industry conditions.
The Company’s 2015 net operating cash flow was $189.5 million. Accordingly, the net operating cash flow metric resulted in the achievement of 114% of target payout. The Company’s 2015 NIPS was 6.05%, excluding the impact of debt redemption costs, net of tax, of approximately $0.5 million. Accordingly, the NIPS performance metric resulted in an achievement of 200% of target.
Based on the weighting of each performance metric, the 2015 annual incentive awards resulted in a payout of 157% of target. No discretionary adjustments were made to 2015 annual incentive payouts for any NEO. The annual incentive awards paid are shown in the Summary Compensation Table.
2016 Amendment & Restatement of Annual Incentive Plan
In February 2016, the Committee approved the use of operating income margin as an additional performance measure for annual incentives awarded under the Annual Incentive Plan for Executive Officers. The Committee selected this additional performance measure based on a market analysis performed by Meridian that compared the performance metrics used by AAM under our annual incentive plan to the performance metrics used by companies in our comparative peer group and among a broader industry group. As a result, the Committee decided to maintain the existing performance measures and add operating income margin, a pre-tax earnings measure under the plan. Accordingly, the Second Amended & Restated AAM Annual Incentive Plan for Executive Officers was adopted effective January 1, 2016 and filed as Exhibit 10.38 to our annual report on Form 10-K for the fiscal year ended December 31, 2015.
Long-Term Incentive Compensation.The table below shows the 2015 target long-term incentive opportunities for our NEOs: |
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| 2015 Target Long-Term Incentive Opportunity |
| ($)(1) | | %(2) |
David C. Dauch | 4,312,500 |
| | 375% |
Christopher J. May | 148,320 |
| | 60% |
Michael K. Simonte | 1,153,800 |
| | 200% |
Alberto L. Satine | 556,200 |
| | 120% |
Norman Willemse | 410,000 |
| | 100% |
Terry Woychowski | 540,000 |
| | 120% |
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| Compensation Discussion and Analysis |
(1) Amounts reflect the value the Committee considered when granting the awards for 2015. These amounts differ from the value of the awards shown in the 2015 SummaryLong-Term Incentive Compensation Table and Grants of Plan-Based Awards Table because those tables reflect the probable outcome of the performance metrics for the performance shares.
(2) Stated as a percentage of base salary.
Mr. Dauch's LTI opportunity was increased to 375% from 350% of base salary effective January 1, 2015. The Committee approved this increase in consideration of the Company's financial performance and Mr. Dauch's leadership in strengthening AAM's management team and advancing product technology and innovation. Mr. Dauch's LTI opportunity was increased to 400% for 2016 based on the market benchmark study provided by Meridian.
For Mr. Simonte, Mr. Satine, Mr. Willemse and Mr. Woychowski, 2015 LTI targets were not changed from 2014. Mr. May's 2015 LTI target was determined based on his prior position as Treasurer. The target opportunities for Mr. May (100%), Mr. Simonte (230%), Mr. Satine (150%) and Mr. Willemse (150%) were increased for 2016 awards in connection with their appointments to new positions.
2015 Long-Term Incentives
The Committee determined theOur LTI program and each NEO's target LTI opportunity for 2015 in consideration of peer group data, market trends, pay-for-performance alignment and executive retention. Under the 2015 LTI program, each NEO was granted performance shares of 66% and RSUs of 34% of the NEO's target LTI value. RSU awards vest in full on the third anniversary of the grant date and are payable in shares.
Performance share awards are subject to two equally weighted three-year performance metrics: (1) cumulative earnings before interest, taxes, depreciation and amortization (EBITDA) margin and (2) relative total shareholder return (TSR). The Committee selected EBITDA margin because it is a key indicator of our financial and operational performance and is useful in analyzing entity valuation. The Committee selected relative TSR because of its alignment with stock price performance. This TSR performance metricofficers is designed to reward NEOs for creating sustained shareholder value, to encourage ownership of Company stock, and to retain and motivate executive officers to build long-term value for our stockholders. The EBITDA and relative TSR performance measures also complement the metrics we use to determine payouts under our annual incentive program.
The following table shows the threshold, target and maximum EBITDA margin and relative TSR performance levels to be used in determining 2015 performance share payouts. These performance levels were designed to drive a level of performance in the top one-halfexecutives while aligning their interests with those of our competitor peer group. The competitor peer group consists of companies listed above in Peer Group and Compensation Benchmarking.
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| EBITDA Margin Performance Measure | Relative TSR Performance Measure |
Performance Level | 3 Year Cumulative EBITDA Margin | Percent of Target Award Opportunity Earned | Company's TSR Percentile Rank | Percent of Target Award Opportunity Earned |
Threshold | 10% | 25% | 35th | 50% |
Target | 12% | 100% | 50th | 100% |
Maximum | 15% | 200% | 75th | 200% |
Payout of 2013 Performance Unit Awards
Payouts of the 2013 cash-based performance unit awards were determined based on EBITDA margin for the performance period beginning January 1, 2013 through December 31, 2015. The Company's cumulative EBITDA margin for the performance period was 13.9%, after adjustments approved by the Committee for certain special charges, including debt refinancing costs and the payout of certain terminated vested participants under our defined benefit U.S. pension plans. The adjusted EBITDA margin resulted in a payment at 163% of target. See Summary Compensation Table for the amounts paid to NEOs (other than Mr. May) in March 2016.
Payout of 2012 Performance Unit Award
The payout of a 2012 cash-based performance unit award to Mr. Dauch was determined based on EBITDA margin for the performance period beginning July 1, 2012 through June 30, 2015. The Company's cumulative EBITDA margin for the performance period was 13.1% after adjustments approved by the Committee for certain special charges, including debt refinancing costs and the payout of certain terminated vested participants under our defined benefit U.S. pension plans. The adjusted EBITDA margin resulted in a payment at 135.4% of target. See Summary Compensation Table for the amount paid to Mr. Dauch in August 2015.
Equity Grant Practices
shareholders. AAM generally makes equity grants to its executive officers and other executives on an annual basis, subject to the approval of the Committee. Grants are typically made in the first quarter of each year to coincide with the communication to executive officers of their annual cash incentive awards for the previous year’s performance. This timing increases the impact of the awards by strengthening the link between pay and performance.
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| Form of Award |
| Performance Shares |
| RSUs |
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LTI Mix | 66 | % | 34 | % |
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Objective | Drive and reward performance key to strategic business objectives |
| Encourage retention and ownership supporting shareholder alignment |
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Performance Measure | 50% Free Cash Flow 50% RelativeTSR |
| Continued service with AAM |
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Competitor Peer Group for Relative TSR | Autoliv Inc. BorgWarner Inc. Dana Incorporated Lear Corporation Magna International Inc. Meritor Inc, Tenneco Inc. Visteon Corporation |
| Not applicable |
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Performance / Vesting Period | Subject to achievement of performance measures over the three-year performance period January 1, 2018 through December 31, 2020 |
| Cliff vest on the third anniversary of the grant date |
|
| | |
Settlement | Settled in AAM stock upon vesting |
| Settled in AAM stock upon vesting |
|
Our competitor peer group is used to assess relative performance for establishing long-term incentive award performance levels. The competitor peer group consists of companies that compete with AAM has never allowed backdating, spring loading orfor capital and operate in similar markets. This group of companies serves as an appropriate benchmark for long-term incentives because of the likelihood that these companies will experience similar business conditions over a three-year cycle.
The Committee evaluated the performance measures for 2018 LTI performance share awards to ensure that the measures are aligned with our business strategy. A key objective of the Company is to strengthen our balance sheet and continue to provide for profitable growth, research and development of innovative technology and other timingcapital priorities. As a result, free cash flow is a key driver to reduce gross leverage and ultimately convert value to shareholders through the valuation process. Accordingly, the Committee modified the 2018 LTI performance metrics to replace EBITDA margin with free cash flow. The Committee believes that relative TSR continues to be an important measure of option grantsperformance because of its alignment with shareholder value creation. Based on these considerations, the 2018 performance share awards are based 50% on free cash flow and 50% on relative TSR.
The performance levels set for 2018 LTI required our management team to continue to perform at a high level, achieve integration synergies, implement productivity improvements, successfully launch new product programs and create long-term value. The Committee increased the rigor of the threshold, target and maximum performance levels as shown below.
| |
– | Free cash flow target performance for 2018 - 2020 was set at a level higher than the previous three years' performance. |
|
| |
| Compensation Discussion and Analysis |
| |
– | Achievement of target performance would result in the highest free cash flow in AAM history. |
| |
– | Relative TSR payout is capped if absolute TSR is negative. |
The table below shows the threshold, target and maximum free cash flow and relative TSR performance levels to be used in determining the payouts for these awards for the performance period January 1, 2018 through December 31, 2020.
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| | | | | | |
| Free Cash Flow Performance Measure | | Relative TSR Performance Measure | |
Performance Level | 3 Year Cumulative Free Cash Flow | Percent of Target Award Opportunity Earned |
| Company's TSR Percentile Rank | Percent of Target Award Opportunity Earned |
|
Threshold | $990 million | 50 | % | 35th | 50 | % |
Target | $1,325 million | 100 | % | 50th | 100 | % |
Maximum | $1,525 million | 200 | % | 75th | 200 | % |
LTI Award Values
The table below shows the 2018 and 2017 target long-term incentive opportunities for our NEOs. In connection with our acquisition of MPG in 2017, the Committee increased the 2018 LTI target opportunities for the NEOs to reflect the significant increase in size and complexity of the Company. The Committee also considered the greater levels of responsibility and challenges ahead for each of the NEOs to deliver expected results. For Mr. May, the Committee made an incremental increase to his 2018 LTI target to more closely align his incentive opportunity with comparable market practice. |
| | | | | | | | |
| 2018 Target Long-Term Incentive Opportunity | | 2017 Target Long-Term Incentive Opportunity | |
| ($)(1) |
| %(2) |
| ($)(1) |
| %(2) |
|
David C. Dauch | 5,750,000 |
| 500 | % | 5,175,000 |
| 450 | % |
Christopher J. May | 1,375,000 |
| 250 | % | 412,000 |
| 100 | % |
Michael K. Simonte | 2,250,000 |
| 300 | % | 1,516,160 |
| 230 | % |
Alberto L. Satine | 1,220,000 |
| 200 | % | 787,950 |
| 150 | % |
Norman Willemse | 1,060,000 |
| 200 | % | 695,250 |
| 150 | % |
(1) Amounts reflect the value the Committee considered when granting the awards for 2018 and 2017. These amounts differ from the value of the awards shown in the Summary Compensation Table and Grants of Plan-Based Awards Table because those tables reflect the grant date fair value of these awards, which is based on the probable outcome of the performance metrics for the performance shares.
(2) Stated as a percentage of base salary.
Payout of 2016 Performance Share Awards
The performance period for 2016 performance awards ended on December 31, 2018. The number of shares earned was based on relative TSR and EBITDA margin over the three-year performance period as shown below. |
| | | | | | | | | | |
| Actual Performance | | % of Target Shares Earned |
| | Award Weighting |
| | Weighted Payout |
|
Relative TSR | 11th percentile | | 0 | % | | 50 | % | | 0 | % |
| | | | | | | |
EBITDA Margin | 16.6%(1) | | 200 | % | | 50 | % | | 200 | % |
| | | Final Payout as a % of Target | | | 100 | % |
(1) Excludes the restructuring and acquisition-related costs and debt refinancing and redemption costs, goodwill impairment and other non-recurring items. See Non-GAAP Reconciliation in Appendix A.
|
| |
| Compensation Discussion and Analysis |
Payouts under the relative TSR performance share awards resulted in a zero payout to senior management because the threshold performance level was not achieved. This result reflects the Committee's commitment to align LTI pay with the releaseinterest of material non-public information. Currently,our shareholders through rigorous goal-setting. Our shareholders did not realize value on our stock optionsover this time period. Consequently, and by design, our senior management team received no value from these awards.
|
| | |
Governance Point | | |
Payout capped if 3-year absolute TSR is negative. | | |
| | |
The performance targets for the EBITDA margin performance share awards were determined in consideration of AAM's historical EBITDA margins for 2013 – 2015. The maximum performance level was set to drive performance significantly above our peers and encourage EBITDA margin growth. Over this period, management delivered a result well in excess of targets and prior actual performance, which supported an above-target payout. This outstanding financial performance allowed us to reduce debt and position AAM to achieve our strategic objectives.
|
| | |
Actual Performance | | |
Average Adjusted EBITDA Performance from 2013 - 2015 | | 13.9% |
| | |
Peer Average Adjusted EBITDA Performance from 2013 - 2015 | | 10.7% |
| | |
2018 Omnibus Incentive Plan
At the 2018 annual meeting, our shareholders approved the adoption of the 2018 Omnibus Incentive Plan. Beginning in 2019, LTI awards are granted under this plan. In approving the 2019 LTI awards, the Committee determined that 66% of the total LTI award would continue to be performance-based in order to drive superior performance that is aligned with our business strategy. Consistent with 2018 performance-based LTI awards, one-half of the 2019 performance-based LTI award is based on relative TSR and one-half is based on free cash flow performance. The relative TSR portion of the 2019 LTI award is denominated and settled in AAM stock. The free cash flow portion of the 2019 LTI award is a performance unit that is denominated in dollars and settled in cash.
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| |
| Compensation Discussion and Analysis |
Summary of Direct Compensation
The Committee believes each pay element of direct compensation is consistent with our compensation philosophy. The Committee reviews direct compensation for each NEO and compares each compensation element to the market data of our comparative peer group. The Committee also considers individual performance, experience, internal equity, scope and responsibility of position, retention and other factors.
Direct compensation for our CEO is higher than for the other NEOs due to the CEO's breadth of executive and operating responsibilities for the entire global enterprise. The Committee does not usedtarget CEO pay as a vehiclecertain multiple of the pay of the other NEOs. For 2018, the Committee set total direct compensation for long-term incentive awards underthe NEOs at approximately the 50thpercentile of the peer group.
|
|
Indirect Compensation Elements |
Retirement and Deferred Compensation Plans
Our NEOs participate in AAM's qualified retirement and nonqualified retirement and deferred compensation plans. Each executive officer is eligible to participate in the Company's 401(k) plan, which allows U.S. salaried participants to defer a portion of their base salary up to certain IRS limits.
The Supplemental Executive Retirement Plan (SERP), a nonqualified defined benefit plan, provides retirement benefits to executives that are offset by the qualified pension plan benefits. To align our benefit programs with prevailing market practices, the SERP was amended to freeze further benefit accruals as of April 30, 2018 and to freeze the plan to new participants as of April 1, 2018. At the time the legacy SERP was frozen, the AAM Executive Retirement Savings Plan (ERSP) was adopted to become effective January 1, 2019. The ERSP, a nonqualified deferred compensation programs.plan, reduces executive retirement benefits and provides cost savings to the Company as compared to the legacy SERP.
The ERSP provides certain highly-compensated associates the opportunity to receive supplemental deferred compensation upon retirement and certain other qualifying events. The Company provides contributions to the plan equal to a percentage of a participant's combined base salary and bonus paid during a calendar year less their maximum eligible 401(k) Company contributions. The Company may also make discretionary contributions.
In April 2018, the Company also froze the Executive Deferred Compensation Plan (EDC) to further contributions as of December 31, 2018 and to new participants as of April 1, 2018, due to the EDC's limited participation and retention value. Existing contributions will vest and be paid in accordance with the EDC's terms.
Benefits.The SERP, ERSP and EDC plans are further described in Pension Benefits and Nonqualified Deferred Compensation.
Other Benefits and Perquisites
Our NEOs participate in the same benefit and retirementmedical plans in whichas our U.S. salaried associates participate.associates. A group of approximately 6040 senior executives, including the NEOs, also receive supplemental life, supplemental disability and umbrella liability insurance benefits. Our NEOs are eligible to participate in AAM’s qualified and nonqualified defined benefit pension plans and defined contribution plans. They are also eligible to participate in a nonqualified deferred compensation plan that permits deferrals of a portion of base salary and/or annual cash incentive compensation on a pretax basis. These plans are described in the Pension Benefits and Nonqualified Deferred Compensation sections below.
Perquisites.AAM provides a very limited number of perquisites to senior executives, including our NEOs. AAM does not pay for country club memberships. Senior executives are eligible for the use of a Company-provided vehicle with AAM content. Mr. Dauch has the use of two Company-provided vehicles. Occasionally, the Company inviteswe invite spouses of AAM executives to attend Company business events and payspay for the spouse’s travel and related non-business expenses. The CompanyAAM reimburses the executive for taxes attributable to the income associated with this benefit. We do not otherwise provide tax gross ups for executives except for those available for all salaried associates generally. Perquisites are further described in the footnotes to the Summary Compensation Table.
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| |
| Compensation Discussion and Analysis |
|
|
Other Compensation Matters |
Severance Programs
The Company provides severance benefits to NEOs (other than the CEO and President) under the AAM Executive Officer Severance Plan (Severance Plan) and the AAM Change in Control Plan (CIC Plan). Mr. Dauch and Mr. Simonte do not participate in these programs because their employment agreements provide severance payments and benefits as described below.
The Committee believes that these severance programs provide competitive severance benefits that attract and retain key talent during potentially critical and uncertain periods. These programs are designed to foster stability within senior management by helping executives maintain focus on and dedication to their responsibilities to maximize shareholder value, including in the event of a transaction that may result in a change in control. These programs are also guided by our compensation philosophy and governance practices (e.g., double-trigger change in control provisions, no tax gross ups) and are well aligned with those of our peers.
The Severance Plan, which was adopted in April 2018, provides severance benefits other than in connection with a change in control. The Committee adopted this plan to further align our programs with market practices. Under the Severance Plan, upon termination of employment by the Company without cause or resignation by a participant for good reason, each eligible executive officer will be entitled to certain severance payments and benefits, including a multiple of base salary and target bonus, prorated annual target bonus for the year of termination and continued participation in the Company's medical benefit plans for the applicable severance period.
The CIC Plan provides participants, including eligible executive officers, severance payments and benefits in the event of termination of employment on or within two years following a CIC. These benefits include a multiple of base salary and target bonus and continued participation in the Company's medical benefit plans for the applicable severance period.
Benefits under the Severance Plan and the CIC Plan are subject to execution and non-revocation of a general waiver and release of claims against the Company and compliance with certain restrictive covenants. The benefits are also subject to recoupment or clawback. Benefits provided to our NEOs under these programs are described in Potential Payments Upon Termination or Change in Control.
Employment Agreements
In February 2015, Mr. Dauch's employment agreement was amended to change the severance payments and benefits in the event his employment is terminated on or within two years following a change in control (CIC). The amendment reflects an increase in his severance payment from two times to three times his annual base salary and bonus. The CIC benefits for Mr. Dauch were determined in consideration of market data and the level of CIC benefits provided to other executive officers under the AAM Executive Officer Change in Control Plan (CIC Plan) discussed below.
The Company entered into an employment agreement with Mr. Simonte effective August 1, 2015 in connection with his appointment as President of the Company.
The terms of Mr. Dauch's and Mr. Simonte's employment agreements are described in the Narrative to the Summary Compensation Table and Grants of Plan-Based Awards Table and Potential Payments Upon Termination or Change in Control.
Change in Control Plan
In February 2015, upon the recommendation of the Committee, the Board approved the CIC Plan for executive officers. The CIC Plan provides eligible executive officers with severance payments and benefits in the event of termination of employment on or within two years following a CIC. Mr. Dauch and Mr. Simonte do not participate in the CIC Plan due to the severance payments and benefits provided under each of their employment agreements.
Severance payments and benefits under the CIC Plan include, among other things, a severance payment equal to two times annual base salary and annual bonus and continuation of medical benefits for two years. CIC severance payments and benefits are subject to continued compliance following termination of employment for two years with the non-competition provision of the CIC Plan. CIC severance payments and benefits for all executive officers are subject to the execution and non-revocation of a general waiver and release of claims against the Company. Certain severance payments are also subject to the Company's clawback policy as described below.
The Board believes the CIC Plan enhances stockholder value by encouraging executive officers to consider CIC transactions that may be in the best interests of the Company and our stockholders while keeping them neutral to potential job loss. The Board also believes that the CIC Plan is aligned with competitive market practices and will help to retain key talent. Severance benefits provided to our NEOs are further described under Potential Payments Upon Termination or Change in Control.
Executive Compensation Recoupment (Clawback) Policy
The clawback policy authorizes the Committee to determine whether to require recoupment of performance-based incentive compensation actually paid or awarded to any executive officer if certain conditions are met. For purposes of this policy, performance-based compensation includes all annual incentives for periods beginning with the 2014 fiscal year and long-term incentives awarded after January 1, 2014, whether paid in cash or equity, to the extent the awards are determined based on the Company's financial performance.
The Committee may require recoupment if the executive officer engaged in fraud or intentional misconduct that caused or contributed to the need for a material restatement of the Company's financial statements filed with the SEC. If the Committee determines that any performance-based compensation paid or awarded to the executive officer would not have been awarded or would have been awarded at a lower amount had it been calculated based on such restated financial statements (adjusted compensation), the Committee may seek to recover for the benefit of the Company the excess of the awarded compensation over the adjusted compensation (excess compensation). In deciding whether to seek recovery of excess compensation from the executive officer, the Committee will consider the factors it deems relevant under the circumstances and whether the assertion of a claim is in the best interests of the Company.
Executive Officer Stock Ownership Requirements
A fundamental objective of our compensation program is for executive officers to own AAM stock in order to align their interests with those of our stockholders and to reinforce the importance of making sound long-term decisions. The Company's current stock ownership requirements are as follows:
|
| |
| Multiple of
Base Salary
|
Chief Executive Officer | 5 |
President; Executive Vice President | 3 |
Senior Vice President; Group Vice President; Vice President | 2 |
Executive officers have five years from April 2012 to meet these requirements or, for new executive officers, five years from the date of appointment. Shares owned directly, unvested RSUs and performance shares (at target) count toward the requirement while unexercised stock options are not included. These ownership levels must be maintained as long as the person is an executive officer of AAM.
The Committee annually reviews each executive officer’s stock ownership level according to this policy. Each NEO has met or is on track to meet the ownership requirements established for his position.
Anti-hedging and Anti-pledging Policy
AAM prohibits employees and non-employee directors from entering into transactions that may result in a financial benefit if our stock price declines, or any hedging transaction involving our stock, including but not limited to the use of financial derivatives, short sales or any similar transactions. Pledging of Company stock is also prohibited.
Tax Deductibility of Compensation
In general, the compensation awarded to NEOs will be taxable to the executive and will give rise to a corresponding corporate deduction at the time the compensation is paid. Section 162(m) of the Code precludes a public corporation from taking a tax deduction for annual compensation in excess of $1 million paid to the CEO or to other NEOs other than the CFO. One exception applies to performance-based compensation paid pursuant to stockholder-approved employee benefit plans. Performance-based compensation is compensation that is paid only if the individual’s performance meets pre-established objective performance goals based on performance criteria approved by our stockholders.
Although deductibility of compensation is preferred, tax deductibility is not the primary objective of our compensation programs. The Committee may decide to pay compensation or grant awards that serve the objectives of our executive compensation program even though such compensation or awards may not be deductible by the Company.
The annual incentives and long-term incentive performance share awards granted in 2015 to our NEOs are intended to comply with the performance-based compensation exemption under Section 162(m). RSUs granted to NEOs in 2015, although not deductible, were considered to be the appropriate vehicle for a portion of the long-term incentive component of our executive compensation program.
REPORT OF THE COMPENSATION COMMITTEE
We have reviewed and discussed the Compensation Discussion and Analysis with management. Based on such review and discussion, we recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
Compensation Committee of the Board of Directors
Elizabeth A. Chappell, Chair
Steven B. Hantler
William L. Kozyra
James A. McCaslin
Samuel Valenti III
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation of our named executive officers (NEOs) for the fiscal years ended December 31, 2015, December 31, 2014 and December 31, 2013 to the extent they served as our NEOs in such years.
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| | | | | | | | | | | | | | | | | |
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards(2) ($) | Options Awards ($) | Non-Equity Incentive Plan Compen- sation(3) ($) | Change in Pension Value And Nonqualified Deferred Compensation Earnings(4) ($) | All Other Compen- sation(5) ($) | Total ($) |
David C. Dauch(1)Chairman & Chief Executive Officer | 2015 | 1,150,000 |
| — |
| 5,348,595 |
| — |
| 5,447,875 |
| 1,201,615 |
| 67,131 |
| 13,215,216 |
|
2014 | 1,100,000 |
| — |
| 4,454,330 |
| — |
| 2,638,120 |
| 1,081,679 |
| 75,189 |
| 9,349,318 |
|
2013 | 1,033,333 |
| — |
| 1,750,002 |
| — |
| 3,185,250 |
| 245,423 |
| 116,389 |
| 6,330,397 |
|
Christopher J. May Vice President & Chief Financial Officer | 2015 | 292,505 |
| — |
| 148,344 |
| — |
| 297,646 |
| 107,445 |
| 44,199 |
| 890,139 |
|
| | | | | | | | |
| | | | | | | | |
Michael K. Simonte President | 2015 | 603,192 |
| — |
| 1,431,050 |
| — |
| 1,773,967 |
| 347,876 |
| 52,561 |
| 4,208,646 |
|
2014 | 560,100 |
| — |
| 1,296,049 |
| — |
| 961,046 |
| 375,597 |
| 52,666 |
| 3,245,458 |
|
2013 | 543,800 |
| — |
| 543,810 |
| — |
| 1,429,085 |
| 27,943 |
| 50,817 |
| 2,595,455 |
|
Alberto L. Satine President Driveline | 2015 | 482,875 |
| — |
| 689,895 |
| — |
| 899,225 |
| 224,587 |
| 52,473 |
| 2,349,055 |
|
2014 | 450,000 |
| — |
| 624,777 |
| — |
| 498,640 |
| 237,798 |
| 41,032 |
| 1,852,247 |
|
2013 | 360,000 |
| — |
| 216,006 |
| — |
| 565,800 |
| — |
| 41,399 |
| 1,183,205 |
|
Norman Willemse President Metal Formed Products | 2015 | 426,667 |
| — |
| 508,544 |
| — |
| 743,575 |
| 169,498 |
| 32,065 |
| 1,880,349 |
|
2014 | 375,767 |
| — |
| 445,473 |
| — |
| 445,467 |
| 135,322 |
| 48,459 |
| 1,450,488 |
|
2013 | 320,000 |
| — |
| 160,006 |
| — |
| 579,120 |
| 12,546 |
| 50,348 |
| 1,122,020 |
|
Terry J. Woychowski (6) Former Senior Vice President, Advanced Engineering | 2015 | 437,932 |
| — |
| 669,787 |
| — |
| 440,100 |
| — |
| 492,901 |
| 2,040,720 |
|
2014 | 463,500 |
| — |
| 624,777 |
| — |
| 305,100 |
| 57,407 |
| 50,819 |
| 1,501,603 |
|
| | | | | | | | |
| |
(1) | Compensation of Mr. Dauch is based solely on employment as an executive officer. He received no compensation for serving as a director. |
| |
(2) | Reflects the grant date fair value of restricted stock units and performance share awards made during fiscal year 2015 calculated in accordance with FASB ASC 718 (without any reduction for risk of forfeiture) as determined based on applying the assumptions used in our financial statements. See Note 6 to the audited consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2015 regarding assumptions underlying the valuation of equity awards. Assuming the maximum performance levels are achieved for the performance share awards granted on March 2, 2015, the maximum value of performance share awards would be $5,692,562 for Mr. Dauch, $1,523,080 for Mr. Simonte, $734,270 for Mr. Satine, $541,259 for Mr. Willemse and $712,858 for Mr. Woychowski based on grant date fair value. These amounts may not reflect the actual value realized upon vesting or settlement, if any. Mr. May did not receive a grant of performance share awards during 2015. |
(3)Reflects amounts earned under the AAM Incentive Compensation Plan for Executive Officers for 2015 and cash-based performance unit awards granted under the 2012 Omnibus Incentive Plan for the 3-year performance period ending December 31, 2015. For Mr. Dauch, also reflects the payment of $338,500 for a cash-based performanceaward for the performance period July 1, 2012 through July 30, 2015. The 2015 amounts earned are as follows: |
| | | | | | | | | | | |
Name | AAM Incentive Compensation Plan | | 2012 Omnibus Incentive Plan | | Total |
David C. Dauch | $ | 2,256,875 |
| | $ | 3,191,000 |
| | $ | 5,447,875 |
|
Christopher J. May | $ | 297,646 |
| | $ | — |
| | $ | 297,646 |
|
Michael K. Simonte | $ | 887,573 |
| | $ | 886,394 |
| | $ | 1,773,967 |
|
Alberto L. Satine | $ | 547,145 |
| | $ | 352,080 |
| | $ | 899,225 |
|
Norman Willemse | $ | 482,775 |
| | $ | 260,800 |
| | $ | 743,575 |
|
Terry Woychowski | $ | — |
| | $ | 440,100 |
| | $ | 440,100 |
|
| |
(4) | Reflects the annualized increase in pension value under the Salaried Retirement Program, the Albion Pension Plan and the Supplemental Executive Retirement Program (SERP). For Mr. Woychowski, reflects a net negative change in pension value for 2015 of $82,596 resulting from the forfeiture of his SERP benefit upon termination of employment. See Pension Benefits Table below. There are no above-market or preferential earnings on compensation deferred under our Executive Deferred Compensation Plan.
|
(5) The components of All Other Compensation for 2015 are as follows: |
| | | | | | | | | | | | | | |
Name | Employer 401(k) Match Contributions(a) ($) | Retirement Contributions(b) ($) | Executive Life Insurance Premiums(c) ($) | Company-Provided Vehicles(d) ($) | Tax Gross Ups for Spousal Travel(e) ($) | Other(f) ($) | Total ($) |
David C. Dauch | 13,086 |
| 13,250 |
| 10,859 |
| 22,214 |
| 2,033 |
| 5,689 |
| 67,131 |
|
Christopher J. May | 12,855 |
| 12,855 |
| 1,096 |
| 16,978 |
| — |
| 415 |
| 44,199 |
|
Michael K. Simonte | 13,250 |
| 13,250 |
| 5,047 |
| 20,414 |
| — |
| 600 |
| 52,561 |
|
Alberto L. Satine | 12,975 |
| 13,250 |
| 6,362 |
| 18,376 |
| — |
| 1,510 |
| 52,473 |
|
Norman Willemse | 12,865 |
| 13,250 |
| 4,943 |
| — |
| 407 |
| 600 |
| 32,065 |
|
Terry Woychowski | 9,000 |
| 7,950 |
| 5,620 |
| 20,303 |
| — |
| 450,028 |
| 492,901 |
|
(a)Includes employer matching contributions under AAM’s 401(k) plan.
(b)Includes employer retirement contributions under AAM’s 401(k) plan.
(c)Includes executive life insurance premiums paid by the Company.
| |
(d) | Includes personal use of Company-provided vehicles. The aggregate incremental cost of Company-provided vehicles is based on total vehicle cost if business use of the vehicle is less than 50%. For Mr. Dauch, includes the cost of personal use of a second Company-provided vehicle. For Mr. May, reflects a vehicle allowance of $5,000 through May 2015 and the personal use of a Company-provided vehicle for the remainder of the year. |
| |
(e) | Includes amounts reimbursed for taxes attributable to the income associated with the cost of spousal travel for participation in Company business meetings and events. |
| |
(f) | For Mr. Dauch, includes the cost of travel for spousal participation in Company business meetings or events, personal umbrella liability insurance premiums, cost of an executive physical and meals provided during business hours. For Mr. May, Mr. Simonte and Mr. Willemse, includes the cost of personal umbrella liability insurance premiums. For Mr. Satine, includes the cost of an executive physical and the cost of personal umbrella liability insurance premiums. For Mr. Woychowski, includes a severance payment of $448,168 in connection with the termination of his employment effective December 9, 2015, the cost of personal umbrella insurance premiums and the cost of an executive physical. |
(6) Refer to the Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table and the Potential Payments Upon Termination or Change in Control section below for a description of the terms of the separation agreement with Mr. Woychowski effective December 9, 2015.
GRANTS OF PLAN-BASED AWARDS
Annual and long-term incentive awards granted in 2015 to the NEOs are shown in the following table. The annual and long-term incentive compensation programs are described in the Compensation Discussion and Analysis and the Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table below.
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| | | | | | | | | | | | | | | | | | |
Name | Grant Date | Approval Date | Estimated Future Payouts under Non Equity Incentive Plan Awards(1) | Estimated Future Payouts under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) | Grant Date Fair Value of Stock and Option Awards(4) ($) |
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) |
David C. Dauch | | | | | | | | | | |
Annual Incentive | 1/1/2015 | 10/28/2014 | 359,375 |
| 1,437,500 |
| 2,875,000 |
| — |
| — |
| — |
| — |
| — |
|
Performance Shares (TSR) | 3/2/2015 | 2/4/2015 | — |
| — |
| — |
| 28,181 |
| 56,362 |
| 112,724 |
| — |
| 1,759,002 |
|
Performance Shares (EBITDA) | 3/2/2015 | 2/4/2015 | — |
| — |
| — |
| 14,091 |
| 56,362 |
| 112,724 |
| — |
| 2,123,325 |
|
Restricted Stock Units | 3/2/2015 | 2/4/2015 | — |
| — |
| — |
| — |
| — |
| — |
| 58,070 |
| 1,466,268 |
|
Christopher J. May | | | | | | | | | | |
Annual Incentive | 1/1/2015 | 10/28/2014 | 47,396 |
| 189,583 |
| 379,166 |
| — |
| — |
| — |
| — |
| — |
|
Restricted Stock Units | 3/2/2015 | 2/4/2015 | — |
| — |
| — |
| — |
| — |
| — |
| 5,875 |
| 148,344 |
|
Michael K. Simonte | | | | | | | | | | |
Annual Incentive | 1/1/2015 | 10/28/2014 | 141,333 |
| 565,333 |
| 1,130,666 |
| — |
| — |
| — |
| — |
| — |
|
Performance Shares (TSR) | 3/2/2015 | 2/4/2015 | — |
| — |
| — |
| 7,540 |
| 15,080 |
| 30,160 |
| — |
| 470,632 |
|
Performance Shares (EBITDA) | 3/2/2015 | 2/4/2015 | — |
| — |
| — |
| 3,770 |
| 15,080 |
| 30,160 |
| — |
| 568,109 |
|
Restricted Stock Units | 3/2/2015 | 2/4/2015 | — |
| — |
| — |
| — |
| — |
| — |
| 15,537 |
| 392,309 |
|
Alberto L. Satine | | | | | | | | | | |
Annual Incentive | 1/1/2015 | 10/28/2014 | 87,125 |
| 348,500 |
| 697,000 |
| — |
| — |
| — |
| — |
| — |
|
Performance Shares (TSR) | 3/2/2015 | 2/4/2015 | — |
| — |
| — |
| 3,635 |
| 7,270 |
| 14,540 |
| — |
| 226,889 |
|
Performance Shares (EBITDA) | 3/2/2015 | 2/4/2015 | — |
| — |
| — |
| 1,817 |
| 7,270 |
| 14,540 |
| — |
| 273,883 |
|
Restricted Stock Units | 3/2/2015 | 2/4/2015 | — |
| — |
| — |
| — |
| — |
| — |
| 7,490 |
| 189,123 |
|
Norman Willemse | | | | | | | | | | |
Annual Incentive | 1/1/2015 | 10/28/2014 | 76,875 |
| 307,500 |
| 615,000 |
| — |
| — |
| — |
| — |
| — |
|
Performance Shares (TSR) | 3/2/2015 | 2/4/2015 | — |
| — |
| — |
| 2,680 |
| 5,359 |
| 10,718 |
| — |
| 167,249 |
|
Performance Shares (EBITDA) | 3/2/2015 | 2/4/2015 | — |
| — |
| — |
| 1,340 |
| 5,359 |
| 10,718 |
| — |
| 201,890 |
|
Restricted Stock Units | 3/2/2015 | 2/4/2015 | — |
| — |
| — |
| — |
| — |
| — |
| 5,521 |
| 139,405 |
|
Terry J. Woychowski | | | | | | | | | | |
Annual Incentive | 1/1/2015 | 10/28/2014 | 67,500 |
| 270,000 |
| 540,000 |
| — |
| — |
| — |
| — |
| — |
|
Performance Shares (TSR) | 3/2/2015 | 2/4/2015 | — |
| — |
| — |
| 3,529 |
| 7,058 |
| 14,116 |
| — |
| 220,273 |
|
Performance Shares (EBITDA) | 3/2/2015 | 2/4/2015 | — |
| — |
| — |
| 1,765 |
| 7,058 |
| 14,116 |
| — |
| 265,896 |
|
Restricted Stock Units | 3/2/2015 | 2/4/2015 | — |
| — |
| — |
| — |
| — |
| — |
| 7,272 |
| 183,618 |
|
| |
(1) | Reflects annual incentive awards granted under the AAM Incentive Compensation Plan for Executive Officers. |
| |
(2) | Reflects performance share awards granted under the 2012 Omnibus Incentive Plan. The awards are payable in common stock based on the Company's EBITDA margin and relative TSR performance, each weighted 50%, over the 3-year performance period January 1, 2015 through December 31, 2017. |
| |
(3) | Reflects RSUs granted under the 2012 Omnibus Incentive Plan. The awards are payable in common stock, contingent upon continued employment through the 3-year vesting period. No options were granted in 2015. |
| |
(4) | Reflects the full grant date fair value of performance share awards and RSUs made during fiscal year 2015 calculated in accordance with FASB ASC 718 (without any reduction for risk of forfeiture) as determined based on applying the assumptions used in our financial statements. See Note 6 to the audited consolidated financial statements in our annual |
report on Form 10-K for the year ended December 31, 2015 regarding assumptions underlying the valuation of equity awards.
Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table
Employment Agreements
Our employment agreements with Mr. Dauch as CEO and Mr. Simonte as President provide for the following compensation and benefits as of December 31, 2015:
|
| | |
| CEO Employment Agreement | President Employment Agreement |
Base Salary | $1,150,000 effective January 1, 2015, subject to annual review and increase by the Compensation Committee. | $640,000 effective August 1, 2015, subject to annual review and increase by the Compensation Committee. (Actual amount paid for 2015, $603,192) |
Annual Incentive | Participation in the annual incentive plan for executive officers. Target opportunity of 125% of base salary, subject to the annual review and increase by the Compensation Committee. | Participation in the annual incentive plan for executive officers. Initial target opportunity as of August 1, 2015 is 100% of base salary, subject to annual review and increase by the Compensation Committee. |
Long-Term Incentive | Participation in the long-term incentive plans for executive officers. Target opportunity of 375% for 2015, subject to annual review and increase by the Compensation Committee. | Participation in the long-term incentive plans for executive officers. Initial target opportunity for 2016 is 220% of base salary, subject to annual review and increase by the Compensation Committee. |
Other Benefits | Participation in plans applicable to executive officers. Retiree medical, dental and vision coverage equivalent to the benefit levels offered in the Company's group health care plans for salaried associates as of September 1, 2012. | Participation in plans applicable to executive officers. |
Term | Initial term: September 1, 2012 through August 31, 2015. Additional one-year extensions unless either party provides 60 days' written notice of intent not to renew. | Initial term: August 1, 2015 through July 31, 2018. Additional one-year extensions unless either party provides 60 days' written notice of intent not to renew. |
Mr. Dauch and Mr. Simonte are also entitled to certain payments and benefits in the event of termination of employment under the scenarios described below in Potential Payments Upon Termination or Change in Control.
Agreement with Former Executive
The Company entered into a separation agreement and release with Mr. Woychowski in connection with his separation from employment with AAM as of December 9, 2015. Pursuant to the separation agreement, Mr. Woychowski received a lump sum severance payment of $448,168 (less withholding taxes) and executed a full and final release of claims against AAM. Payments made to Mr. Woychowski are shown in the Potential Payments Upon Termination or Change in Control section below.
Payment or settlement of outstanding LTI awards were made to Mr. Woychowski under the terms of applicable award agreements. Mr. Woychowski received full payment of the 2013 performance unit award of $440,100 for the performance period January 1, 2013 through December 31, 2015. He also received pro-rata payouts of two-thirds of his 2014 performance share awards and one-third of his 2015 performance share awards, less shares withheld for taxes. The remaining balance of each of these performance awards was forfeited. Outstanding RSU awards for 2013, 2014 and 2015 were forfeited. Pursuant to the AAM Incentive Compensation Plan for Executive Officers, Mr. Woychowski was not eligible to receive payment of an annual incentive award for 2015.
Annual Incentive Awards
In 2015, annual incentive awards were granted under the AAM Incentive Compensation Plan for Executive Officers. Net operating cash flow and NIPS were selected as performance metrics for these awards. The maximum payout for both performance metrics is 200%. See Annual Incentive Compensation in the CD&A.
Long-Term Incentive Awards
In 2015, the Company granted long-term incentive awards to NEOs in the form of RSUs and performance share awards. The terms of these awards are described in Long-Term Incentive Compensation in the CD&A.
2015 Awards Granted Under the 2012 Omnibus Incentive Plan
Restricted Stock Units (RSUs). The RSUs granted on March 2, 2015 to NEOs vest in three years. All RSUs are payable in common stock.
Performance Share Awards. The performance share awards granted to NEOs on March 2, 2015 are based upon the attainment of certain EBITDA margin performance targets and relative TSR over a three-year performance period beginning January 1, 2015 through December 31, 2017. The performance share awards represented 66% of the total LTI award opportunity for executive officers. One-half of the 2015 performance share payouts, or 33% of the total LTI award, earned will be measured by EBITDA margin performance and one-half, or 33% of the total LTI award, will be measured by relative TSR performance over a three-year period. TSR performance share payouts will be capped if the Company's TSR is negative for the three-year period. All performance shares are payable in common stock.
The following tables illustrate the threshold, target and maximum performance levels for determining 2015 award payouts for each performance measure.
|
| | | | | | | |
| EBITDA Margin Performance Measure | | Relative TSR Performance Measure |
Performance Level | 3-Year Cumulative EBITDA Margin | | Percent of Target Award Opportunity Earned | | Company TSR Percentile Rank | | Percent of Target Award Opportunity Earned |
Threshold | 10% | | 25% | | 35th | | 50% |
Target | 12% | | 100% | | 50th | | 100% |
Maximum | 15% | | 200% | | 75th | | 200% |
2013 Performance Unit Awards
Payouts of the 2013 cash-based performance unit awards were determined based on EBITDA margin for the performance period beginning January 1, 2013 through December 31, 2015. The Company's cumulative EBITDA margin for the performance period was 13.9%, after adjustments approved by the Committee for certain special charges, including debt refinancing and the payout of certain terminated vested participants under our defined benefit U.S. pension plans. The adjusted EBITDA margin resulted in a payment at 163% of target.
2012 Performance Unit Award
The payout of the 2012 cash-based performance unit award to Mr. Dauch was determined based on EBITDA margin for the performance period beginning July 1, 2012 through June 30, 2015. The Company's cumulative EBITDA margin for the performance period was 13.1% after adjustments approved by the Committee for certain special charges, including debt refinancing costs and the payout of certain terminated vested participants under our defined benefit U.S. pension plans. The adjusted EBITDA margin resulted in a payment at 135.4% of target.
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2015
|
| | | | | | | | | | | |
| Option Awards | Stock Awards |
Name | Number of Securities Underlying Unexercised Options Exercisable(1) (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested(2) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market of Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(8) |
David C. Dauch | 15,000 |
| 15.58 |
| 3/15/2016 | 137,687(3) | 2,607,792 |
| | |
| 13,000 |
| 26.02 |
| 3/14/2017 | 66,447(4) | 1,258,506 |
| | |
|
|
|
|
|
| 58,070(5) | 1,099,846 |
| | |
| | | | |
| 64,493(6) | 1,221,497 |
|
| | | | | | 128,986(6) | 2,442,995 |
|
| | | | | | 28,181(7) | 533,748 |
|
| | | | | | 112,724(7) | 2,134,993 |
|
Christopher J. May | | | | 9,678(3) | 183,301 |
| | |
| | | | 7,310(4) | 138,451 |
| | |
| | | | 5,875(8) | 111,273 |
| | |
Michael K. Simonte | 10,000 |
| 26.02 |
| 3/14/2017 | 42,786(3) | 810,367 |
| | |
|
|
|
|
|
| 19,334(4) | 366,186 |
| | |
|
|
|
|
|
| 15,537(5) | 294,271 |
| | |
| | | | | | 18,765(6) | 355,409 |
|
| | | | | | 37,530(6) | 710,818 |
|
| | | | | | 7,540(7) | 142,808 |
|
|
|
|
|
|
| | | 30,160(7) | 571,230 |
|
Alberto L. Satine | 8,000 |
| 26.02 |
| 3/14/2017 | 16,995(3) | 321,885 |
| | |
|
|
|
|
|
| 9,320(4) | 176,521 |
| | |
| | | | 7,490(5) | 141,861 |
| | |
| | | | | | 9,046(6) | 171,331 |
|
| | | | | | 18,092(6) | 342,662 |
|
| | | | | | 3,635(7) | 68,847 |
|
| | | | |
| 14,540(7) | 275,388 |
|
Norman Willemse | 9,700 |
| 10.08 |
| 6/25/2018 | 12,589(3) | 238,436 |
| | |
|
|
|
|
|
| 6,645(4) | 125,856 |
| | |
| | | | 5,521(5) | 104,568 |
| | |
| | | | | | 6,450(6) | 122,163 |
|
| | | | | | 12,900(6) | 244,326 |
|
| | | | | | 2,680(7) | 50,759 |
|
| | | | | | 10,718(7) | 202,999 |
|
| |
(1) | All outstanding options are vested as of December 31, 2015. |
| |
(2) | Reflects value of outstanding RSUs at $18.94, the closing price of AAM common stock on December 31, 2015. |
| |
(3) | Reflects RSUs granted on March 6, 2013 that vested on March 6, 2016. |
| |
(4) | Reflects RSUs granted on March 6, 2014. RSUs vest three years from the date of grant. |
| |
(5) | Reflects RSUs granted on March 2, 2015. RSUs vest three years from the date of grant. |
| |
(6) | Reflects performance shares granted on March 6, 2014 for the performance period January 1, 2014 through December 31, 2016 that would be paid at the end of the performance period based on actual performance through December 31, 2015. The TSR awards reflect a target payout and the EBITDA awards reflect a maximum payout. Payouts will be determined at the end of the performance period based on actual performance. |
| |
(7) | Reflects performance shares granted on March 2, 2015 for the performance period January 1, 2015 through December 31, 2017 that would be paid out at the end of the performance period based on actual performance through December 31, 2015. The TSR award amounts reflect a threshold payout and the EBITDA award reflecta maximum payout. Payouts will be determined at the end of the performance period based on actual performance.
|
| |
(8) | Reflects the value of 2014 and 2015 performance shares based on performance through December 31, 2015 as described above in footnotes (6) and (7) multiplied by the closing price of AAM common stock on December 31, 2015. |
OPTIONS EXERCISED AND STOCK VESTED
|
| | | | | | | | |
| Option Awards | Stock Awards |
Name | Number of Shares Acquired on Exercise (1) (#) | Value Realized on Exercise (1) ($) | Number of Shares Acquired on Vesting(2) (#) | Value Realized on Vesting(3) ($) |
David C. Dauch | — |
| — |
| 101,708 |
| 2,420,267 |
|
Christopher J. May | — |
| — |
| — |
| — |
|
Michael K. Simonte | 10,000 |
| 69,601 |
| 34,466 |
| 865,441 |
|
Alberto L. Satine | — |
| — |
| 13,929 |
| 349,757 |
|
Norman Willemse | — |
| — |
| 13,520 |
| 339,487 |
|
Terry J. Woychowski (4) | — |
| — |
| 23,990 |
| 535,238 |
|
| |
(1) | Reflects the number of shares acquired upon exercise of stock options. Value realized upon exercise is based on the difference between the market price upon exercise and the exercise price of the options. |
| |
(2) | Reflects the number of shares vested in May 2015 under RSU awards granted in May 2012. For Mr. Dauch, also includes the number of shares vested in September 2015 under an RSU award granted in September 2012. |
| |
(3) | Reflects the number of shares underlying vested RSUs multiplied by the closing market price of AAM common stock on the vesting date. |
| |
(4) | Reflects the number of shares (approximately 1/3) that vested ratably in March 2015 under an RSU award granted in March 2013. Amount also includes the pro-rata vesting (at target) of 2/3 of the performance share awards granted in March 2014 and 1/3 of the performance share awards granted in March 2015 in connection with the termination of Mr. Woychowski's employment in December 2015. |
PENSION BENEFITS
The NEOs are eligible to participate in pension plans that provide benefits based on years of service and pay. The following table shows the value of the benefits accumulated by the NEOs (other than Mr. Woychowski) and their years of credited service under AAM’s Salaried Retirement Program (SRP), the Albion Pension Plan and AAM’s Supplemental Executive Retirement Program (SERP), each effective as of December 31, 2015.
|
| | | | |
Name | Plan Name | Number of Years of Credited Service(1) (#) | Present Value of Accumulated Benefit(2) ($) |
David C. Dauch | AAM Retirement Program for Salaried Employees | 11.5000 | 329,766 |
|
AAM Supplemental Executive Retirement Program | 20.5000 | 3,821,527 |
|
Christopher J. May | AAM Retirement Program for Salaried Employees | 12.5000 | 141,795 |
|
AAM Supplemental Executive Retirement Program | 21.5000 | 406,650 |
|
Michael K. Simonte | AAM Retirement Program for Salaried Employees | 8.0833 | 220,170 |
|
AAM Supplemental Executive Retirement Program | 17.0833 | 1,494,233 |
|
Alberto L. Satine(3) | AAM Retirement Program for Salaried Employees | 10.5833 | 504,473 |
|
AAM Supplemental Executive Retirement Program | 14.5833 | 638,564 |
|
Norman Willemse(4) | Albion Pension Plan | 6.3333 | 309,197 |
|
AAM Supplemental Executive Retirement Program | 14.5000 | 583,430 |
|
| |
(1) | The years of credited service are through December 31, 2015. Benefits under the SRP were frozen effective December 31, 2006 for Mr. Dauch, Mr. May and Mr. Simonte. Benefits under the SRP were frozen effective December 31, 2011 for Mr. Satine. As a result, credited service under the SRP is less than actual service with the Company. Credited service under the SERP reflects actual years of service with the Company. |
| |
(2) | The values shown are based on benefits deferred to the earliest age at which unreduced benefits are payable. The assumptions used to calculate the actuarial present value of accumulated benefits are the same assumptions used in our audited consolidated financial statements for the fiscal year ended December 31, 2015 and assume continued employment until unreduced retirement age is attained. For material assumptions used, see Note 5 to the audited consolidated financial statements in our annual report on Form 10-K for the fiscal year ended December 31, 2015. |
| |
(3) | Mr. Satine was eligible to retire on December 31, 2015 under both the SRP and the SERP. He qualifies for a reduced benefit of approximately 61% of the unreduced benefit under the SRP and the lump sum benefit under the SERP. |
| |
(4) | Mr. Willemse is not a participant in the SRP. Mr. Willemse was eligible to retire on December 31, 2015 under both the Albion Pension Plan and the SERP. He qualifies for the lump sum benefit under the SERP. |
Salaried Retirement Program (SRP). The annual retirement benefit payable to each executive, commencing on retirement at or after age 65, equals the sum of the executive’s contributions plus an additional benefit based on the executive’s average monthly salary (determined as the average of the executive’s base salary in the highest 60 months during his final 10 years of service) and years of credited service. Benefits under the SRP may be paid as a single life annuity or, upon election, in the form of a joint and survivor annuity with a reduction in the amount of the annual benefit. The SRP is a qualified plan subject to Internal Revenue Code (IRC) limitations on benefits and is subject to Employee Retirement Income Security Act of 1974.
Effective December 31, 2006, the SRP was amended to freeze benefits at current levels for associates who were not eligible to retire by December 1, 2011. Associates who were eligible for early or normal retirement on or before December 31, 2011 continued to accrue benefits through December 31, 2011.
Albion Pension Plan. Our Albion Automotive Limited subsidiary provides pension benefits under the Albion Pension Plan for its salaried associates. Mr. Willemse is a participant in this plan as based on his former employment with this subsidiary. The annual retirement benefit payable, commencing on retirement at or after age 65, is based on the participant's average salary (as defined in the plan during the final 10 years of service with Albion Automotive Limited), years of pensionable service and the percentage of participant contributions made to the plan. The participant may elect benefits to be in the form of an annuity or to receive a portion of the benefit payable in a lump sum.
Supplemental Executive Retirement Program (SERP). Executive officers who are grandfathered under the SRP are eligible to receive the basic form of pension benefit under the SERP upon retirement. In addition, the executive may be eligible to receive the alternative form of benefit, if greater than the basic benefit, upon retirement at or after age 62. The executive must have at least 10 years of credited service to receive either form of benefit under the SERP.
The total monthly benefit payable under the basic form of SERP is equal to the following amount:
Two percent of the executive’s average monthly salary calculated as of December 31, 2011 (as determined for the SRP excluding the limitations as specified under the IRC), multiplied by the executive’s years of credited service; less
The benefit payable to the executive under the SRP (without reduction for survivor benefits), plus 2% of the maximum monthly social security benefit payable at age 65 multiplied by the executive’s years of credited service.
The Compensation Committee has discretion to reduce or eliminate the amount payable under the alternative form of benefit. Subject to the Compensation Committee’s discretion, the total monthly benefit payable under the alternative form of SERP is equal to the following amount:
1.5% of the executive’s average monthly salary calculated as of December 31, 2011 (as determined for the SRP excluding the limitations as specified under the IRC) and average monthly incentive compensation as of December 31, 2011 (determined as the average of the highest five of the executive’s last 10 annual cash incentive awards, divided by 12) multiplied by the executive’s years of credited service; less
The benefit payable to the executive under the SRP (without reduction for survivor benefits), plus the maximum monthly social security benefit payable at age 65.
SERP benefits payable under the basic and alternative forms are generally paid as a single life annuity. If the executive’s spouse is eligible for survivor benefits under the SRP; however, the executive’s monthly SERP benefit will be reduced and paid in the form of a joint and survivor annuity.
Mr. Dauch, Mr. May, Mr. Simonte and Mr. Willemse, who are not grandfathered under the SRP, are eligible to receive a benefit under the current SERP formula, payable six months after retirement in a lump sum. As a grandfathered participant, Mr. Satine may alternatively be eligible to receive a benefit under the current SERP formula if this benefit is greater than that under the basic or alternative benefit described above. Under the current SERP formula, the amount of the benefit will be equal to 12.5% of the executive’s final average compensation (determined as the executive’s average annual base salary and cash incentive for the highest five consecutive years), multiplied by the executive’s years of credited service, less the sum of the actuarial equivalent value of the executive’s benefits payable under the SRP, Albion Pension Plan and the balance of the executive’s employer retirement contribution account under AAM’s 401(k) plan.
NONQUALIFIED DEFERRED COMPENSATION
The following table summarizes deferred compensation of NEOs under the Executive Deferred Compensation Plan for the 2015 fiscal year.
|
| | | | | | | | | | |
Name | Executive Contributions in Last FY ($) | Registrant contributions in Last FY ($) | Aggregate Earnings In Last FY(1) ($) | Aggregate Withdrawals Distributions ($) | Aggregate Balance at Last FYE(2) ($) |
David C. Dauch | — |
| — |
| 10,307 |
| — |
| 385,522 |
|
Christopher J. May | — |
| — |
| — |
| — |
| — |
|
Michael K. Simonte | — |
| — |
| — |
| — |
| — |
|
Alberto L. Satine | — |
| — |
| — |
| — |
| — |
|
Norman Willemse | — |
| — |
| (1,993 | ) | — |
| 126,703 |
|
Terry J. Woychowski | — |
| — |
| — |
| — |
| — |
|
| |
(1) | Reflects hypothetical accrued earnings or losses during 2015 on notional investments designed to track the performance of funds similar to those available to participants in the Company’s 401(k) plan. None of the earnings shown in this column are reported as compensation in the Summary Compensation Table.
|
| |
(2) | Of the aggregate balance, the amounts reflect compensation previously reported in the Summary Compensation Table for each of the NEOs.
|
Under AAM’s Executive Deferred Compensation Plan, a nonqualified, tax-deferred savings plan, certain executives, including the NEOs, may elect to defer payment of 6% to 75% of their base salary and/or their annual incentive award during any plan year. Base salary deferred into the plan receives a 3% Company match. Matching contributions are vested after five years of credited service. The amounts deferred are unfunded and unsecured obligations of AAM.
Amounts deferred or credited into this plan are represented in the executive’s notional account and are “invested” among funds similar to those available under AAM’s 401(k) plan. Although the executive has no actual or constructive ownership of shares in the investment funds, the return on the executive’s account is determined as if the amounts were notionally invested in these funds.
The table below shows the investment fund options available under the Executive Deferred Compensation Plan and the annual rates of return for the calendar year ended December 31, 2015.
|
| | | | | |
Name of Fund | Rate of Return | Name of Fund | Rate of Return |
Fidelity Retirement Money Market Portfolio | 0.02 | % | Vanguard External Market Index | (3.27 | )% |
PIMCO Total Return Fund | 0.73 | % | Harding Loevner Institutional Emerging Market Fund | (13.47 | )% |
PIMCO High Yield Fund | (1.85 | )% | Fidelity Freedom Income K Fund | (0.32 | )% |
Dreyfus International Bond Fund | (6.39 | )% | Fidelity Freedom K 2005 Fund | (0.17 | )% |
Vanguard Total Bond Market Fund | 0.40 | % | Fidelity Freedom K 2010 Fund | (0.23 | )% |
Domini Social Equity Fund | (6.91 | )% | Fidelity Freedom K 2015 Fund | (0.22 | )% |
Spartan 500 Index Fund | 1.36 | % | Fidelity Freedom K 2020 Fund | (0.14 | )% |
Touchstone Value Y Fund | (1.90 | )% | Fidelity Freedom K 2025 Fund | (0.15 | )% |
T. Rowe Price Growth Stock Fund | 10.85 | % | Fidelity Freedom K 2030 Fund | (0.13 | )% |
Fidelity Growth Company Fund | 7.83 | % | Fidelity Freedom K 2035 Fund | (0.13 | )% |
Fidelity Low-Priced Stock Fund | (0.45 | )% | Fidelity Freedom K 2040 Fund | (0.12 | )% |
Nuveen Mid Cap Growth Opportunities | (0.60 | )% | Fidelity Freedom K 2045 Fund | (0.14 | )% |
American Beacon Small Cap Value Fund | (5.04 | )% | Fidelity Freedom K 2050 Fund | 0.15 | % |
Royce PA Mutual Fund | (11.34 | )% | Fidelity Freedom K 2055 Fund | (0.11 | )% |
Fidelity Diversified International Fund | 3.24 | % | Spartan International Index Fund | (0.79 | )% |
Distributions can be received (1) upon retirement in a lump sum or in annual payments over a period of five or ten years, (2) in a lump sum upon death, disability, termination of employment or change in control or (3) if elected by the participant, during employment at a specified date after a minimum deferral period. The minimum deferral period is at least three years following the end of the plan year to which the deferral election relates and distributions during employment consist of participant deferrals and related earnings or losses (not Company contributions and related earnings or losses).
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The following tables show the estimated potential payments and benefits that each of the NEOs (other than Mr. Woychowski) would receive upon termination of employment under various circumstances that would trigger payments under applicable employment agreements and the Company’s plans and programs, assuming the termination event occurred on December 31, 2015. Although the calculations are intended to provide reasonable estimates of the potential payments, they are based on numerous assumptions and may not represent the actual amounts these NEOs would receive upon each termination event. For Mr. Woychowski, the table shows actual payments made in connection with termination of his employment without cause as of December 9, 2015.
Employment Agreements
Severance benefits are provided to Mr. Dauch and Mr. Simonte under the terms of each of their employment agreements. In connection with the adoption of the Severance Plan in April 2018, their employment agreements were amended to align the calculation of cash severance payable with that of the Severance Plan. Accordingly, severance calculations under the amended employment agreements include a target annual bonus (in addition to base salary) and a prorated annual target bonus for the year of termination. Severance payments will be paid in a lump sum to the extent allowable under Section 409A.
Executive Compensation Recoupment (Clawback) Policy
The clawback policy authorizes the Committee to determine whether to require recoupment of performance-based incentive compensation actually paid or awarded to any executive officer if certain conditions are met. For purposes of this policy, performance-based compensation includes all annual and long-term incentive awards, whether paid in cash or equity, to the extent the awards are based on the Company's financial performance.
The Committee may require recoupment if the executive officer engaged in fraud or intentional misconduct that caused or contributed to the need for a material restatement of the Company's financial statements filed with the SEC. If the Committee determines that any performance-based compensation paid or awarded to the executive officer would not have been awarded or would have been awarded at a lower amount had it been calculated based on such restated financial statements (adjusted compensation), the Committee may seek to recover for the benefit of the Company the excess of the awarded compensation over the adjusted compensation (excess compensation). In deciding whether to seek recovery of excess compensation from the executive officer, the
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| Compensation Discussion and Analysis |
Committee will consider the factors it deems relevant under the circumstances and whether the assertion of a claim is in the best interests of the Company.
Executive Officer Stock Ownership Requirements
Our stock ownership policy is an important feature of our compensation philosophy that helps to ensure alignment of our executives' interests with those of our stockholders. The stock ownership requirement for each executive is based on the executive's position as described below.
|
| | |
| Multiple of Base Salary |
|
Chief Executive Officer | 6 |
|
Chief Financial Officer; President | 3 |
|
Other Executive Officers | 2 |
|
Executive officers have five years from 2017 to meet these requirements or, for new executive officers, five years from the date of appointment. Shares owned directly, unvested RSUs and performance shares (at target) count toward the requirement. These ownership levels must be maintained as long as the person is an executive officer of AAM. NEOs who have not met these requirements may not sell shares. The Committee annually reviews each executive officer’s stock ownership level according to this policy. Each NEO has met or is on track to meet the ownership requirements established for his position.
Anti-Hedging and Anti-Pledging Policy
AAM prohibits employees and non-employee directors from entering into transactions that may result in a financial benefit if our stock price declines, or any hedging transaction involving our stock, including the use of financial derivatives, short sales or any similar transactions. Pledging of AAM stock is also prohibited.
Risk Assessment of Compensation Policies and Practices
We conducted an annual risk assessment for the Committee to determine whether the risks arising from our 2018 compensation practices are reasonably likely to have a material adverse effect on the Company. The risk assessment considered AAM’s annual and long-term incentive programs and pay mix, performance measures used to calculate payouts, and pay philosophy and governance. Our annual assessment focuses on the program for executive officers in light of their decision-making authority and influence, but also considers the compensation of other salaried associates. Our methodology was reviewed by the Committee and Meridian.
We have designed our compensation programs with specific features to address potential risks while rewarding our executive officers and other associates for achieving long-term financial and strategic objectives through prudent business judgment and appropriate risk taking. Based on our risk assessment and consideration of various mitigating factors, we concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
Tax Deductibility of Compensation
Section 162(m) of the Code (Section 162(m)) generally disallows a tax deduction to public companies for compensation over $1 million paid to certain “covered employees.” Pursuant to the Tax Cuts and Jobs Act, enacted on December 22, 2017, the definition of “covered employees” under Section 162(m) includes a company's CEO, CFO and the three other most highly compensated executive officers. Once an officer is a “covered employee,” the officer’s pay will remain subject to Section 162(m) for so long as the officer is receiving compensation from the Company. Further, the Tax Cuts and Jobs Act repealed the exclusion for “qualified performance-based compensation” under Section 162(m) effective January 1, 2018, except for compensation payable pursuant to a written binding contract in place before November 2, 2017 that is not materially modified thereafter (a grandfathered arrangement). The Company can no longer grant qualified performance-based compensation. Outstanding awards that previously qualified for the performance-based compensation exclusion under Section 162(m) may or may not qualify as grandfathered awards.
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| |
| Compensation Committee Report |
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|
Compensation Committee Report |
We have reviewed and discussed the Compensation Discussion and Analysis with management. Based on such review and discussion, we recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
Compensation Committee of the Board of Directors
James A. McCaslin, Chair
William L. Kozyra
Peter D. Lyons
Sandra E. Pierce
Samuel Valenti III
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| |
| Executive Compensation Tables |
|
|
Executive Compensation Tables |
Summary Compensation Table
The following table summarizes the compensation of our named executive officers (NEOs) for the fiscal years ended December 31, 2018, December 31, 2017 and December 31, 2016 to the extent they served as NEOs in such years.
|
| | | | | | | | | | | | | | | | | |
Name and Principal Position | Year | Salary ($) |
| Bonus ($) |
| Stock Awards(2) ($) |
| Options Awards ($) |
| Non-Equity Incentive Plan Compen- sation(3) ($) |
| Change in Pension Value And Nonqualified Deferred Compensation Earnings(4) ($) |
| All Other Compen- sation(5) ($) |
| Total ($) |
|
David C. Dauch(1) Chairman & Chief Executive Officer | 2018 | 1,150,000 |
| — |
| 5,700,848 |
| — |
| 1,350,700 |
| 1,168,373 |
| 99,378 |
| 9,469,299 |
|
2017 | 1,150,000 |
| — |
| 7,319,937 |
| — |
| 2,819,000 |
| 1,869,698 |
| 86,982 |
| 13,245,617 |
|
2016 | 1,150,000 |
| — |
| 5,617,069 |
| — |
| 2,875,000 |
| 1,385,652 |
| 74,599 |
| 11,102,320 |
|
Christopher J. May Vice President & Chief Financial Officer | 2018 | 550,000 |
| — |
| 1,363,250 |
| — |
| 382,800 |
| 278,969 |
| 47,939 |
| 2,622,958 |
|
2017 | 478,003 |
| — |
| 582,790 |
| — |
| 693,800 |
| 397,791 |
| 44,586 |
| 2,196,970 |
|
2016 | 391,667 |
| — |
| 488,450 |
| — |
| 480,000 |
| 231,058 |
| 47,641 |
| 1,638,816 |
|
Michael K. Simonte President | 2018 | 750,000 |
| — |
| 2,230,775 |
| — |
| 652,500 |
| 517,163 |
| 66,424 |
| 4,216,862 |
|
2017 | 727,300 |
| — |
| 2,144,593 |
| — |
| 1,387,500 |
| 720,741 |
| 56,779 |
| 5,036,913 |
|
2016 | 640,000 |
| — |
| 1,797,486 |
| — |
| 1,280,000 |
| 397,940 |
| 50,836 |
| 4,166,262 |
|
Alberto L. Satine President Electrification(6) | 2018 | 610,000 |
| — |
| 1,209,580 |
| — |
| 424,600 |
| 250,024 |
| 61,972 |
| 2,556,176 |
|
2017 | 588,825 |
| — |
| 1,114,572 |
| — |
| 902,800 |
| 482,501 |
| 59,099 |
| 3,147,797 |
|
2016 | 510,000 |
| — |
| 934,146 |
| — |
| 814,500 |
| 280,651 |
| 58,130 |
| 2,597,427 |
|
Norman Willemse President Metal Forming(7) | 2018 | 530,000 |
| — |
| 1,050,955 |
| — |
| 368,900 |
| 227,486 |
| 50,203 |
| 2,227,544 |
|
2017 | 513,378 |
| — |
| 983,438 |
| — |
| 784,400 |
| 380,281 |
| 34,521 |
| 2,696,018 |
|
2016 | 450,000 |
| — |
| 824,283 |
| — |
| 720,000 |
| 236,980 |
| 33,925 |
| 2,265,188 |
|
| |
(1) | Compensation of Mr. Dauch is based solely on employment as an executive officer. He received no compensation for serving as a director. |
| |
(2) | Reflects the grant date fair value of restricted stock units and performance share awards made during fiscal year 2018 calculated in accordance with FASB ASC 718 (without any reduction for risk of forfeiture) as determined based on applying the assumptions used in our financial statements. See Note 10 to the audited consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2018 regarding assumptions underlying the valuation of equity awards. Assuming the maximum performance levels are achieved for the performance share awards granted on March 2, 2018, the maximum value of performance share awards would be $7,590,048 for Mr. Dauch, $1,814,988 for Mr. May, $2,970,012 for Mr. Simonte, $1,610,441 for Mr. Satine and $1,399,212 for Mr. Willemse based on grant date fair value. These amounts may not reflect the actual value realized upon vesting or settlement, if any. |
| |
(3) | Reflects amounts earned under the AAM Incentive Compensation Plan for Executive Officers for 2018. |
| |
(4) | Reflects the annualized increase in pension value under the Salaried Retirement Program, the Albion Pension Plan and the Supplemental Executive Retirement Program (SERP). See Pension Benefits Table. There are no above-market or preferential earnings on compensation deferred under our Executive Deferred Compensation Plan. |
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| Executive Compensation Tables |
| |
(5) | The components of All Other Compensation for 2018 are as follows: |
|
| | | | | | | | | | | | | | |
Name | Employer 401(k) Match Contributions(a) ($) |
| Retirement Contributions(b) ($) |
| Executive Life Insurance Premiums(c) ($) |
| Company-Provided Vehicles(d) ($) |
| Tax Gross Ups for Spousal Travel(e) ($) |
| Other(f) ($) |
| Total ($) |
|
David C. Dauch | 13,750 |
| 13,750 |
| 13,690 |
| 32,016 |
| 9,554 |
| 16,618 |
| 99,378 |
|
Christopher J. May | 13,750 |
| 13,750 |
| 3,229 |
| 16,587 |
| — |
| 623 |
| 47,939 |
|
Michael K. Simonte | 13,750 |
| 13,750 |
| 8,510 |
| 26,976 |
| — |
| 3,438 |
| 66,424 |
|
Alberto L. Satine | 13,750 |
| 13,750 |
| 11,884 |
| 20,555 |
| — |
| 2,033 |
| 61,972 |
|
Norman Willemse | 13,583 |
| 13,750 |
| 10,526 |
| 11,721 |
| — |
| 623 |
| 50,203 |
|
(a)Includes employer matching contributions under AAM’s 401(k) plan.
(b)Includes employer retirement contributions under AAM’s 401(k) plan.
(c)Includes executive life insurance premiums paid by the Company.
| |
(d) | Includes personal use of Company-provided vehicles. The aggregate incremental cost of Company-provided vehicles is based on total vehicle cost if business use of the vehicle is less than 50%. For Mr. Dauch, includes the cost of personal use of a second Company-provided vehicle. |
| |
(e) | Includes amounts reimbursed for taxes attributable to the income associated with the cost of travel for spouse accompanying the NEO to Company business meetings and events. |
| |
(f) | For Mr. Dauch, includes $11,772 for the cost of travel for spouse accompanying him to Company business meetings or events, personal umbrella liability insurance premiums, cost of an executive physical and meals provided during business hours. For Mr. Simonte and Mr. Satine, includes the cost of personal umbrella liability insurance premiums and the cost of an executive physical. For Mr. May and Mr. Willemse, includes the cost of personal umbrella liability insurance premiums. |
(6) Effective January 16, 2019, Mr. Satine's title was changed to Senior Vice President Special Projects.
(7) Mr. Willemse was not an NEO in 2017.
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| |
| Executive Compensation Tables |
Grants of Plan-Based Awards
Annual and long-term incentive awards granted in 2018 to the NEOs are shown in the following table. The annual and long-term incentive compensation programs are described in the Compensation Discussion and Analysis and the Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table.
|
| | | | | | | | | | | | | | | | | | | | |
| | | Estimated Future Payouts under Non Equity Incentive Plan Awards(1) | Estimated Future Payouts under Equity Incentive Plan Awards(2) | | |
Name | Grant Date |
| Approval Date |
| Threshold ($) |
| Target ($) |
| Maximum ($) |
| Threshold (#) |
| Target (#) |
| Maximum (#) |
| All Other Stock Awards: Number of Shares of Stock or Units(3) (#) |
| Grant Date Fair Value of Stock and Option Awards(4) ($) |
|
David C. Dauch | | | | | | | | | | |
Annual Incentive | — |
| — |
| 776,250 |
| 1,552,500 |
| 3,105,000 |
| — |
| — |
| — |
| — |
| — |
|
Performance Shares (TSR) | 3/2/2018 | 2/7/2018 | — |
| — |
| — |
| 66,440 |
| 132,879 |
| 265,758 |
| — |
| 1,848,347 |
|
Performance Shares (Free Cash Flow) | 3/2/2018 | 2/7/2018 | — |
| — |
| — |
| 66,440 |
| 132,879 |
| 265,758 |
| — |
| 1,897,512 |
|
Restricted Stock Units | 3/2/2018 | 2/7/2018 | — |
| — |
| — |
| — |
| — |
| — |
| 136,904 |
| 1,954,989 |
|
Christopher J. May | | | | | | | | | | |
Annual Incentive | — |
| — |
| 220,000 |
| 440,000 |
| 880,000 |
| — |
| — |
| — |
| — |
| — |
|
Performance Shares (TSR) | 3/2/2018 | 2/7/2018 | — |
| — |
| — |
| 15,888 |
| 31,775 |
| 63,550 |
| — |
| 441,990 |
|
Performance Shares (Free Cash Flow) | 3/2/2018 | 2/7/2018 | — |
| — |
| — |
| 15,888 |
| 31,775 |
| 63,550 |
| — |
| 453,747 |
|
Restricted Stock Units | 3/2/2018 | 2/7/2018 | — |
| — |
| — |
| — |
| — |
| — |
| 32,739 |
| 467,513 |
|
Michael K. Simonte | | | | | | | | | | |
Annual Incentive | — |
| — |
| 375,000 |
| 750,000 |
| 1,500,000 |
| — |
| — |
| — |
| — |
| — |
|
Performance Shares (TSR) | 3/2/2018 | 2/7/2018 | — |
| — |
| — |
| 25,998 |
| 51,996 |
| 103,992 |
| — |
| 723,264 |
|
Performance Shares (Free Cash Flow) | 3/2/2018 | 2/7/2018 | — |
| — |
| — |
| 25,998 |
| 51,996 |
| 103,992 |
| — |
| 742,503 |
|
Restricted Stock Units | 3/2/2018 | 2/7/2018 | — |
| — |
| — |
| — |
| — |
| — |
| 53,572 |
| 765,008 |
|
Alberto L. Satine | | | | | | | | | | |
Annual Incentive | — |
| — |
| 244,000 |
| 488,000 |
| 976,000 |
| — |
| — |
| — |
| — |
| — |
|
Performance Shares (TSR) | 3/2/2018 | 2/7/2018 | — |
| — |
| — |
| 14,097 |
| 28,194 |
| 56,388 |
| — |
| 392,179 |
|
Performance Shares (Free Cash Flow) | 3/2/2018 | 2/7/2018 | — |
| — |
| — |
| 14,097 |
| 28,194 |
| 56,388 |
| — |
| 402,610 |
|
Restricted Stock Units | 3/2/2018 | 2/7/2018 | — |
| — |
| — |
| — |
| — |
| — |
| 29,047 |
| 414,791 |
|
Norman Willemse | | | | | | | | | | |
Annual Incentive | — |
| — |
| 212,000 |
| 424,000 |
| 848,000 |
| — |
| — |
| — |
| — |
| — |
|
Performance Shares (TSR) | 3/2/2018 | 2/7/2018 | — |
| — |
| — |
| 12,248 |
| 24,496 |
| 48,992 |
| — |
| 340,739 |
|
Performance Shares (Free Cash Flow) | 3/2/2018 | 2/7/2018 | — |
| — |
| — |
| 12,248 |
| 24,496 |
| 48,992 |
| — |
| 349,803 |
|
Restricted Stock Units | 3/2/2018 | 2/7/2018 | — |
| — |
| — |
| — |
| — |
| — |
| 25,239 |
| 360,413 |
|
| |
(1) | Reflects annual incentive awards granted under the AAM Incentive Compensation Program for Executive Officers. |
| |
(2) | Reflects performance share awards granted under the 2012 Omnibus Incentive Plan. The awards are payable in common stock based on the Company's free cash flow and relative TSR performance, each weighted 50%, over the 3-year performance period January 1, 2018 through December 31, 2020. |
| |
(3) | Reflects RSUs granted under the 2012 Omnibus Incentive Plan. The awards are payable in common stock, contingent upon continued employment through the 3-year vesting period. No options were granted in 2018. |
| |
(4) | Reflects the full grant date fair value of performance share awards and RSUs made during fiscal year 2018 calculated in accordance with FASB ASC 718 (without any reduction for risk of forfeiture) as determined based on applying the assumptions used in our financial statements. See Note 10 to the audited consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2018 regarding assumptions underlying the valuation of equity awards. |
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| Executive Compensation Tables |
Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table
Employment Agreements
Our employment agreements with Mr. Dauch as CEO and Mr. Simonte as President provide for the following compensation and benefits as of December 31, 2018.
|
| | |
| CEO Employment Agreement | President Employment Agreement |
Base Salary | $1,150,000 for 2018, subject to annual review and increase by the Compensation Committee | $750,000 for 2018, subject to annual review and increase by the Compensation Committee |
Annual Incentive | Participation in the annual incentive plan for executive officers. Target opportunity of 135% of base salary for 2018, subject to annual review and increase by the Compensation Committee | Participation in the annual incentive plan for executive officers. Target opportunity of 100% of base salary for 2018, subject to annual review and increase by the Compensation Committee |
Long-Term Incentive | Participation in the long-term incentive plans for executive officers. Target opportunity of 500% for 2018, subject to annual review and increase by the Compensation Committee | Participation in the long-term incentive plans for executive officers. Target opportunity of 300% for 2018, subject to annual review and increase by the Compensation Committee |
Other Benefits | Participation in plans applicable to executive officers. Retiree medical, dental and vision coverage equivalent to the benefit levels offered in the Company's group health care plans for salaried associates as of September 1, 2012 | Participation in plans applicable to executive officers |
Term | Initial term expired August 31, 2015. Additional one-year extensions unless either party provides 60 days' written notice of intent not to renew | Initial term expired July 31, 2018. Additional one-year extensions unless either party provides 60 days' written notice of intent not to renew |
Mr. Dauch and Mr. Simonte are also entitled to certain payments and benefits in the event of termination of employment under the scenarios described below in Potential Payments Upon Termination or Change in Control.
Annual Incentive Awards
In 2018, annual incentive awards were granted under the AAM Incentive Compensation Program for Executive Officers. Absolute EBITDA was selected as sole performance metric for these awards. The maximum payout for each performance metric is 200%. See Annual Incentive Compensation in the CD&A.
Long-Term Incentive Awards
In 2018, the Company granted long-term incentive awards to NEOs in the form of RSUs and performance share awards. The terms of these awards are described in Long-Term Incentive Compensation in the CD&A.
2018 Awards Granted Under the 2012 Omnibus Incentive Plan
Restricted Stock Units
The RSUs granted in 2018 to NEOs vest in three years. All RSUs are payable in common stock.
Performance Share Awards
The performance share awards granted to NEOs in 2018 are based upon the attainment of certain Free Cash Flow performance targets and relative TSR over a three-year performance period beginning January 1, 2018 through December 31, 2020. The performance share awards represented 66% of the total LTI award opportunity for executive officers. One-half of the 2018 performance share payouts, or 33% of the total LTI award, will be measured by Free Cash Flow performance and one-half, or 33% of the total LTI award, will be measured by relative TSR performance over a three-year period. TSR performance share payouts will be capped if the Company's TSR is negative for the three-year period. All performance shares are payable in common stock.
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| Executive Compensation Tables |
The following table illustrates the threshold, target and maximum performance levels for determining 2018 award payouts for each performance measure.
|
| | | | | | | | | |
| Free Cash Flow | | Relative TSR |
Performance Level | 3-Year Cumulative Free Cash Flow | | Percent of Target Award Opportunity Earned |
| | Company TSR Percentile Rank | | Percent of Target Award Opportunity Earned |
|
Threshold | $990 million | | 50 | % | | 35th | | 50 | % |
Target | $1,325 million | | 100 | % | | 50th | | 100 | % |
Maximum | $1,525 million | | 200 | % | | 75th | | 200 | % |
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| |
| Executive Compensation Tables |
Outstanding Equity Awards at December 31, 2018
|
| | | | | | | |
| Stock Awards |
Name | Number of Shares or Units of Stock That Have Not Vested (#) |
| Market Value of Shares or Units of Stock That Have Not Vested(1) ($) |
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market of Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(7) |
|
David C. Dauch | 101,361(2) |
| 1,125,107 |
| 43,082(5) | 478,210 |
|
| 88,774(3) |
| 985,391 |
| 172,326(5) | 1,912,819 |
|
| 136,904(4) |
| 1,519,635 |
| 66,440(6) | 737,484 |
|
| — |
| — |
| 132,879(6) | 1,474,957 |
|
Christopher J. May | 8,814(2) |
| 97,835 |
| 3,430(5) | 38,073 |
|
| 7,068(3) |
| 78,455 |
| 13,720(5) | 152,292 |
|
| 32,739(4) |
| 363,403 |
| 15,888(6) | 176,357 |
|
| — |
| — |
| 31,775(6) | 352,703 |
|
Michael K. Simonte | 32,436(2) |
| 360,040 |
| 12,622(5) | 140,104 |
|
| 26,009(3) |
| 288,700 |
| 50,488(5) | 560,417 |
|
| 53,572(4) |
| 594,649 |
| 25,998(6) | 288,578 |
|
| — |
| — |
| 51,996(6) | 577,156 |
|
Alberto L. Satine | 16,857(2) |
| 187,113 |
| 6,560(5) | 72,816 |
|
| 13,516(3) |
| 150,028 |
| 26,240(5) | 291,264 |
|
| 29,047(4) |
| 322,422 |
| 14,097(6) | 156,477 |
|
| — |
| — |
| 28,194(6) | 312,953 |
|
Norman Willemse | 14,874(2) |
| 165,101 |
| 5,788(5) | 64,247 |
|
| 11,927(3) |
| 132,390 |
| 23,152(5) | 256,987 |
|
| 25,239(4) |
| 280,153 |
| 12,248(6) | 135,953 |
|
| — |
| — |
| 24,496(6) | 271,906 |
|
| |
(1) | Reflects value of outstanding RSUs at $11.10, the closing price of AAM common stock on December 31, 2018. |
| |
(2) | Reflects RSUs granted on March 4, 2016 that vested on March 4, 2019. |
| |
(3) | Reflects RSUs granted on February 28, 2017. RSUs vest three years from the date of grant. |
| |
(4) | Reflects RSUs granted on March 2, 2018. RSUs vest three years from the date of grant. |
| |
(5) | Reflects performance shares granted on February 28, 2017 for the performance period January 1, 2017 through December 31, 2019 that would be paid out at the end of the performance period based on actual performance through December 31, 2018. The relative TSR award amounts reflect a threshold payout and the EBITDA margin award amounts reflect a maximum payout. Payouts will be determined at the end of the performance period based on actual performance. |
| |
(6) | Reflects performance shares granted on March 2, 2018 for the performance period January 1, 2018 through December 31, 2020 that would be paid out at the end of the performance period based on actual performance through December 31, 2018. The relative TSR award amounts reflect a threshold payout and the free cash flow awards reflect a target payout. Payouts will be determined at the end of the performance period based on actual performance. |
| |
(7) | Reflects the value of 2017 and 2018 performance shares based on performance through December 31, 2018 as described above in footnotes (5) and (6) multiplied by $11.10, the closing price of AAM common stock on December 31, 2018. |
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| Executive Compensation Tables |
Options Exercised and Stock Vested
|
| | | | | | | | |
| Option Awards | Stock Awards |
Name | Number of Shares Acquired on Exercise (1) (#) |
| Value Realized on Exercise (1) ($) |
| Number of Shares Acquired on Vesting(2) (#) |
| Value Realized on Vesting(3) ($) |
|
David C. Dauch | — |
| — |
| 254,830 |
| 3,013,276 |
|
Christopher J. May | — |
| — |
| 22,985 |
| 273,816 |
|
Michael K. Simonte | — |
| — |
| 78,501 |
| 920,769 |
|
Alberto L. Satine | — |
| — |
| 40,212 |
| 470,171 |
|
Norman Willemse | 9,700 |
| 54,087 |
| 34,395 |
| 399,341 |
|
| |
(1) | Reflects the number of shares acquired upon exercise of stock options. Value realized upon exercise is based on the difference between the market price of AAM common stock acquired upon exercise and the exercise price for such stock options on the exercise date. |
| |
(2) | Reflects the number of shares vested in March 2018 under RSU awards granted in March 2015. Also includes the number of performance shares earned for the performance period ending December 31, 2018. |
| |
(3) | Reflects the number of shares underlying vested RSUs multiplied by the closing market price of AAM common stock on the vesting date. Also includes the number of performance shares earned for the period ending December 31, 2018 multiplied by the closing market price of AAM common stock at December 31, 2018. See Compensation Discussion and Analysis for further detail of the payouts earned. |
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Pension Benefits
The NEOs are eligible to participate in pension plans that provide benefits based on years of service and pay. Pension benefits are provided under a qualified defined benefit pension plan, AAM's Salaried Retirement Program (SRP) and for Mr. Willemse, the Albion Pension Plan. Supplemental pension benefits are provided under the nonqualified Supplemental Executive Retirement Program (SERP).
In 2018, the SERP was amended to freeze further benefit accruals as of April 30, 2018. The amendment also froze the plan to new participants as of April 1, 2018. Frozen benefits will pay out in accordance with the SERP's terms.
The following table shows the value of the benefits accumulated by the NEOs and their years of credited service under the SRP, the Albion Pension Plan and the SERP, each as of December 31, 2018. |
| | | | | |
Name | Plan Name | Number of Years of Credited Service(1) (#) |
| Present Value of Accumulated Benefit(2) ($) |
|
David C. Dauch | AAM Salaried Retirement Program | 11.5000 |
| 378,924 |
|
AAM Supplemental Executive Retirement Program | 22.8333 |
| 8,196,092 |
|
Christopher J. May | AAM Salaried Retirement Program | 12.5000 |
| 163,827 |
|
AAM Supplemental Executive Retirement Program | 23.8333 |
| 1,292,436 |
|
Michael K. Simonte | AAM Salaried Retirement Program | 8.0833 |
| 252,912 |
|
AAM Supplemental Executive Retirement Program | 19.4166 |
| 3,097,335 |
|
Alberto L. Satine(3) | AAM Salaried Retirement Program | 10.5833 |
| 680,327 |
|
AAM Supplemental Executive Retirement Program | 16.9166 |
| 1,475,886 |
|
Norman Willemse(4) | Albion Pension Plan | 6.3333 |
| 319,629 |
|
AAM Supplemental Executive Retirement Program | 17.0000 |
| 1,417,745 |
|
| |
(1) | Benefits under the SRP were frozen effective December 31, 2006 for Mr. Dauch, Mr. May and Mr. Simonte. Benefits under the SRP were frozen effective December 31, 2011 for Mr. Satine. Benefits for Mr. Willemse under the Albion Pension Plan reflect his years of service with our UK subsidiary, Albion Automotive Limited. Credited service under the SERP reflects service through the freeze date of April 30, 2018. As a result, credited service under the SRP, the Albion Pension Plan and the SERP is less than actual service with the Company. |
| |
(2) | The values shown are based on benefits deferred to the earliest age at which unreduced benefits are payable. The assumptions used to calculate the actuarial present value of accumulated benefits are the same assumptions used in our audited consolidated financial statements for the fiscal year ended December 31, 2018 and assume continued employment until unreduced retirement age is attained. For material assumptions used, see Note 9 to the audited consolidated financial statements in our annual report on Form 10-K for the fiscal year ended December 31, 2018. |
| |
(3) | Mr. Satine was eligible to retire on December 31, 2018 under both the SRP and the SERP. He qualifies for an unreduced benefit under the SRP and the lump sum benefit under the SERP. |
| |
(4) | Mr. Willemse is not a participant in the SRP. Mr. Willemse was eligible to retire on December 31, 2018 under both the Albion Pension Plan and the SERP. He qualifies for the lump sum benefit under the SERP. |
Salaried Retirement Program (SRP). The annual retirement benefit payable to each executive, commencing on retirement at or after age 65, equals the sum of the executive’s contributions plus an additional benefit based on the executive’s average monthly salary (determined as the average of the executive’s base salary in the highest 60 months during his final 10 years of service) and years of credited service. Benefits under the SRP may be paid as a single life annuity or, upon election, in the form of a joint and survivor annuity with a reduction in the amount of the annual benefit. The SRP is a qualified plan subject to Internal Revenue Code (IRC) limitations on benefits and is subject to the Employee Retirement Income Security Act of 1974.
Effective December 31, 2006, the SRP was amended to freeze benefits at current levels for associates who were not eligible to retire by December 1, 2011. Associates who were eligible for early or normal retirement on or before December 31, 2011 continued to accrue benefits through December 31, 2011.
Albion Pension Plan. Our Albion Automotive Limited subsidiary provides pension benefits under the Albion Pension Plan for its salaried associates. Mr. Willemse is a participant in this plan based on his former employment with this subsidiary. The annual retirement benefit payable, commencing on retirement at or after age 65, is based on the participant's average salary (as defined in the plan during the final 10 years of service with Albion Automotive
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Limited), years of pensionable service and the percentage of participant contributions to the plan. The participant may elect benefits to be in the form of an annuity or to receive a portion of the benefit payable in a lump sum.
Supplemental Executive Retirement Program (SERP). Executive officers who were hired before April 1, 2018 are eligible to receive a benefit under the SERP, payable six months after retirement in a lump sum. The now frozen SERP benefit amount was determined as of April 30, 3018 as 12.5% of the executive’s final average compensation (determined as the executive’s average annual base salary and cash incentive for the highest five consecutive years), multiplied by the executive’s years of credited service, less the sum of the actuarial equivalent value of the executive’s benefits payable under the SRP, the Albion Pension Plan and the balance of the executive’s employer retirement contribution account under AAM’s 401(k) plan.
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Nonqualified Deferred Compensation
The following table summarizes deferred compensation of NEOs under the Executive Deferred Compensation Plan (EDC) for the 2018 fiscal year.
|
| | | | | | | | | | |
Name | Executive Contributions in Last FY ($) |
| Registrant contributions in Last FY ($) |
| Aggregate Earnings In Last FY(1) ($) |
| Aggregate Withdrawals Distributions ($) |
| Aggregate Balance at Last FYE(2) ($) |
|
David C. Dauch | — |
| — |
| (28,523 | ) | — |
| 453,948 |
|
Christopher J. May | — |
| — |
| — |
| — |
| — |
|
Michael K. Simonte | — |
| — |
| — |
| — |
| — |
|
Alberto L. Satine | — |
| — |
| — |
| — |
| — |
|
Norman Willemse | — |
| — |
| (8,891 | ) | — |
| 97,086 |
|
| |
(1) | Reflects hypothetical accrued earnings or losses during 2018 on notional investments designed to track the performance of funds similar to those available under the Company’s 401(k) plan. None of the earnings shown in this column are reported as compensation in the Summary Compensation Table. |
| |
(2) | Of the aggregate balance, the amounts reflect compensation previously reported in the Summary Compensation Table for the NEOs. |
Executive Deferred Compensation Plan
The EDC is a nonqualified, tax-deferred savings plan for certain executives, including the NEOs. In April 2018, the EDC was amended to freeze further deferrals as of December 31, 2018. The amendment also froze the plan to new participants as of April 1, 2018.
Participants may elect to defer payment of 6% to 75% of their base salary and/or their annual incentive award during a plan year. Base salary deferred into the plan receives a 3% Company match. Matching contributions are vested after five years of credited service. The amounts deferred are unfunded and unsecured obligations of AAM.
Amounts deferred or credited into this plan are represented in the executive’s notional account and are “invested” among funds also available under AAM’s 401(k) plan. Although the executive has no actual or constructive ownership of shares in the investment funds, the return on the executive’s account is determined as if the amounts were notionally invested in these funds.
Distributions can be received (1) upon retirement in a lump sum or in annual payments over a period of five or ten years, (2) in a lump sum upon death, disability, termination of employment or change in control or (3) if elected by the participant, during employment at a specified date after a minimum deferral period of three years. Distributions during employment consist of participant deferrals and related earnings or losses (not Company contributions and related earnings or losses).
Executive Retirement Savings Plan
In connection with freezing the SERP and the EDC, we adopted the AAM Executive Retirement Savings Plan (ERSP) effective as of January 1, 2019. The ERSP is a nonqualified deferred compensation program contributed to by the Company to provide certain highly-compensated associates, including the NEOs, the opportunity to receive supplemental deferred compensation upon retirement and certain other qualifying events. The ERSP does not provide for participant contributions.
ERSP eligible executives will receive an annual contribution to their account equal to 10% of combined base salary and bonus paid during a calendar year less their maximum eligible 401(k) Company contributions. In addition, certain participants, including the NEOs, are eligible to receive an additional Company contribution equal to 12.5% of base salary and bonus paid for a period of 5 calendar years. The Company also may make discretionary contributions.
Amounts deferred or credited into this plan are represented in the executive’s notional account and are “invested” among funds also available under AAM’s 401(k) plan. Although the executive has no actual or constructive ownership of shares in the investment funds, the return on the executive’s account is determined as if the amounts were notionally invested in these funds.
ERSP contributions and account balances vest at the earliest of the following:
| |
– | Age 55 with 10 years of service; |
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– | Age 60 with 5 years of service; or |
Distributions can be received in a lump sum or in annual installments of two to ten years, or in a lump sum upon death, disability, termination of employment or change in control.
No contributions were made to this plan in 2018.
Investment Options
In April 2018, the investment fund options under AAM's 401(k) plan were changed. The new funds selected were replaced with similar fund options. The table below shows the investment fund options available under the EDC and the ERSP as of December 31, 2018 and the related annual rates of return for the year ended December 31, 2018.
|
| | | | | | |
Name of Fund | Rate of Return |
| | Name of Fund | Rate of Return |
|
PIMCO Total Return Fund | (0.26 | )% | | Hartford International Opportunities Fund | (18.74 | )% |
PIMCO High Yield Fund | (2.49 | )% | | Victory Sycamore Established Value Fund | (9.95 | )% |
Dreyfus International Bond Fund | (5.79 | )% | | FIAM Blend Target Date 2005 Fund | (2.22 | )% |
Vanguard Total Bond Market Index Fund | (0.01 | )% | | FIAM Blend Target Date 2010 Fund | (3.16 | )% |
Fidelity 500 Index Fund | (4.40 | )% | | FIAM Blend Target Date 2015 Fund | (4.02 | )% |
MFS Value Fund | (9.87 | )% | | FIAM Blend Target Date 2020 Fund | (4.76 | )% |
Vanguard FTSE Social Index Fund | (3.38 | )% | | FIAM Blend Target Date 2025 Fund | (5.45 | )% |
Fidelity Growth Company Fund | (4.46 | )% | | FIAM Blend Target Date 2030 Fund | (6.54 | )% |
Fidelity Low-Priced Stock Fund | (10.68 | )% | | FIAM Blend Target Date 2035 Fund | (7.83 | )% |
Eaton Vance Atlanta Capital SMID Fund | (5.35 | )% | | FIAM Blend Target Date 2040 Fund | (8.44 | )% |
Vanguard External Market Index Fund | (9.35 | )% | | FIAM Blend Target Date 2045 Fund | (8.46 | )% |
American Beacon Small Cap Value Fund | (15.63 | )% | | FIAM Blend Target Date 2050 Fund | (8.41 | )% |
Janus Henderson Triton Fund | (5.04 | )% | | FIAM Blend Target Date 2055 Fund | (8.39 | )% |
Fidelity Diversified International Fund | (15.20 | )% | | FIAM Blend Target Date 2060 Fund | (8.45 | )% |
Fidelity International Index Fund | (13.52 | )% | | FIAM Blend Target Date Income Fund | (1.45 | )% |
Harding Loevner Institutional Emerging Market Fund | (18.63 | )% | | Mass Mutual Diversified SAGIC Fund | 2.72 | % |
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| Executive Compensation Tables |
Potential Payments Upon Termination or Change in Control
The following tables show the estimated potential payments and benefits that each of the NEOs would receive upon termination of employment under various circumstances that would trigger payments under applicable employment agreements and the Company’s plans and programs, assuming the termination event occurred on December 31, 2018. Although the calculations are intended to provide reasonable estimates of the potential payments, they are based on numerous assumptions and may not represent the actual amounts these NEOs would receive upon each termination event.
Employment Agreements
Under our employment agreements with Mr. Dauch and Mr. Simonte, the Company may terminate their employment with or without cause. Cause means:
a material breach of his obligations under the agreement;
the willful and continued failure or refusal to satisfactorily perform his duties;
a conviction of or pleading guilty (or no contest) to a felony or to another crime involving dishonesty or moral turpitude or which reflects negatively upon the Company or impairs its operations;
engaging in any misconduct, negligence, act of dishonesty (including any violation of federal securities laws) or violence that is materially injurious to the Company;
a material breach of a restrictive covenant (i.e., non-competition, non-solicitation) or Company policy;
refusal to follow the directions of the Board; or
any other willful misconduct that is materially injurious to AAM's financial condition or business reputation.
| |
– | a material breach of his obligations under the agreement; |
| |
– | the willful and continued failure or refusal to satisfactorily perform his duties; |
| |
– | a conviction of or pleading guilty (or no contest) to a felony or to another crime involving dishonesty or moral turpitude or which reflects negatively upon the Company or impairs its operations; |
| |
– | engaging in any misconduct, negligence, act of dishonesty (including any violation of federal securities laws) or violence that is materially injurious to the Company; |
| |
– | a material breach of a restrictive covenant (i.e., non-competition, non-solicitation) or Company policy; |
| |
– | refusal to follow the directions of the Board; or |
| |
– | any other willful misconduct that is materially injurious to AAM's financial condition or business reputation. |
In addition, Mr. Dauch and Mr. Simonte may resign for good reason, which means:
a material decrease in compensation or a failure by the Company to pay material compensation;
a material diminution of responsibilities, positions or titles (other than solely as a result of the Company ceasing to be a publicly-traded company);
relocation more than 50 miles outside the Detroit-metropolitan area; or
a material breach by the Company.
| |
– | a material decrease in compensation or a failure by the Company to pay material compensation; |
| |
– | a material diminution of responsibilities, positions or titles (other than solely as a result of the Company ceasing to be a publicly-traded company); |
| |
– | relocation more than 50 miles outside the Detroit-metropolitan area; or |
| |
– | a material breach by the Company of its obligations under the agreement. |
Upon termination for cause or resignation without good reason, Mr. Dauch and Mr. Simonte are entitled to receive only accrued and unpaid compensation. Participation in the Company’s benefit plans would cease upon termination.
If employment is terminated without cause or upon resignation for good reason on or within two years following a CIC, Mr. Dauch and Mr. Simonte are entitled to a severance payment of a multiple of annual base salary and annual bonus, plus a target annual bonus prorated through the termination date. The annual bonus payment is determined based on the higher of his target annual bonus for either the year of the CIC or the year of termination. The severance multiple for Mr. Dauch is three times and Mr. Simonte's multiple is two times. In addition, each would receive medical benefit continuation after termination of employment following a CIC; Mr. Dauch for three years and Mr. Simonte for two years. Each would also receive outplacement services; Mr. Dauch $50,000 and Mr. Simonte $30,000.
If employment is terminated without cause, or upon resignation for good reason not in connection with a CIC, Mr. Dauch and Mr. Simonte are entitled to a severance payment of two times annual base salary and annual target bonus, plus a target annual bonus prorated through the termination date. Payments of base salary are paid in accordance with ordinary payroll practices commencing on the 60th day following separation of service or in a lump sum to the extent allowable under Section 409A. Target bonus amounts are payable in a lump sum on the 60th day following the termination date. In addition, each would receive medical benefit continuation for two years. Each are also entitled to receive accrued and unpaid compensation, and continued payment of base salary for two years following termination. Each would also receiveas well as outplacement services; Mr. Dauch $50,000 and Mr. Simonte $30,000.
Certain severance payments are subject to recoupment or clawback. Salary and benefit continuation is also subject to compliance with the confidentiality, non-competition, non-solicitation and intellectual property assignment provisions of each employment agreement as well as the execution and non-revocation of a general waiver and release of claims.
If employment terminates due to disability or death, Mr. Dauch and Mr. Simonte will be entitled to accrued benefits under applicable benefit plans and programs.
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| Executive Compensation Tables |
AAM Executive Officer Change in ControlSeverance Plan
Under the AAM Executive Officer Change in ControlSeverance Plan, adopted in February 2015, upon termination of employment by the Company without cause or resignation by an executive officer (other than Mr. Dauch and Mr. Simonte)participant for good reason on or within two years followingnot in connection with a CIC, each eligible executive officerparticipant will be entitled to certain severance payments and benefits, in addition to other accrued compensation and benefits:benefits, including:
a cash amount equal to annual base salary multiplied by two;
a cash amount equal to target annual bonus multiplied by two, with target annual bonus determined as the greater of the target amount in the year of the CIC or the year of termination of employment;
reimbursement of outplacement service costs of up to $30,000 incurred within 24 months following termination of employment; and
continued participation in AAM's medical benefit plans for two years following termination of employment, or, in certain cases, a cash amount equal to the value of the benefit continuation.
| |
– | a cash amount equal to annual base salary and target annual bonus multiplied by up to 1.5 based on position; target annual bonus is determined as the target amount in the year of termination; |
| |
– | a prorated annual bonus equal to the annual bonus for the performance year during which the qualifying termination occurs based on active employment during the performance year; |
| |
– | reimbursement of outplacement service costs of up to $20,000; and |
| |
– | continued participation in AAM's medical benefit plans for up to 1.5 years following termination of employment based on position, or, in certain cases, a cash amount equal to the value of the benefit continuation. |
For purposes of the CICSeverance Plan, cause means: (1) the participant's willful and continued failure or refusal to satisfactorily perform his/her duties; (2) a conviction of or pleading guilty (or no contest) to a felony or to another crime involving dishonesty or moral turpitude or which reflects negatively upon the Company or impairs its operations; (3) engaging in any willful misconduct, gross negligence, act of dishonesty (including any violation of federal securities laws) or violence that is injurious to the Company; (4) a material breach of any restrictive covenant or any material written policy of the Company; (5) a material failure to comply with any material applicable laws and regulations or professional standards relating to the business of the Company; or (6) any other misconduct that is injurious to the financial condition or business reputation of the Company.
The Severance Plan defines good reason to include any of the following acts or omissions: (1) a material reduction in a participant's annual base salary or bonus opportunity in effect immediately prior to the reduction; or (2) a relocation of the office at which the participant is to perform the majority of his or her duties to a location more than 50 miles from such location at which the participant performed such duties prior to the relocation.
These benefits are subject to execution and non-revocation of a general waiver and release of claims against the Company and continued compliance with the restrictive covenants of the Severance Plan. The benefits are also subject to recoupment or clawback.
AAM Change in Control Plan
Under the AAM Change in Control Plan, upon termination of employment by the Company without cause or resignation by an executive officer participant for good reason on or within two years following a CIC, each participant will be entitled to certain severance payments and benefits, in addition to other accrued compensation and benefits, including:
| |
– | a cash amount equal to annual base salary multiplied by two; |
| |
– | a cash amount equal to target annual bonus multiplied by two, with target annual bonus determined as the greater of the target amount in the year of the CIC or the year of termination of employment; |
| |
– | a prorated target annual bonus with the target annual bonus determined as the greater of the target amount in the year of the CIC or the year of termination of employment; |
| |
– | reimbursement of outplacement service costs of up to $30,000 incurred within 24 months following termination of employment; and |
| |
– | continued participation in AAM's medical benefit plans for two years following termination of employment, or, in certain cases, a cash amount equal to the value of the benefit continuation. |
For purposes of the CIC Plan, cause means: (1) the participant's willful and continued failure or refusal to satisfactorily perform his/her duties; (2) a conviction of or pleading guilty (or no contest) to a felony or to another crime involving dishonesty or moral turpitude or which reflects negatively upon the Company or impairs its operations; (3) engaging in any willful misconduct, gross negligence, act of dishonesty (including any violation of federal securities laws) or violence that is injurious to the Company; (4) a material breach of any employment agreement restrictive covenant or any material written policy of the Company; (5) a material failure to comply with any material applicable laws and regulations or professional standards relating to the business of the Company; or (6) any other misconduct that is injurious to the financial condition or business reputation of the Company.
The CIC Plan defines good reason to include any of the following acts or omissions: (1) a material reduction in a participant's position, authority, duties or responsibilities following the CIC; (2) a material reduction in a participant's annual base salary or bonus opportunity in effect prior to the CIC; or (3) a relocation of the office at which the
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| Executive Compensation Tables |
participant is to perform the majority of his or her duties following a CIC to a location more than 50 miles from such location prior to the CIC.
This salary and benefit continuation isThese benefits are subject to the executive officer's compliance with the confidentiality, non-competition, non-solicitation and intellectual property assignment provisions of the CIC Plan as well as the execution and non-revocation of a general waiver and release of claims. Certain severance paymentsclaims against the Company and continued compliance with the restrictive covenants of the CIC Plan. The benefits are also subject to recoupment or clawback.
No Tax Gross Ups
The Company does not provide tax gross ups to executive officers upon a CIC. If any of the payments or benefits under Mr. Dauch's or Mr. Simonte's employment agreement or the CIC Plan are deemed to be parachute payments under Section 280G of the Code and would be subject to the excise tax imposed under Section 4999 of the Code, the payments or benefits will be reduced by the amount required to avoid the excise tax if the reduction would give a better after-tax result than if the full payments and benefits were received.
Non-Competition Agreements
Pursuant to their non-competition agreements with the Company, Mr. May, Mr. Satine Mr. Willemse and Mr. WoychowskiWillemse are prohibited, while employed by AAM and for one year following termination of employment (prior to a CIC), from:
directly or indirectly engaging in any business that competes with AAM;
soliciting or inducing our employees to leave AAM, or offering employment to our employees or otherwise interfering with our relationship with our employees, agents or consultants; and
using, exploiting or disclosing our confidential information to any third party without our prior written consent.
| |
– | directly or indirectly engaging in any business that competes with AAM; |
| |
– | soliciting or inducing our employees to leave AAM or otherwise interfering with our relationship with our employees, agents or consultants; and |
| |
– | using, exploiting or disclosing our confidential information to any third party without our prior written consent. |
Potential Payments Upon Termination or Change in Control
The tables below reflect potential payments to each NEO (other than Mr. Woychowski) upon resignation for good reason, termination without cause, disability, retirement and a CIC as of December 31, 2015.2018. Upon termination for cause or resignation without good reason, each NEO would receive only accrued and unpaid compensation and benefits. The assumptions used to determine retirement benefits for eligible NEOs are the same as those used in our audited consolidated financial statements for the fiscal year ended December 31, 2015.2018. See Note 59 to the audited consolidated financial statements in our 20152018 annual report on Form 10-K. Mr. Dauch, Mr. May and Mr. Simonte were not eligible to retire as of December 31, 2015.2018. The footnotes following the tables provide additional detail regarding the potential payments and benefits shown for each termination scenario.
| | David C. Dauch | For Good Reason Resignation ($) | Without Cause Termination ($) | Disability Retirement(1) ($) | Retirement ($) |
Termination Upon a Change in Control(2) ($) | For Good Reason Resignation ($) |
| Without Cause Termination ($) |
| Disability Retirement(1) ($) |
| Retirement ($) |
|
Termination Upon a Change in Control(2) ($) |
|
Compensation: | | |
Severance | 2,300,000(3) |
| 2,300,000(3) |
| — |
| — |
| 3,450,000(4) |
| 2,300,000(3) |
| 2,300,000(3) |
| — |
| — |
| 3,450,000(4) |
|
Annual Incentive | 2,256,875(3) |
| 2,256,875(3) |
| 2,256,875(5) |
| — |
| 6,569,375(4) |
| 4,455,700(3) |
| 4,455,700(3) |
| 1,350,700(5) |
| — |
| 6,008,200(4) |
|
Long Term Incentives: | | |
RSUs(6) | — |
| — |
| 4,966,144 |
| — |
| 4,966,144 |
| — |
| — |
| 3,630,133 |
| — |
| 3,630,133 |
|
2013 Performance Unit Awards(7) | — |
| 2,852,500 |
| 2,852,500 |
| — |
| 2,852,500 |
| |
2014 Performance Share Awards(8) | — |
| 1,628,663 |
| 1,628,663 |
| — |
| 1,628,663 |
| |
2015 Performance Share Awards(9) | — |
| 711,664 |
| 711,664 |
| — |
| 2,134,993 |
| |
2016 Performance Share Awards(7) | | — |
| 2,184,036 |
| 2,184,036 |
| — |
| 2,184,036 |
|
2017 Performance Share Awards(8) | | — |
| 1,275,212 |
| 1,275,212 |
| — |
| 1,912,819 |
|
2018 Performance Share Awards(9) | | — |
| 983,305 |
| 983,305 |
| — |
| 2,949,914 |
|
| | |
Other Benefits: | | |
Retirement Plans | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
SERP | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Welfare Benefit | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Deferred Compensation(10) | 385,522 |
| 385,522 |
| 385,522 |
| — |
| 385,522 |
| 453,948 |
| 453,948 |
| 453,948 |
| — |
| 453,948 |
|
Health care(11) | 34,754 |
| 34,754 |
| 320,403 |
| — |
| 53,903 |
| |
Health Care(11) | | 38,372 |
| 38,372 |
| 47,965 |
| — |
| 58,961 |
|
Disability(12) | — |
| — |
| 7,623,096 |
| — |
| — |
| — |
| — |
| 6,387,336 |
| — |
| — |
|
Life Insurance(13) | — |
| — |
| 98,206 |
| — |
| — |
| — |
| — |
| 16,373 |
| — |
| — |
|
Outplacement Services(14) | 50,000 |
| 50,000 |
| — |
| — |
| 50,000 |
| 50,000 |
| 50,000 |
| — |
| — |
| 50,000 |
|
Total | 5,027,151 |
| 10,219,978 |
| 20,843,073 |
| — |
| 22,091,100 |
| 7,298,020 |
| 11,740,573 |
| 16,329,008 |
| — |
| 20,698,011 |
|
|
| | | | | | | | | | |
Christopher J. May | For Good Reason Resignation ($) | Without Cause Termination ($) | Disability Retirement(1) ($) | Retirement ($) |
Termination Upon a Change in Control(2) ($) |
Compensation: | | | | | |
Severance | — |
| — |
| — |
| — |
| 700,000(15) |
|
Annual Incentive | — |
| — |
| 297,646(5) |
| — |
| 717,646(15) |
|
Long Term Incentives: | | | | | |
RSUs(6) | — |
| — |
| 433,025 |
| — |
| 433,025 |
|
2013 Performance Unit Awards | — |
| — |
| — |
| — |
| — |
|
2014 Performance Share Awards | — |
| — |
| — |
| — |
| — |
|
2015 Performance Share Awards | — |
| — |
| — |
| — |
| — |
|
| | | | | |
Other Benefits: | | | | | |
Retirement Plans | — |
| — |
| — |
| — |
| — |
|
SERP | — |
| — |
| — |
| — |
| — |
|
Welfare Benefit | — |
| — |
| — |
| — |
| — |
|
Deferred Compensation | — |
| — |
| — |
| — |
| — |
|
Health care(16) | — |
| — |
| 419,808 |
| — |
| 30,944 |
|
Disability(12) | — |
| — |
| 3,162,867 |
| — |
| — |
|
Life Insurance(13) | — |
| — |
| 26,744 |
| — |
| — |
|
Outplacement Services(17) | — |
| — |
| — |
| — |
| 30,000 |
|
Total | — |
| — |
| 4,340,090 |
| — |
| 1,911,615 |
|
|
| | | | | | | | | | |
Michael K. Simonte | For Good Reason Resignation ($) | Without Cause Termination ($) | Disability Retirement(1) ($) | Retirement ($) |
Termination Upon a Change in Control(2) ($) |
Compensation: | | | | | |
Severance | 1,280,000(3) |
| 1,280,000(3) |
| — |
| — |
| 1,280,000(4) |
|
Annual Incentive | 887,573(3) |
| 887,573(3) |
| 887,573(5) |
| — |
| 2,167,573(4) |
|
Long Term Incentives: | | | | | |
RSUs(6) | — |
| — |
| 1,470,824 |
| — |
| 1,470,824 |
|
2013 Performance Unit Awards(7) | — |
| 886,394 |
| 886,394 |
| — |
| 886,394 |
|
2014 Performance Share Awards(8) | — |
| 473,879 |
| 473,879 |
| — |
| 473,879 |
|
2015 Performance Share Awards(9) | — |
| 190,410 |
| 190,410 |
|
|
| 571,230 |
|
| | | | | |
Other Benefits: | | | | | |
Retirement Plans | — |
| — |
| — |
| — |
| — |
|
SERP | — |
| — |
| — |
| — |
| — |
|
Welfare Benefit | — |
| — |
| — |
| — |
| — |
|
Deferred Compensation | — |
| — |
| — |
| — |
| — |
|
Health care(11) | 34,754 |
| 34,754 |
| 315,131 |
| — |
| 34,754 |
|
Disability(12) | — |
| — |
| 4,561,542 |
| — |
| — |
|
Life Insurance(13) | — |
| — |
| 54,733 |
| — |
| — |
|
Outplacement Services(14) | 30,000 |
| 30,000 |
| — |
| — |
| 30,000 |
|
Total | 2,232,327 |
| 3,783,010 |
| 8,840,486 |
| — |
| 6,914,654 |
|
|
| | | | | | | | | | |
Alberto L. Satine | For Good Reason Resignation ($) | Without Cause Termination ($) | Disability Retirement ($) | Retirement ($) |
Termination Upon a Change in Control(2) ($) |
Compensation: | | | | | |
Severance | — |
| — |
| — |
| — |
| 1,020,000(15) |
|
Annual Incentive | — |
| — |
| 547,145(5) |
| 547,145(5) |
| 1,363,145(15) |
|
Long Term Incentives: | | | | | |
RSUs(6) | — |
| — |
| 640,267 |
| 164,967 |
| 640,267 |
|
2013 Performance Unit Awards(7) | — |
| 352,080 |
| 352,080 |
| 352,080 |
| 352,080 |
|
2014 Performance Share Awards(8) | — |
| 228,442 |
| 228,442 |
| 228,442 |
| 228,442 |
|
2015 Performance Share Awards(9) | — |
| 91,796 |
| 91,796 |
| 91,796 |
| 275,388 |
|
| | | | | |
Other Benefits: | | | | | |
Retirement Plans(18) | 504,473 |
| 504,473 |
| 727,130 |
| 434,290 |
| 504,473 |
|
SERP(19) | 638,564 |
| 638,564 |
| 409,396 |
| 638,564 |
| 638,564 |
|
Welfare Benefit(20) | — |
| — |
| 14,216 |
| — |
| — |
|
Deferred Compensation | — |
| — |
| — |
| — |
| — |
|
Health care(16) | — |
| — |
| — |
| — |
| 47,384 |
|
Disability | — |
| — |
| — |
| — |
| — |
|
Life Insurance | — |
| — |
| — |
| — |
| — |
|
Outplacement Services(17) | — |
| — |
| — |
| — |
| 30,000 |
|
Total | 1,143,037 |
| 1,815,355 |
| 3,010,472 |
| 2,457,284 |
| 5,099,743 |
|
|
| | | | | | | | | | |
Norman Willemse | For Good Reason Resignation ($) | Without Cause Termination ($) | Disability Retirement ($) | Retirement ($) |
Termination Upon a Change in Control(2) ($) |
Compensation: | | | | | |
Severance | — |
| — |
| — |
| — |
| 900,000(15) |
|
Annual Incentive | — |
| — |
| 482,775(5) |
| 482,775(5) |
| 1,202,775(15) |
|
Long Term Incentives: | | | | | |
RSUs(6) | — |
| — |
| 468,860 |
| 118,760 |
| 468,860 |
|
2013 Performance Unit Awards(7) | — |
| 260,800 |
| 260,800 |
| 260,800 |
| 260,800 |
|
2014 Performance Share Awards(8) | — |
| 162,884 |
| 162,884 |
| 162,884 |
| 162,884 |
|
2015 Performance Share Awards(9) | — |
| 67,666 |
| 67,666 |
| 67,666 |
| 202,999 |
|
| | | | | |
Other Benefits: | | | | | |
Retirement Plans(21) | 309,197 |
| 309,197 |
| 286,746 |
| 286,746 |
| 309,197 |
|
SERP(19) | 583,430 |
| 583,430 |
| 583,430 |
| 583,430 |
| 583,430 |
|
Welfare Benefit(20) | — |
| — |
| 9,237 |
| — |
| — |
|
Deferred Compensation(10) | 126,703 |
| 126,703 |
| 126,703 |
| 126,703 |
| 126,703 |
|
Health care(16) | — |
| — |
| — |
| — |
| 47,385 |
|
Disability | — |
| — |
| — |
| — |
| — |
|
Life Insurance | — |
| — |
| — |
| — |
| — |
|
Outplacement Services(17) | — |
| — |
| — |
| — |
| 30,000 |
|
Total | 1,019,330 |
| 1,510,680 |
| 2,449,101 |
| 2,089,764 |
| 4,295,033 |
|
|
| | |
Terry J. Woychowski (as of December 9, 2015) | Without Cause
Termination
($) |
Compensation: | |
| 448,168 |
|
Annual Incentive | — |
|
Long Term Incentives: | |
RSUs(23)
| — |
|
2013 Performance Unit Awards (actual payment amount)(24)
| 440,100 |
|
2014 Performance Share Awards (actual pro-rated payment amount)(25)
| 259,454 |
|
2015 Performance Share Awards (actual pro-rated payment amount)(25)
| 101,205 |
|
| |
Other Benefits: | |
Retirement Plans | — |
|
SERP | — |
|
Welfare Benefit | — |
|
DeferredExecutive Compensation | — |
|
Health care | — |
|
Disability | — |
|
Life Insurance | — |
|
Outplacement Services | — |
|
Total | 1,248,927 | Tables |
|
| | | | | | | | | | |
Christopher J. May | For Good Reason Resignation ($) |
| Without Cause Termination ($) |
| Disability Retirement(1) ($) |
| Retirement ($) |
|
Termination Upon a Change in Control(2) ($) |
|
Compensation: | | | | | |
Severance | 825,000(15) |
| 825,000(15) |
| — |
| — |
| 1,100,000(16) |
|
Annual Incentive | 1,042,800(15) |
| 1,042,800(15) |
| 382,800(5) |
| — |
| 1,262,800(16) |
|
Long Term Incentives: | | | | | |
RSUs(6) | — |
| — |
| 539,693 |
| — |
| 539,693 |
|
2016 Performance Share Awards(7) | — |
| 189,921 |
| 189,921 |
| — |
| 189,921 |
|
2017 Performance Share Awards(8) | — |
| 101,528 |
| 101,528 |
| — |
| 152,292 |
|
2018 Performance Share Awards(9) | — |
| 235,135 |
| 235,135 |
| — |
| 705,405 |
|
| | | | | |
Other Benefits: | | | | | |
Retirement Plans | — |
| — |
| — |
| — |
| — |
|
SERP | — |
| — |
| — |
| — |
| — |
|
Welfare Benefit | — |
| — |
| — |
| — |
| — |
|
Deferred Compensation | — |
| — |
| — |
| — |
| — |
|
Health Care(17) | — |
| — |
| 40,424 |
| — |
| 32,339 |
|
Disability(12) | — |
| — |
| 4,072,804 |
| — |
| — |
|
Life Insurance(13) | — |
| — |
| 2,878 |
| — |
| — |
|
Outplacement Services(18) | 20,000 |
| 20,000 |
| — |
| — |
| 30,000 |
|
Total | 1,887,800 |
| 2,414,384 |
| 5,565,183 |
| — |
| 4,012,450 |
|
|
| | | | | | | | | | |
Michael K. Simonte | For Good Reason Resignation ($) |
| Without Cause Termination ($) |
| Disability Retirement(1) ($) |
| Retirement ($) |
|
Termination Upon a Change in Control(2) ($) |
|
Compensation: | | | | | |
Severance | 1,500,000(3) |
| 1,500,000(3) |
| — |
| — |
| 1,500,000(4) |
|
Annual Incentive | 2,152,500(3) |
| 2,152,500(3) |
| 652,500(5) |
| — |
| 2,152,500(4) |
|
Long Term Incentives: | | | | | |
RSUs(6) | — |
| — |
| 1,243,389 |
| — |
| 1,243,389 |
|
2016 Performance Share Awards(7) | — |
| 698,900 |
| 698,900 |
| — |
| 698,900 |
|
2017 Performance Share Awards(8) | — |
| 373,611 |
| 373,611 |
| — |
| 560,417 |
|
2018 Performance Share Awards(9) | — |
| 384,770 |
| 384,770 |
| — |
| 1,154,311 |
|
| | | | | |
Other Benefits: | | | | | |
Retirement Plans | — |
| — |
| — |
| — |
| — |
|
SERP | — |
| — |
| — |
| — |
| — |
|
Welfare Benefit | — |
| — |
| — |
| — |
| — |
|
Deferred Compensation | — |
| — |
| — |
| — |
| — |
|
Health Care(11) | 38,371 |
| 38,371 |
| 47,964 |
| — |
| 38,371 |
|
Disability(12) | — |
| — |
| 4,067,667 |
| — |
| — |
|
Life Insurance(13) | — |
| — |
| 11,204 |
| — |
| — |
|
Outplacement Services(14) | 30,000 |
| 30,000 |
| — |
| — |
| 30,000 |
|
Total | 3,720,871 |
| 5,178,152 |
| 7,480,005 |
| — |
| 7,377,888 |
|
|
| |
| Executive Compensation Tables |
|
| | | | | | | | | | |
Alberto L. Satine | For Good Reason Resignation ($) |
| Without Cause Termination ($) |
| Disability Retirement ($) |
| Retirement ($) |
|
Termination Upon a Change in Control(2) ($) |
|
Compensation: | | | | | |
Severance | 915,000(15) |
| 915,000(15) |
| — |
| — |
| 1,220,000(16) |
|
Annual Incentive | 1,156,600(15) |
| 1,156,600(15) |
| 424,600(5) |
| 424,600(5) |
| 1,400,600(16) |
|
Long Term Incentives: | | | | | |
RSUs(6) | — |
| — |
| 659,563 |
| 362,130 |
| 659,563 |
|
2016 Performance Share Awards(7) | — |
| 363,214 |
| 363,214 |
| 363,214 |
| 363,214 |
|
2017 Performance Share Awards(8) | — |
| 194,176 |
| 194,176 |
| 194,176 |
| 291,264 |
|
2018 Performance Share Awards(9) | — |
| 208,636 |
| 208,636 |
| 208,636 |
| 625,907 |
|
| | | | | |
Other Benefits: | | | | | |
Retirement Plans(19) | 680,327 |
| 680,327 |
| 567,817 |
| 680,327 |
| 680,327 |
|
SERP(20) | 1,475,886 |
| 1,475,886 |
| 1,475,886 |
| 1,475,886 |
| 1,475,886 |
|
Welfare Benefit(21) | — |
| — |
| 259,215 |
| 259,215 |
| — |
|
Deferred Compensation | — |
| — |
| — |
| — |
| — |
|
Health Care(17) | — |
| — |
| — |
| — |
| 50,254 |
|
Disability | — |
| — |
| — |
| — |
| — |
|
Life Insurance | — |
| — |
| — |
| — |
| — |
|
Outplacement Services(18) | 20,000 |
| 20,000 |
| — |
| — |
| 30,000 |
|
Total | 4,247,813 |
| 5,013,839 |
| 4,153,107 |
| 3,968,184 |
| 6,797,015 |
|
|
| | | | | | | | | | |
Norman Willemse | For Good Reason Resignation ($) |
| Without Cause Termination ($) |
| Disability Retirement ($) |
| Retirement ($) |
|
Termination Upon a Change in Control(2) ($) |
|
Compensation: | | | | | |
Severance | 795,000(15) |
| 795,000(15) |
| — |
| — |
| 1,060,000(16) |
|
Annual Incentive | 1,004,900(15) |
| 1,004,900(15) |
| 368,900(5) |
| 368,900(5) |
| 1,216,900(16) |
|
Long Term Incentives: | | | | | |
RSUs(6) | — |
| — |
| 577,644 |
| 318,332 |
| 577,644 |
|
2016 Performance Share Awards(7) | — |
| 320,501 |
| 320,501 |
| 320,501 |
| 320,501 |
|
2017 Performance Share Awards(8) | — |
| 171,325 |
| 171,325 |
| 171,325 |
| 256,987 |
|
2018 Performance Share Awards(9) | — |
| 181,270 |
| 181,270 |
| 181,270 |
| 543,811 |
|
| | | | | |
Other Benefits: | | | | | |
Retirement Plans(19) | 319,629 |
| 319,629 |
| 223,334 |
| 304,598 |
| 319,629 |
|
SERP(20) | 1,417,745 |
| 1,417,745 |
| 1,417,745 |
| 1,417,745 |
| 1,417,745 |
|
Welfare Benefit(21) | — |
| — |
| 210,855 |
| 210,855 |
| — |
|
Deferred Compensation(10) | 97,086 |
| 97,086 |
| 97,086 |
| 97,086 |
| 97,086 |
|
Health Care(17) | — |
| — |
| — |
| — |
| 50,255 |
|
Disability | — |
| — |
| — |
| — |
| — |
|
Life Insurance | — |
| — |
| — |
| — |
| — |
|
Outplacement Services(18) | 20,000 |
| 20,000 |
| — |
| — |
| 30,000 |
|
Total | 3,654,360 |
| 4,327,456 |
| 3,568,660 |
| 3,390,612 |
| 5,890,558 |
|
Notes to Termination Tables
| |
(1) | Assumes total and permanent disability on December 31, 2015.2018. Because Mr. Dauch, Mr. May and Mr. Simonte are not eligible to retire on December 31, 2015,2018, the amounts assume continued employment (on leave)reflect disability payments until retirement at 65.65 or for health and life insurance for 30 months (6 months of short-term disability and 24 months of long-term disability). |
| |
(2) | For Mr. Dauch and Mr. Simonte, amounts reflect CIC benefits under their employment agreements and outstanding LTI awards as of December 31, 2015.2018. For other NEOs, amounts reflect payments and benefits under the CIC Plan and outstanding LTI awards as of December 31, 2015.2018. |
| |
(3) | Under their employment agreements, Mr. Dauch and Mr. Simonte are entitled to receive two years’ base salary (payable semimonthly)and target bonus and accrued and unpaid compensation upon resignation for good reason or termination without cause. The annual bonus amounts reflect 2015 awardsamount for each reflects the 2018 award paid in March 2016.2019 and the 2018 target annual bonus for two years. |
|
| |
| Executive Compensation Tables |
| |
(4) | Upon termination without cause or resignation for good reason on or within two years following a CIC, Mr. Dauch and Mr. Simonte are entitled to a multiple of base salary and annual bonus (Mr(Mr. Dauch, three times; Mr. Simonte, two times) plus a target annual bonus prorated through termination. The severance amount for each reflects base salary as of December 31, 20152018 times the applicable multiple. The annual bonus amount for each reflects the 20152018 award paid in March 20162019 and the 20152018 target bonus times the applicable multiple. |
| |
(5) | In the event of disability or retirement, AAM’s Incentive Compensation Plan for Executive Officers provides a pro-rata award payout through the date of disability or retirement. The amounts reflect 20152018 awards payable in March 20162019 under a disability termination event and also upon retirement for Mr. Satine and Mr. Willemse. |
| |
(6) | Outstanding RSUs vest upon termination of employment due to death, disability or upon a CIC. The value reflects the number of RSUs multiplied by the closing price of AAM common stock on December 31, 2015.2018. In the event of retirement, RSUs granted in 2014 and 2015 vest pro-rata based on continued employment through retirement. In the event of retirement for Mr. Satine and Mr. Willemse, the amounts reflect approximately 2/3the applicable pro-rata portion for each of their 2014 RSU awards and 1/3 of their 20152016-2018 RSU awards multiplied by the closing price of AAM common stock on December 31, 2015.2018. |
| |
(7) | The 2013 performance unit awards payable in the event of disability, retirement, termination without cause or upon a CIC are determined based on actual performance through December 31, 2015. Amounts reflect awards earned through December 31, 2015 and paid in March 2016. |
| |
(8) | The 20142016 performance share awards payable in the event of a disability, retirement, termination without cause or upon a CIC are based on target performance and reflect the pro-rata portion of employment during the performance period. As ofThe amounts reflect actual shares paid in March 2019 based on performance through December 31, 2015, approximately 2/3 of the performance period has lapsed. Amounts reflect pro-rata awards at the target amount of shares2018 multiplied by the closing price of AAM common stock on December 31, 2015.2018. |
| |
(9)(8) | The 20152017 performance share awards payable in the event of a disability, retirement or termination without cause are based on target performance and reflect the pro-rata portion of employment during the performance period. As of December 31, 2015,2018, approximately 2/3 of the performance period has lapsed. Amounts reflect pro-rata awards at the target amount of shares multiplied by the closing price of AAM common stock on December 31, 2018. The 2017 performance share awards vest in full upon termination without cause or resignation for good reason on or within two years following a CIC. |
| |
(9) | The 2018 performance share awards payable in the event of a disability, retirement or termination without cause are based on target performance and reflect the pro-rata portion of employment during the performance period. As of December 31, 2018, approximately 1/3 of the performance period has lapsed. Amounts reflect pro-rata awards at the target amount of shares multiplied by the closing price of AAM common stock on December 31, 2015.2018. The 20152018 performance share awards vest in full upon termination without cause or resignation for good reason on or within two years following a CIC. |
| |
(10) | Amounts reflect account balances in the Executive Deferred Compensation Plan as of December 31, 2015.2018. |
| |
(11) | Under their employment agreements, Mr. Dauch and Mr. Simonte are entitled to two years' health care benefits upon resignation for good reason or termination without cause. Upon termination on or within two years following a CIC, Mr. Dauch (three years) and Mr. Simonte (two years) are also entitled to health care benefits. In the event of disability, the amount reflectsMr. Dauch and Mr. Simonte receive health care benefits until retirement.for a maximum of 30 months (6 months of short-term disability and 24 months of long-term disability). |
| |
(12) | Reflects benefits equal to 100% of base salary for the first year of disability. Based on participant elections, amounts reflectdisability and 60% of base salary until retirement for Mr. Dauch, and 66-2/3% for Mr. May and for Mr. Simonte. |
| |
(13) | Reflects basic and supplemental life insurance benefits until retirement.through date of termination (30 months from date of disability). |
| |
(14) | Under their employment agreements, Mr. Dauch ($50,000) and Mr. Simonte ($30,000) are entitled to reimbursement for outplacement services upon termination without cause, resignation for good reason or termination of employment on or within two years following a CIC. |
| |
(15) | Under the Severance Plan, Mr. May, Mr. Satine and Mr. Willemse are entitled to a cash payment equal to 1.5 times annual base salary and annual bonus upon termination without cause or resignation for good reason plus a prorated annual bonus based on actual performance. The annual bonus amount is based on the target annual bonus for the year of termination. The severance amount reflects base salary as of December 31, 2018 times the severance multiplier of 1.5. The annual bonus amount reflects the 2018 award paid in March 2019 and the 2018 target annual bonus times the multiplier of 1.5. |
| |
(16) | Under the CIC Plan, Mr. May, Mr. Satine and Mr. Willemse are entitled to a cash payment equal to two times annual base salary and annual bonus upon termination without cause or resignation for good reason on or within two years following a CIC. The annual bonus amount is based on the greater of the target annual bonus for the year of the CIC or for the year of termination. The severance amount reflects base salary as of December 31, 20152018 for two years. The annual bonus amount reflects the 20152018 award paid in March 20162019 and the 20152018 target annual bonus for two years. |
| |
(16)(17) | For Mr. May, Mr. Satine and Mr. Willemse, amounts reflect two years' health care benefits provided upon termination without cause or resignation for good reason on or within two years following a CIC. For Mr. May, inIn the event of disability, the amount reflectsMr. May would receive health care benefits until retirement.for a maximum of 30 months (6 months of short-term disability and 24 months of long- term disability). |
| |
(17)(18) | Under the CIC Plan, Mr. May, Mr. Satine and Mr. Willemse are entitled to reimbursement of up to $30,000 of outplacement services upon termination of employment without cause or resignation for good reason on or within two years of a CIC. Under the Severance Plan, each are entitled to reimbursement of up to $20,000 of outplacement services upon termination of employment without cause or resignation for good reason. |
| |
(18)(19) | Reflects a joint and survivor benefit payable monthly. |
| |
(19)(20) | Reflects the present value of the frozen SERP benefit calculated assuming a lump sum payment for Mr. Satine and Mr. Willemse. |
| |
(20)(21) | Reflects welfare benefits assuming retirement under the retiree welfare plan. |
|
| |
(21) | Reflects Mr. Willemse's benefits in the Albion Pension Plan as of December 31, 2015.CEO Pay Ratio |
| |
(22) | Under the separation agreement with Mr. Woychowski, AAM made a lump sum severance payment in exchange for his release of all claims against the Company. |
| |
(23) | Upon his termination, Mr. Woychowski's outstanding RSUs were forfeited. |
| |
(24) | Under the 2013 performance unit award agreement, Mr. Woychowski received a cash payout based on the Company's actual performance through December 31, 2015. |
| |
(25) | Under the 2014 and 2015 performance share award agreements, Mr. Woychowski received pro-rata payouts upon termination of employment. The amounts reflect the number of shares multiplied by the closing price of AAM common stock on December 10, 2015. |
PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION
AAM is seeking a non-binding advisory vote from our stockholders to approve the compensation of our named executive officers as disclosed in the Compensation Discussion and Analysis (CD&A) and narrative and tabular disclosures in this proxy statement. In the CD&A, we provide a detailed description of our compensation programs, including our compensation philosophy and objectives, the individual elements of executive pay, and how the programs are administered. We encourage you to review the CD&A, together with the other narrative and tabular disclosures, in considering your advisory vote on our named executive officers’ compensation.
Our executive officer compensation program is designed to reward performance that supports the achievement of our business objectives and creates long-term stockholder value. The Compensation Committee considers the following fundamental objectives, among others, in determining our compensation programs:
Compensation and benefit programs should attract, motivate and retain experienced executives who are vital to our short-term and long-term success, profitability and growth;
Compensation and benefit programs should reward Company and individual performance; and
Compensation and benefit programs should foster the long-term focus required to deliver value to our stockholders.
Our executive officer compensation program also reflects an externally competitive compensation structure based on a market study of executive compensation programs in AAM's comparative peer group. In order to ensure that our compensation program drives performance in support of our strategic principles and cultural values, we regularly compare our compensation practices and governance against market best practices and stockholder feedback.
At our 2015 annual meeting of stockholders, over 98% of the votes cast were in favor of the Company's say-on-pay proposal. The Committee and the Board considered this favorable outcome as a reflection of our stockholders' strong support of the overall executive compensation program for our NEOs.
Although the vote on this proposal is advisory and non-binding, the Board and the Compensation Committee will carefully consider the voting results when making future compensation decisions.
The Board unanimously recommends a vote FOR the approval of the compensation of our named executive officers.
2015 COMPENSATION OF NON-EMPLOYEE DIRECTORS
Total 2015 compensation of our non-employee directors is shown below.
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| | | | | | | | |
Name | Fees Earned or Paid in Cash(1) ($) | Stock Awards(2) ($) | All Other Compensation(3) ($) | Total ($) |
Elizabeth A. Chappell | 114,000 |
| 100,019 |
| 800 |
| 214,819 |
|
Forest J. Farmer(4) | 45,000 |
| — |
| 3,700 |
| 48,700 |
|
Steven B. Hantler | 101,500 |
| 100,019 |
| 1,100 |
| 202,619 |
|
William L. Kozyra(5) | 58,500 |
| 100,019 |
| — |
| 158,519 |
|
Richard C. Lappin(4) | 55,000 |
| — |
| — |
| 55,000 |
|
Peter D. Lyons(5) | 56,500 |
| 100,019 |
| — |
| 156,519 |
|
James A. McCaslin | 155,500 |
| 100,019 |
| — |
| 255,519 |
|
William P. Miller II | 120,500 |
| 100,019 |
| — |
| 220,519 |
|
John F. Smith | 116,000 |
| 100,019 |
| 300 |
| 216,319 |
|
Samuel Valenti III | 117,500 |
| 100,019 |
| — |
| 217,519 |
|
Thomas K. Walker(4) | 45,000 |
| — |
| 1,100 |
| 46,100 |
|
| |
(1) | Fees earned in 2015 for services whether paid in cash or deferred under the AAM Executive Deferred Compensation Plan. |
| |
(2) | Reflects the full grant date fair value of restricted stock unit awards granted on April 30, 2015 calculated in accordance with FASB ASC 718 (without any reduction for risk of forfeiture) as determined based on applying the assumptions used in our financial statements. The grant date fair value of equity awards is calculated using the closing market price of AAM common stock on the grant date of $24.93. See Note 6 to the audited consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2015 regarding assumptions underlying the valuation of equity awards. |
| |
(3) | The Company reimburses non-employee directors for travel and related out-of-pocket expenses in connection with attending Board, committee and stockholder meetings. From time to time, the Company invites spouses of non-employee directors to attend Company events associated with these meetings. The Company pays for spousal travel and certain other expenses and reimburses non-employee directors for taxes attributable to the income associated with this benefit. Amounts reflect reimbursement of taxes on this income. |
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(4) | Mr. Farmer, Mr. Lappin and Mr. Walker served on the Board through April 30, 2015. |
| |
(5) | Mr. Lyons and Mr. Kozyra joined the Board on April 30, 2015. |
As of December 31, 2015, each non-employee director had the following number of outstanding RSUs (including those deferred). No options were outstanding as of December 31, 2015.
|
| |
Name | Restricted Stock
Units Outstanding
(#)
|
Elizabeth A. Chappell | 36,584 |
Steven B. Hantler | 25,484 |
William L. Kozyra | 4,012 |
Peter D. Lyons | 4,012 |
James A. McCaslin | 25,484 |
William P. Miller II | 39,834 |
John F. Smith | 25,484 |
Samuel Valenti III | 9,471CEO Pay Ratio |
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires that the Company determine the ratio of the CEO's total compensation (under the Summary Compensation Table definition) to that of AAM's global median employee.
To determine the median employee, we made a direct determination from our global employee population, excluding non-U.S. locations to the extent that the total employees excluded in these locations in the aggregate did not exceed 5% of our total employee population. We have excluded 723 employees in Germany, 380 in Thailand, 79 in Korea, 4 in Japan and 4 in Luxembourg out of our global employee population of approximately 25,000. We established a consistently applied compensation measure inclusive of base pay, overtime, incentives and allowances. Our population was evaluated as of October 31, 2017 and reflects paid compensation from January 1, 2017 through October 31, 2017. Where allowed under the rule, we have annualized compensation through December 31, 2017. We included the employer cost of medical, dental and vision benefits for both the median employee and the CEO. Non-U.S. compensation was converted to U.S. dollars based on applicable exchange rates as of October 31, 2017. There have been no significant changes in our workforce population or compensation arrangements for 2018 that would impact the methodology that was used to calculate the median employee in 2017, and the Company has determined to use the same median employee identified last year.
Based on the above determination, the total compensation for the median employee is $55,835. Using the CEO's total compensation of $9,490,429 (including the employer cost of medical, dental and vision benefits), the resulting ratio is 170:1.
Narrative Description of Non-Employee Director Compensation
2015 Annual Retainer and Meeting Attendance Fees
The Board, upon recommendation of the Compensation Committee, approved a change to the structure of the non-employee director compensation effective August 1, 2015. In consideration of a market study of non-employee director compensation performed by Meridian, the non-employee director compensation was changed to eliminate meeting fees. In lieu of meeting fees, the non-employee director annual retainer was increased from $80,000 to $110,000, committee chair annual retainers were added, and the lead director annual retainer was increased from $20,000 to $30,000.
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| | | |
Effective August 1, 2015: | |
Annual retainer | $ | 110,000 |
|
Committee chair annual retainer: | |
Audit Committee chair | 20,000 |
|
Other committee chair | 10,000 |
|
Lead director annual retainer | 30,000 |
|
Non-employee director compensation included meeting attendance fees (Board $1,500; Committee Chairman $3,000; Committee members $2,000) through July 31, 2015.
Restricted Stock Units (RSUs). For 2015, each non-employee director received an award of RSUs equal to a grant date value of $100,000 on April 30, 2015, the date of the annual stockholder meeting. The awards are payable in stock and vest in one year, unless vesting is accelerated upon death, disability or a change in control. In connection with the change in fee structure effective August 1, 2015, the Board also approved an increase to the 2016 non-employee director annual RSU award grant date value to $110,000.
Deferral. Non-employee directors may elect to defer, on a pre-tax basis, a portion of their retainer and meeting fees and receive tax-deferred earnings (or losses) on the deferrals under AAM’s Executive Deferred Compensation Plan. The rate of return on deferred amounts is based on the performance of selected benchmark funds identified in the plan, which is described in Nonqualified Deferred Compensation above. Non-employee directors may also elect to defer settlement of RSUs until after termination of service from the Board.
Stock Ownership Guidelines. The Compensation Committee has adopted non-employee director stock ownership guidelines equal to a multiple of three times the annual retainer. Non-employee directors are expected to meet the guidelines within three years from the date of election to the Board. Shares owned directly, deferred RSUs and unvested RSUs count toward the guidelines while unexercised stock options are not included. Each non-employee director has met the ownership guidelines or is on track to meet these ownership guidelines. Current stock ownership of non-employee directors is shown in the Security Ownership section below.
Anti-hedging and Anti-pledging policy. Non-employee directors are prohibited from entering into transactions that may result in a financial benefit if our stock price declines, or any hedging transaction involving our stock, including but not limited to the use of financial derivatives, short sales or any similar transactions. Pledging of Company stock is also prohibited.
SECURITY OWNERSHIP
The following tables show the number of shares of AAM common stock beneficially owned as of March 8, 2016 (unless otherwise noted) by:
•each person known to us who beneficially owns more than 5% of AAM common stock;
•each of our non-employee directors and nominees;
•our named executive officers (unless otherwise noted); and
•all directors, nominees and executive officers as a group.
A beneficial owner of stock is a person who has voting power (the power to control voting decisions) or investment power (the power to cause the sale of the stock). All individuals listed in the tables have sole voting and investment power over the shares (unless otherwise noted).
The beneficial ownership calculation includes 76,484,312 shares of AAM common stock outstanding on March 8, 2016.
MORE THAN 5% BENEFICIAL OWNERS
The table below shows the name, address and share ownership of each person or organization known by us to be a beneficial owner of more than 5% of AAM’s common stock as of December 31, 2015.
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| | |
Name and Address | Shares of Common Stock Beneficially Owned | Percent of Shares Outstanding |
Blackrock, Inc.(1) | 6,318,118 | 8.30 |
55 East 52nd Street, New York, NY 10055 | | |
The Vanguard Group(2) | 7,768,475 | 10.21 |
100 Vanguard Blvd., Malvern, PA 19355 | | |
|
| |
(1) | Based on the Schedule 13G filed on January 25, 2016 by Blackrock, Inc., reporting sole voting power over 6,125,449 shares and sole investment power over 6,318,118 shares.Ratification of Independent Registered Public Accounting Firm |
| |
(2) | Based on the Schedule 13G filed on February 10, 2016 by The Vanguard Group, reporting sole voting power over 166,135 shares, sole investment power over 7,601,940, shared voting power over 4,600 shares and shared investment power over 166,535 shares. |
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
Independent Auditors
|
|
| | Proposal 3: Ratification of Appointment of Independent |
| Shares
Beneficially
Owned(1)(2)
| Percent of
Shares
Outstanding
|
Non-Employee Directors and Nominees | | |
Elizabeth A. Chappell | 38,560 |
| * |
Steven B. Hantler | 30,484 |
| * |
William L. Kozyra | 4,012 |
| * |
Peter D. Lyons | 4,012 |
| * |
James A. McCaslin | 29,484 |
| * |
William P. Miller II | 47,534 |
| * |
John F. Smith | 30,484 |
| * |
Samuel Valenti III | 9,471 |
| * |
Named Executive Officers | | |
David C. Dauch(3)
| 175,608 |
| * |
Christopher J. May | 11,503 |
| * |
Michael K. Simonte | 57,500 |
| * |
Alberto L. Satine | 33,991 |
| * |
Norman Willemse | 18,159 |
| * |
Terry J. Woychowski | 20,828 |
| * |
Directors, Nominees and Executive Officers as a Group
(28 persons)
| 693,448 |
| *Registered Public Accounting Firm for 2019 |
(*) Less than 1% of the outstanding shares of AAM common stock.
| |
(1) | Includes vested RSUs awarded to non-employee directors that have been deferred. For the number of RSUs held by each non-employee director, see table to the 2015 Compensation of Non-Employee Directors.
|
| |
(2) | Includes the following number of shares of common stock which may be acquired upon exercise of options that were exercisable or would become exercisable within 60 days: 28,000 for Mr. Dauch; 10,000 for Mr. Simonte; 8,000 for Mr. Satine; and 9,700 for Mr. Willemse. |
| |
(3) | Includes 548 shares held in trusts for the benefit of Mr. Dauch’s children. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own more than 10% of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. Based solely on our review of these reports, and written representations from such reporting persons, we believe that the Section 16(a) filing requirements for such reporting persons were met during 2015.
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2016
The Audit Committee of the Board of Directors of AAM has appointed Deloitte & Touche LLP to serve as the independent registered public accounting firm to examine the Company’s consolidated financial statements for the year ending December 31, 2016.2019. Although ratification is not required by our bylawsby-laws or otherwise, the Board is submitting the appointment of Deloitte & Touche LLP to our stockholders as a matter of good corporate practice. If the appointment is not ratified, the Audit Committee will consider whether the appointment is appropriate and will use its discretion in determining whether the appointment of Deloitte & Touche LLP is in the best interests of the Company and its stockholders.
Representatives of Deloitte & Touche LLP will attend the 20162019 annual meeting and be available to make a statement or respond to appropriate questions.
|
| |
þ | The Board unanimously recommends a vote FOR ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2019. |
|
| |
| Pre-Approval Policy and Auditor Fees |
|
|
Policy for Pre-Approval of Audit and Non-Audit Services |
The Audit Committee’s policy is to approve in advance all audit and permitted non-audit services (including scope, fee structure and the potential effect of the service on the auditor’s independence) to be performed for the Company by its independent registered public accounting firmfirm. Pre-approval is generally provided for 2016.up to one year, is detailed as to the particular service or category of services and is generally subject to a specific budget. The Audit Committee may also pre-approve particular services on a case-by-case basis. The Chairman of the Audit Committee may pre-approve permissible non-audit services that arise between Audit Committee meetings, provided the fees do not exceed a limit established by the Audit Committee and the Audit Committee is informed of the decision to pre-approve the service at its next scheduled meeting. The Audit Committee received regular updates on the amount of fees and scope of audit, non-audit and tax services provided by D&T during 2018. All services provided by D&T during fiscal 2018 were authorized and approved by the Audit Committee in compliance with applicable pre-approval policies and procedures.
|
|
Independent Registered Public Accounting Firm's Fees |
The following table shows the fees for professional services rendered by D&T for the audit of the Company's financial statements for the years ended December 31, 2018 and December 31, 2017, and fees billed for other services rendered by D&T, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates during those periods.
|
| | | | | | |
| December 31, | |
| 2018 |
| 2017 |
|
Audit Fees(1) | $ | 6,118,093 |
| $ | 5,014,534 |
|
Audit Related Fees(2) | 221,914 |
| 464,857 |
|
Tax Fees(3) | 700,000 |
| 617,675 |
|
All Other Fees(4) | 79,500 |
| — |
|
Total | $ | 7,119,507 |
| $ | 6,097,066 |
|
| |
(1) | Audit fees include fees for the audit of annual consolidated financial statements and internal controls over financial reporting, reviews of quarterly consolidated financial statements, statutory audits, consents and comfort letters, reviews of documents filed with the SEC and other services related to SEC matters. |
| |
(2) | Audit-related fees are for services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements. |
| |
(3) | Fees for tax services in 2018 and 2017 consisted of fees for tax compliance, tax advice and tax planning services. |
| |
(4) | Other fees in 2018 are for non-tax related advisory and consulting services. |
AUDIT COMMITTEE DISCLOSURE
|
| |
| Report of the Audit Committee |
|
|
Report of the Audit Committee |
The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to the Company’s financial reporting process by monitoring, among other matters, the quality and integrity of the Company’s financial statements, the independence and performance of Deloitte & Touche LLP (D&T), the Company’s independent registered public accounting firm, and the performance of the Company’s internal auditors. Management has primary responsibility for preparing the consolidated financial statements and for the reporting processes, including the design and maintenance of the Company’s system of internal controls. The independent registered public accounting firm is responsible for auditing the Company’s consolidated financial statements and opining upon the effectiveness of the internal control over financial reporting under the standards of the Public Company Accounting Oversight Board (PCAOB). The Audit Committee is solely responsible for the compensation, appointment and oversight of the Company’s independent registered public accounting firm.
In this context, the Audit Committee has met and held discussions with management, D&T and the internal auditors, separately and together, with and without management present, regarding the Company’s audited consolidated financial statements for the year ended December 31, 2015,2018, and the Company’s internal controls over financial reporting. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles in the U.S. The Audit Committee also discussed with D&T the matters required to be discussed by PCAOB Auditing Standard No. 16, Communications with Audit Committees, applicable rules of the SEC, and other relevant professional and regulatory standards, which include, among other items, matters related to the conduct of the audit of the Company’s consolidated financial statements. Further, the Audit Committee discussed with the internal auditors the Company’s plans for and scope of internal audits, identification of audit risks and results of audit activities.
The Audit Committee reviewed and discussed with D&T the auditor’s independence from the Company and the Company’s management. As part of that review, D&T submitted to the Audit Committee the written disclosures and the letter required by requirements of the PCAOB regarding D&T’s communication with the Audit Committee concerning independence. Further, the Audit Committee discussed with D&T the firm’s independence and considered whether D&T’s performance of non-audit services to the Company was compatible with maintaining D&T’s independence. The Audit Committee concluded that D&T is independent from the Company and its management.
Based on the considerations described above and the limitations of the role and responsibilities of the Audit Committee, the Audit Committee recommended to the Board that the audited consolidated financial statements for the year ended December 31, 20152018 be included in the Company’s 20152018 annual report on Form 10-K.
Audit Committee of the Board of DirectorsDirectors*
William P. Miller II, Chairman
Peter D. LyonsChair
John F. Smith
Samuel Valenti III
* Herbert K. Parker and Sandra E. Pierce, who were appointed to the Committee in January 2019, are not included as signatories
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| Voting and Meeting Information |
Voting and Meeting Information
Why am I receiving this proxy statement?
You received these proxy materials because you owned shares of Contents
Policy for Pre-ApprovalAAM common stock on March 5, 2019 (record date). AAM’s Board is soliciting your proxy to vote your shares at the annual meeting. By use of Audit and Non-Audit Servicesa proxy, you can vote whether or not you attend the meeting. This proxy statement describes the matters on which you are asked to vote so you can make an informed decision.
The Audit Committee’s policy is to approve in advance all audit and permitted non-audit services (including scope, fee structure and the potential effect of the service on the auditor’s independence) to be performedThis proxy statement, together with our Annual Report for the Company by its independent registered public accounting firm. Pre-approval is generally provided for up to onefiscal year is detailed as to the particular service or category of services and is generally subject to a specific budget. The Audit Committee may also pre-approve particular services on a case-by-case basis. The Chairman of the Audit Committee may pre-approve permissible non-audit services that arise between Audit Committee meetings, provided the fees do not exceed a limit established by the Audit Committee and the Audit Committee is informed of the decision to pre-approve the service at its next scheduled meeting. The Audit Committee received regular updates on the amount of fees and scope of audit, non-audit and tax services provided by D&T during 2015. All services provided by D&T during fiscal 2015 were authorized and approved by the Audit Committee in compliance with applicable pre-approval policies and procedures.
Independent Registered Public Accounting Firm’s Fees
The following table shows the fees for professional services rendered by D&T for the audit of the Company's financial statements for the years ended December 31, 20152018, a proxy card and December 31, 2014,a voter instruction card, will be mailed or can be accessed online on or about March 21, 2019. We refer to these documents as AAM's proxy solicitation materials.
What is "Notice and fees billed for other services renderedAccess" and why did AAM elect to use it?
We make our proxy solicitation materials available to stockholders electronically under the Notice and Access regulations of the SEC. Most of our stockholders receive a notice of electronic availability (notice) instead of a full set of proxy solicitation materials in the mail. The notice explains how to access and review the proxy solicitation materials and how to vote online. We believe this method of delivery expedites distribution of our proxy solicitation materials and allows us to conserve natural resources and reduce the costs of printing and distributing these materials.
If you received a notice but would prefer to receive printed copies of the proxy solicitation materials in the mail, please follow the instructions in the notice.
How do I vote?
You may vote by D&T,any of the member firms of Deloitte Touche Tohmatsu, and their respective affiliates during those periods.
|
| | | | | | |
| December 31, |
| 2015 | 2014 |
Audit Fees(1) | $ | 2,110,826 |
| $ | 1,753,564 |
|
Audit Related Fees(2) | 25,700 |
| — |
|
Tax Fees(3) | 505,500 |
| 671,410 |
|
All Other Fees(4) | 164,095 |
| 164,043 |
|
Total | $ | 2,806,121 |
| $ | 2,589,017 |
|
following methods:
| |
(1)– | Audit fees include fees forIn person — attending the audit of annual consolidated financial statementsmeeting and internal controls over financial reporting, reviews of quarterly consolidated financial statements, statutory audits, consents and comfort letters, reviews of documents filed with the SEC and other services related to SEC matters.casting a ballot. |
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(2)– | Audit-related fees are for services that are reasonably related toBy mail — using the performance of the audit proxy and/or review of the Company’s consolidated financial statements. This category also refers to fees for the audit of employee benefit plans.voting instruction card provided. |
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(3)– | Fees for tax services in 2015 and 2014 consisted of fees for tax compliance, tax advice and tax planning services.By telephone or over the Internet — following the instructions on your notice card, proxy and/or voting instruction card. |
If you vote by telephone or over the Internet, have your notice card or proxy and/or voting instruction card available. The control number on your card is necessary to process your vote. A telephone or Internet vote authorizes the named proxies to vote in the same manner as if you marked, signed and returned the card by mail. If you hold shares in street name, refer to the voting instructions provided by your broker, bank, trustee or other record holder. If your shares are held in street name and you wish to vote them in person at the annual meeting, you must obtain a "legal proxy" from your holder of record to do so.
How many shares may vote at the meeting?
As of March 5, 2019, we had 111,742,180 shares of common stock outstanding and entitled to vote. Under AAM’s by-laws, a majority of these shares must be present in person or by proxy to hold the annual meeting and take any action during the meeting.
Can I change my vote?
You may change your vote at any time before the annual meeting by:
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– | revoking it by written notice to AAM’s Secretary at the address on the notice; |
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(4)– | Other feesvoting in 2015 consisted of fees for advisory services primarily related to government grants toperson at the annual meeting; or |
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– | delivering a foreign subsidiary. Other fees in 2014 were for advisory services related to government grants to foreign subsidiaries and conflict minerals reporting compliance.later-dated proxy vote by mail, telephone or over the internet. |
How many votes do I have?
You will have one vote for each share of AAM common stock outstanding as of March 5, 2019 and entitled to vote at the meeting.
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| |
| Voting and Meeting Information |
How many votes must be present to hold the meeting?
52Under our by-laws, a majority of the votes that can be cast must be present in person or by proxy to constitute a quorum for the annual meeting. Abstentions and shares represented by broker non-votes (explained below) will be counted as present and entitled to vote for purposes of determining a quorum.
What are my choices when voting?
Proposal 1 — You may vote for or against each nominee, or you may abstain from voting your shares.
Proposal 2 — You may vote for or against the proposal to approve the compensation of our named executive officers, or you may abstain from voting your shares.
Proposal 3 — You may vote for or against the proposal to ratify the appointment of the Company’s independent registered public accounting firm, or you may abstain from voting your shares.
How many vote are needed for the proposals to pass?
In an uncontested election, nominees for director who receive a majority of "for" votes cast (meaning the number of shares voted "for" a nominee exceed the number of shares voted "against" that nominee) will be elected. If an incumbent director nominee does not receive a majority of votes cast in an uncontested election, our by-laws require the director to promptly tender a written resignation to the Board. After receiving a recommendation from the Nominating/Corporate Governance Committee, the Board will determine whether to accept or reject the resignation, and will publicly disclose its decision and the rationale behind it within 90 days of the date the election results are certified.
Each of the other proposals will pass if the affirmative vote of a majority of the shares present in person or by proxy are cast in favor of the proposal.
Who will count the votes?
Representatives of Computershare Trust Company, N.A., AAM’s transfer agent, will count the votes and serve as our inspector of election. The inspector of election will attend the annual meeting.
What if I abstain from voting or vote “abstain”?
In you abstain from voting or vote "abstain," your shares will:
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– | be counted as present for purposes of determining whether there are enough votes to establish a quorum; |
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– | have no effect on the outcome of the election of directors; or |
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– | count as a vote against any other proposal to be considered at the annual meeting. |
What if I don't return my proxy card and don't attend the annual meeting?
If your shares are registered in your own name with our transfer agent and you do not vote, your shares will not be voted at all.
If you hold your shares in "street name" and do not give your bank, broker, or other holder of record specific voting instructions, your record holder may vote your shares on the ratification of the independent registered public firm, but may not vote your shares on any other matter that comes before the annual meeting. If you do not provide voting instructions on these matters, the votes will be considered "broker non-votes." Broker non-votes will be counted as present for purposes of determining whether there is a quorum, but will not affect the outcome of any proposal. We urge you to give your record holder voting instructions on each proposal being presented at the annual meeting.
Will I receive a copy of ContentsAAM's Annual Report?
We have either mailed the annual report to you with this proxy statement or sent you a notice with the web address for accessing the annual report online.
How can I receive a copy of AAM's 10-K?
There are three ways to obtain, free of charge, a copy of our annual report on Form 10-K for the fiscal year ended December 31, 2018.
1. Visit the Investor Relations section of our website at www.aam.com
2. Write to our Investor Relations Department at One Dauch Drive, Detroit, Michigan 48211-1198
3. Search the SEC's EDGAR database at www.sec.gov
OTHER MATTERS
Expenses |
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Electronic Delivery of Proxy Materials |
Can I access AAM's proxy solicitation materials electronically?
Most stockholders can elect to view future proxy statements and annual reports online instead of receiving copies in the mail. You can choose this option and save us the cost of printing and mailing these documents by:
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– | following the instructions provided on your proxy card, voter instruction form, or notice |
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– | going to www.envisionreports.com/axl and following the instructions provided |
If you choose to receive future proxy statements and annual reports electronically, you will receive an e-mail message next year containing the Internet address to access these documents as well as voting instructions.
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2020 Stockholder Proposals and Nominations |
Proposals for Inclusion in 2020 Proxy Statement
If you intend to present a proposal at next year's annual meeting and you wish to have the proposal included in the proxy statement for that meeting, the Secretary of AAM must receive your proposal in writing, at the address below, no later than November 22, 2019.
Director Nomination for Inclusion in 2020 Proxy Statement
In February 2019, our Board amended AAM's by-laws to permit a shareholder or a group of up to 20 shareholders that has owned at least 3% of our outstanding common stock for at least three years to nominate and include in our proxy statement candidates for our Board, subject to certain requirements. Written notice of any such nomination must be received by the Company's Secretary on or before November 22, 2019 but no earlier than October 23, 2019. The requirements for such notice are set forth in our by-laws, a copy of which can be found on our website at http://investor.aam.com/governance.
Other Proposals and Nominations
In addition, AAM’s by-laws require stockholders intending to present any matter for consideration at the 2020 annual meeting of stockholders, other than through inclusion in our proxy materials, to notify AAM’s Secretary in writing at the address below on or before February 22, 2020, but no earlier than February 2, 2020.
Where to Send All Proposals and Nominations
Proponents must submit stockholder proposals and recommendations for nomination as a director in writing to the Secretary, American Axle & Manufacturing Holdings, Inc., One Dauch Drive, Detroit, Michigan 48211-1198.
The Secretary will forward the proposals and recommendations to the Nominating/Corporate Governance Committee for consideration.
The Board is soliciting your proxy, and the expense of soliciting proxies will be borne by AAM. Proxy materials were distributed by mail by Computershare Trust Company, N.A. In addition, AAM will reimburse brokers, banks and other holders of record for their expenses in forwarding proxy materials to stockholders.
We have retained Georgeson Inc. to assist in the solicitation of proxies for an estimated fee of $11,000$20,000, plus reimbursement of certain out-of-pocketreasonable and customary expenses. Georgeson may be contacted at (888) 216-0459.(877) 507-1756. In addition, our officers and certain other employees may solicit proxies personally or by telephone fax or e-mail. They will receive no special compensation for these services.
Stockholder ProposalsWe do not know of any other matters that will be considered at the annual meeting. If any other appropriate business should properly come before the meeting, the individuals named in the accompanying proxy card will have discretionary authority to vote according to their best judgment.
For the Board of Directors,
David E. Barnes
Vice President, General Counsel & Secretary
Detroit, Michigan
March 21, 2019
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| Appendix A - Non-GAAP Reconciliation |
Appendix
Non-GAAP Reconciliation
AAM has included in the proxy statement adjusted EBITDA and adjusted EBITDA margin, which are financial metrics used in the AAM Incentive Compensation Program for 2017 Annual MeetingExecutive Officers and the 2012 Omnibus Incentive Plan. These metrics are non-GAAP financial measures. Such information is reconciled to its closest GAAP measure in the tables below in accordance with SEC rules.
Under SEC rules, stockholder proposalsManagement believes that these non-GAAP financial measures are useful to both management and AAM's shareholders in their analysis of the Company's business and operating performance. Management also uses this information for operational planning and decision-making purposes. Non-GAAP financial measures are not and should not be considered a substitute for any GAAP measure. Additionally, non-GAAP financial measures, as presented by AAM, may not be comparable to similarly titled measures reported by other companies. |
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2018 Annual Incentive Performance Metric | Twelve Months Ended |
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| December 31, 2018 |
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Earnings before interest expense, income taxes and depreciation and amortization (EBITDA) and Adjusted EBITDA: | (in millions) |
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Net income | $ | (56.8 | ) |
Interest expense | (57.1 | ) |
Income tax expense | 216.3 |
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Depreciation and amortization | 528.8 |
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EBITDA | $ | 631.2 |
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Restructuring and acquisition-related costs | 78.9 |
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Debt refinancing and redemption costs | 19.4 |
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Gain on sale of business | (15.5 | ) |
Goodwill impairment | 485.5 |
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Non-recurring items: | |
Gain on settlement of capital lease | (15.6 | ) |
Impact of financial performance for divestiture not included in target(1) | 6.8 |
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Adjusted EBITDA | $ | 1,190.7 |
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(1) AAM sold the Powertrain aftermarket business in April 2018. Prior to that sale, in February 2018, performance goals for our annual incentive plan were established. As a result of this timing, full-year EBITDA associated with the sold business was included in the 2018 annual incentive target. This adjustment reflects the impact of the budgeted EBITDA performance for the 2017 annual meetingportion of stockholders must be received by the Secretaryyear that has been excluded from actual EBITDA results. Considering the impact of AAM at One Dauch Drive, Detroit, MI 48211-1198, on or before November 20, 2016this adjustment, actual adjusted EBITDA reflects EBITDA of this business through the closing date of April 4, 2018. Accordingly, adjusted EBITDA reported in order to be eligible for inclusion in the Company’s 2017 proxy materials. In addition, AAM’s bylaws require stockholders intending to present any matter for consideration at the 2017 annual meeting of stockholders, other than through inclusion in our proxy materials, to notify AAM’s Secretary in writing at the above address on or before February 23, 2017, but no earlier than February 3, 2017.
Obtaining a copy of 2015 Form 10-K
AAM will furnish to stockholders without charge a copy of our annual report on Form 10-K for the year ended December 31, 2015. Requests should be directed to American Axle & Manufacturing Holdings, Inc., Investor Relations Department, One Dauch Drive, Detroit, MI 48211-1198, or2018 was adjusted by e-mail to investorrelations@aam.com. The 2015 Annual Report on Form 10-K is available on our website at http://investor.aam.com.this amount for purposes of calculating performance achievements under the plans that use EBITDA performance as a measure.
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| Appendix A - Non-GAAP Reconciliation |
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| | | | | | | | | | | |
2016 - 2018 Long-term Incentive Performance Metric | Twelve Months Ended | |
| December 31, | |
| 2018 |
| | 2017 |
| | 2016 |
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Earnings before interest expense, income taxes and depreciation and amortization (EBITDA) and Adjusted EBITDA: | (in millions) | |
Net income | $ | (56.8 | ) | | $ | 337.5 |
| | $ | 240.7 |
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Interest expense | (57.1 | ) | | 195.6 |
| | 93.4 |
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Income tax expense | 216.3 |
| | 2.5 |
| | 58.3 |
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Depreciation and amortization | 528.8 |
| | 428.5 |
| | 201.8 |
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EBITDA | $ | 631.2 |
| | $ | 964.1 |
| | $ | 594.2 |
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Restructuring and acquisition-related costs | 78.9 |
| | 110.7 |
| | 26.2 |
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Debt refinancing and redemption costs | 19.4 |
| | 3.5 |
| | — |
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Gain on sale of business | (15.5 | ) | | — |
| | — |
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Goodwill impairment | 485.5 |
| | — |
| | — |
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Non-recurring items: | | | | | |
Gain on settlement of capital lease | (15.6 | ) | | 24.9 |
| | — |
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Other | — |
| | (0.5 | ) | | (1.0 | ) |
Adjusted EBITDA | $ | 1,183.9 |
| | $ | 1,102.7 |
| | $ | 619.4 |
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| | | | | |
Net sales, as reported | $ | 7,270.4 |
| | $ | 6,266.0 |
| | $ | 3,948.0 |
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| | | | | |
Adjusted EBITDA margin | 16.3 | % | | 17.6 | % | | 15.7 | % |
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3-year cumulative EBITDA margin | 16.6 | % | | — |
| | — |
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| Electronic Voting Instructions
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on May 5, 2016.
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| | Vote by Internet
• Go to www.envisionreports.com/axl
• Or scan the QR code with your smartphone
• Follow the steps outlined on the secure website
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| Vote by telephone
• Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone
• Follow the instructions provided by the recorded message
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Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas.
| x | |
Appendix B - Director Independence Standards |
qIF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
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A | Proposals — | The Board of Directors recommends a vote FOR all nominees listed in Proposal 1, FOR Proposal 2 and FOR Proposal 3. |
1 | Election of Directors: | For | Withhold | | | | For | Withhold | | | | + |
| 01 - Elizabeth A. Chappell | o | o | 02 - John F. Smith | o | o | | | |
| | | | For | Against | Abstain | | | | For | Against | Abstain |
2 | Approval, on an advisory basis, of the compensation of the Company's named executive officers. | | o | o | o | 3 | Ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2016. | o | o |
4 | In their discretion, the proxies are authorized to the extent permitted by law to vote on any and all other matters as may properly come before the meeting, including the authority to vote to adjourn the meeting. | |
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Appendix B | Non-Voting Items | | | | |
Change of Address — Please print new address below.
| Meeting Attendance | |
| | | | Mark box to the right if you plan to attend the Annual Meeting. | å |
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C | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
| Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. This section must be completed for your instructions to be executed.
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| Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. |
| | / / | | |
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02AGBA
qIF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
Proxy — American Axle & Manufacturing Holdings, Inc.
Board of DirectorsPROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON May 5, 2016
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORSDirector Independence Guidelines
David C. Dauch
A determination of director independence requires the Board to establish that a director does not have any direct or indirect material relationship with AAM(1). In making an independence determination, the Board will consider all relevant facts and David E. Barnes, or either of them, with full power of substitution, are authorized to vote all of your shares as if you were present atcircumstances not only from the Annual Meeting of Stockholders of American Axle & Manufacturing Holdings, Inc. to be held in the Auditorium at AAM’s World Headquarters Complex, One Dauch Drive, Detroit, Michigan, at 8:00 a.m. on May 5, 2016 or at any adjournmentsstandpoint of the meeting.director, but also from that of persons or organizations with which the director has an affiliation.
This proxy
A director will not be voted as you specifyconsidered independent if, within the preceding three years, any of the following apply:
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• | the director was employed by AAM, or an immediate family member(2) served as an executive officer of AAM; |
the director received direct compensation from AAM, other than director and committee fees and pension or other forms of deferred compensation for prior service (and not contingent on continued service);
an immediate family member received more than $120,000 per year in direct compensation from AAM;
the director is affiliated with or employed by AAM’s independent auditor, or an immediate family member is affiliated with or employed in a professional capacity by AAM’s independent auditor;
the director or any of his or her immediate family members has been part of an “interlocking directorate”‘ in which an executive officer of AAM serves on the reverse side. If you do not make a choice, this proxy will be voted for compensation committee of another company that employs the director;
the director nomineesis an executive officer or employee, or an immediate family member is an executive officer, of a company that makes payments to, or receives payments from, AAM for property or services in Proposal 1, forany single fiscal year, exceeding the approval, on an advisory basis,greater of two percent (2%) of the compensationannual consolidated gross revenue of that company or $1 million; or
the director is an executive officer of a charitable organization that has received contributions from AAM in any single fiscal year of more than $1 million or two percent (2%) of the Company’s named executive officers in Proposal 2 and for ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm in Proposal 3.charitable organization’s consolidated gross revenues, whichever is greater.
Voting over the Internet or by telephone reduces costs to AAM. If you vote over the Internet or by telephone, please do not mail this card.___________
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(1) | AAM includes American Axle & Manufacturing Holdings, Inc. and all of its direct and indirect subsidiaries. |
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(2) | Immediate family member includes spouse, parents, stepparents, children, stepchildren, siblings, mothers and fathers-in-law, sons and daughters-in-law and brothers and sisters-in-law and anyone (other than tenants or employees) who share the director’s home. Immediate family member shall be defined in accordance with NYSE listing standards in effect at the time of any independence determination by the Board. |
(Items to be voted appear on reverse side.)