AMERICAN AXLE & MANUFACTURING HOLDINGS INC
For the period ended Dec 31, 2024. Filed Feb 14, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 14, 2025
DCH$4.52+2.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-16.
0001062231-24-000007
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-14.
0001062231-25-000008
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 195 previous paragraphs and 194 current paragraphs.
90 unchanged; 79 reworded; 24 added; 25 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 12 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (24)
Current report
Pending Combination with Dowlais Group plc
Current report
On January 29, 2025, AAM announced that we reached agreement with the Board of Directors of Dowlais Group plc (Dowlais) on the terms of a recommended cash and share offer to be made by AAM to acquire the entire issued and to be issued ordinary share capital of Dowlais, a public limited company incorporated in England and Wales for approximately $1.44 billion in cash and AAM shares (the Business Combination). We believe that the Business Combination will create a leading global driveline and metal forming supplier with a comprehensive product portfolio and a diversified customer base.
Current report
Pursuant to the Business Combination, Dowlais shareholders will be entitled to receive for each share of Dowlais’ common stock: 0.0863 shares of new AAM common stock, 42 pence per share in cash (approximately $0.52 per share) and up to 2.8 pence (approximately $0.035 per share) of Dowlais fiscal year 2024 final dividend prior to closing. Following the close of the transaction, the combined company will be headquartered in Detroit, Michigan and will be led by AAM's Chairman and CEO. The transaction is expected to close by the end of 2025, subject to approval by both sets of shareholders, regulatory approvals, and satisfaction of customary closing conditions.
Current report
Pending Sale of AAM India Manufacturing Corporation Pvt., Ltd.
Current report
In October 2024, we entered into a definitive agreement to sell our commercial vehicle axle business and related assets in India (AAM India Manufacturing Corporation Pvt., Ltd.) for a sales price of $65 million, subject to certain customary adjustments at closing (the India Sale Agreement). The sale is expected to close in the first half of 2025, subject to customary closing conditions, including the receipt of regulatory approvals.
Current report
Commercial Matters
Current report
In April 2024, one of our largest customers notified AAM that production purchase orders related to a previously announced contract to supply e-Beam axles for a future vehicle program were terminated. We believe that the termination of these purchase orders reflects, in part, the significant uncertainty currently underlying the electric vehicle environment, including volatility in estimated volumes and the timing of production. We have submitted a cancellation claim to recover certain costs incurred in connection with the terminated purchase orders. As of December 31, 2024, we have approximately $70 million of assets in our Consolidated Balance Sheet associated with this program, consisting of capitalized engineering, design and development costs and other commercial amounts. As of the date of this report, we believe we are entitled to claim and recover the full amount. However, due to the nature of the cancellation claim process, and the need to reach final resolution with the customer, the ultimate amount to be recovered is not determinable and could differ materially from the amount included in our Consolidated Balance Sheet.
Current report
INDUSTRY UNCERTAINTY REGARDING ADOPTION OF ELECTRIC VEHICLESThe automotive industry has experienced lower than anticipated adoption of electric vehicles. Various barriers to end-user acceptance exist, such as higher vehicle cost, limited offerings, safety concerns, battery range and vehicle performance anxiety and a lack of necessary charging infrastructure. As a result, there is significant uncertainty currently underlying the electric vehicle environment, including volatility in estimated volumes and the timing of program launches and production of electric vehicles. This uncertainty has caused industry participants to reassess capital allocation plans, and has resulted in the extension of certain internal combustion engine (ICE) and hybrid programs.
Current report
We also continue to evaluate our existing product portfolio for areas that are not core to our business in order to enhance AAM's ability to compete globally while remaining cost competitive.
Current report
The increase in net sales in 2024, as compared to 2023, primarily reflects increased production volumes on certain vehicle programs that we support as 2023 sales were negatively impacted by an estimated $99 million associated with the UAW work stoppage that occurred in the second half of 2023. This increase was partially offset by a reduction of approximately $50 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments.
Current report
The change in cost of goods sold primarily reflects a reduction of approximately $49 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments, as well as a reduction of approximately $17 million in depreciation expense. In addition, cost of goods sold for the year ended December 31, 2023 reflects approximately $7 million of expense related to a field action with one of our largest customers for a die cast component included in transmission assemblies. For both of the years ended December 31, 2024 and December 31, 2023, material costs were approximately 57% of total cost of goods sold.
Current report
IMPAIRMENT CHARGEAs a result of the India Sale Agreement, the assets and liabilities associated with this business have met the criteria to be classified as held-for-sale. Upon reclassification to held-for-sale in 2024, we recorded an impairment charge of $12 million to reduce the carrying value of this business to fair value less cost to sell. This impairment charge was primarily driven by approximately $30 million of accumulated currency translation adjustments that were included in the calculation of the carrying value of this business. See Note 2 - Acquisitions and Dispositions for more detail.
Current report
On January 29, 2025, AAM announced the pending Business Combination with Dowlais. We incurred $5.7 million of expense associated with the Business Combination in 2024, primarily related to legal and professional fees. In connection with the Business Combination, we expect to incur significant acquisition-related costs consisting of, among other items, advisory, legal, accounting, valuation and other professional or consulting services. Certain of these costs are expected to be incurred throughout 2025 and a substantial portion of these costs occur at closing, which we currently expect by the end of 2025, subject to approval by both sets of shareholders, regulatory approvals, and satisfaction of customary closing conditions.
Current report
Debt refinancing and redemption costs In 2024, we amended our existing Amended and Restated Credit Agreement and established the New Term Loan B Facility. See Note 4 - Long-Term Debt for further detail on the New Term Loan B Facility. As a result, we incurred approximately $0.2 million of debt refinancing and redemption costs during the year ended December 31, 2024.
Current report
In 2024, we voluntarily redeemed the remaining $127.6 million of our 6.25% Notes due 2026. This resulted in expense of approximately $0.4 million for the write-off of the remaining unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing.
Current report
For the year ended December 31, 2024, as compared to the year ended December 31, 2023, the increase in Segment Adjusted EBITDA for the Metal Forming segment primarily reflects the impact of the timing of commercial recoveries for inflationary costs, partially offset by increased labor costs. In addition, Segment Adjusted EBITDA for the Metal Forming segment was impacted by $7 million of expense in 2023 associated with a warranty-related field action with one of our largest customers and there was no such expense for the year ended December 31, 2024.
Current report
In connection with the Business Combination, we expect to incur significant acquisition-related costs consisting of, among other items, advisory, legal, accounting, valuation and other professional or consulting services. Certain of these costs are expected to be incurred throughout 2025 and a substantial portion of these costs occur at closing, which we currently expect by the end of 2025, subject to approval by both sets of shareholders, regulatory approvals, and satisfaction of customary closing conditions.
Current report
In October 2024, we entered into the India Sale Agreement and the transaction is expected to close in the first half of 2025, subject to customary closing conditions, including the receipt of regulatory approvals. Upon closing, we expect to collect the sales price of $65 million in cash, subject to certain customary adjustments at closing.
Current report
On January 29, 2025, AAM announced that we reached agreement with the Board of Directors of Dowlais on the terms of a recommended cash and share offer to be made by AAM to acquire the entire issued and to be issued ordinary share capital of Dowlais for approximately $1.44 billion in cash and AAM shares. Dowlais shareholders will be entitled to receive for each share of Dowlais’ common stock: 0.0863 shares of new AAM common stock, 42 pence per share in cash (approximately $0.52 per share) and up to 2.8 pence (approximately $0.035 per share) of Dowlais fiscal year 2024 final dividend prior to closing. The transaction is expected to close by the end of 2025, subject to approval by both sets of shareholders, regulatory approvals, and satisfaction of customary closing conditions.
Current report
Redemption of 6.25% Notes due 2026 During the year ended December 31, 2024, we voluntarily redeemed and repurchased the remaining portion of our 6.25% Notes due 2026. This resulted in principal payments totaling $127.6 million and $2.2 million in accrued interest. We also expensed approximately $0.4 million for the write-off of the remaining unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing.
Current report
Financing Related to the Pending Combination with Dowlais In connection with the Business Combination, Holdings and AAM, Inc., entered into a credit agreement (the Backstop Credit Agreement) pursuant to which, subject to the terms and conditions set forth therein, the lenders party thereto agreed to provide AAM, Inc. with: (i) $484.25 million in Tranche A Term Loans; (ii) $1,491.0 million in Tranche B Term Loans; and (iii) $1,250.0 million in revolving loans. Additionally, and in connection with the Business Combination, on January 29, 2025, Holdings and AAM, Inc. entered into: (i) a First Lien Bridge Credit Agreement pursuant to which the lenders party thereto have agreed to provide AAM, Inc. with a $843.0 million interim loan facility (the First Lien Bridge Facility); and (ii) a Second Lien Bridge Credit Agreement pursuant to which the lenders party thereto have agreed to provide AAM, Inc. with a $500.0 million interim loan facility (the Second Lien Bridge Facility and together with the First Lien Bridge Facility, the Bridge Facilities). The proceeds of the commitments provided under the Backstop Credit Agreement and Bridge Facilities, or of other permanent financing that replaces such facilities, which may include the issuance of debt securities and/or one or more senior term loan facilities, will be used, among other things, to finance the cash consideration payable to Dowlais shareholders pursuant to the Business Combination and expenses payable in connection with the Business Combination (including debt refinancing costs) and to refinance borrowings under the Amended and Restated Credit Agreement in full.
Current report
In July 2024, the IRS issued to AAM additional NOPAs for this matter for each of the tax years 2016 through 2019. The issuance of these NOPAs does not impact the aforementioned estimated range of potential income tax expense and interest charges and does not alter AAM’s belief that it is more likely than not that our structure did not give rise to FBCSI and that it’s likely that we will be successful in ultimately defending our position.
Current report
ACCOUNTING FOR ACQUISITIONS On January 29, 2025, AAM announced that we reached agreement with the Board of Directors of Dowlais on the terms of a recommended cash and share offer to be made by AAM to acquire the entire issued and to be issued ordinary share capital of Dowlais for approximately $1.44 billion in cash and AAM shares. Upon successful consummation of this combination, we will be subject to the accounting guidance as prescribed by ASC 805 - Business Combinations. We are required to allocate the purchase price of an acquired business to its identifiable assets and liabilities based on fair value. The excess purchase price over the fair value of identifiable assets and liabilities, if any, is recorded as goodwill. Determining the fair values of assets acquired and liabilities assumed, especially with regard to intangible assets, requires significant levels of estimates and assumptions made by management. In order to assist management, we utilize third party valuation experts in determining the fair values.
Current report
If the initial accounting for an acquisition is incomplete by the end of the reporting period in which the acquisition occurs, we record provisional amounts for the incomplete items. We have the ability to make measurement period adjustments, as necessary, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized on the date of acquisition. The measurement period ends once we receive the information that was not obtainable as of the acquisition date, and should not exceed one year from the acquisition date.
Removed paragraphs (25)
Previous report
Work Stoppage of the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW Work Stoppage)
Previous report
In the third quarter of 2023, the collective bargaining agreements between the UAW and our three largest customers expired and the UAW initiated work stoppages at certain of the manufacturing locations of these customers. The work stoppages continued into the fourth quarter of 2023 and we estimate that the total third and fourth quarter impact on our sales and pre-tax income of the UAW Work Stoppage was approximately $99 million and $27 million, respectively.
Previous report
New labor agreements between the UAW and our three largest customers were ratified in November 2023 and resulted in compensation increases for the UAW associates. There can be no assurance that such future negotiations, whether between AAM and the labor unions representing certain of our hourly associates or between our customers or suppliers and the labor unions representing certain of their hourly associates, will not result in additional labor cost increases or other terms and conditions that could adversely affect our results of operations and financial condition, our ability to compete for future business or our ability to attract and retain qualified associates.
Previous report
Supply Chain Constraints Impacting the Automotive Industry
Previous report
The automotive industry continues to experience significant disruptions in the supply chain, including volatility in metal, commodity and utility costs, increased transportation costs, higher labor costs and labor shortages. As a result, we have continued to experience volatility in our production schedules, including manufacturing downtime, often with limited notice from customers, higher inventory levels and increased labor costs, which have negatively impacted our results of operations and cash flows during these periods. In addition, during 2023, we experienced lower margins at certain of our locations as a result of production inefficiencies and capacity constraints due, in part, to labor shortages impacting our operations. We continue to work with customers and suppliers in our effort to protect continuity of supply as we expect these challenges to continue in 2024. Due to the ongoing uncertainty associated with these supply chain constraints, the ultimate impact on our net sales, results of operations and cash flows is unknown.
Previous report
An area of focus will be the product development cycle and bridging the gap between the shorter development cycles of information technology (IT) software and controls and the longer development cycles of traditional powertrain components. OEMs and suppliers are developing new products, such as hybrid and electric vehicles and the associated vehicle components, and are improving existing products to reduce emissions through lightweighting and efficiency initiatives, such as higher speed transmissions, and downsized engines. The success and continued growth of vehicle electrification will be dependent, in part, on the industry's ability to overcome various barriers to adoption of electric vehicles, including end user acceptance, higher vehicle cost, limited offerings, safety concerns and a lack of necessary vehicle charging infrastructure.
Previous report
We are responding, in part, with ongoing research and development (R&D) activities to develop hybrid and electric driveline systems and related subsystems and components. Since 2020, AAM has been awarded five PACE Awards demonstrating our innovation leadership in electrification. These awards include a PACE award as well as a PACE Innovation Partnership award related to AAM's electric drive technology on the Mercedes-AMG GT 63 S E Performance and a PACEpilot Innovation to Watch award for our highly integrated three-in-one wheel-end electric drive unit in 2022, and a PACE Innovation Award and a PACE Partnership Award for the front and rear electric drive units featured on the Jaguar all-electric AWD crossover vehicle in 2020.
Previous report
AAM’s commitment to DEI begins with our Board of Directors (Board). The Board’s active oversight reflects the importance of our DEI journey to our business and demonstrates the power of accountability to this critical initiative. With oversight from our Board and direction from senior leadership, our DEI Steering Committee (DEI Committee) helps to ensure that our initiatives are guided by the experiences and recommendations of our associates. Comprised of talented and diverse associates, the DEI Committee helps develop new company initiatives designed to advance a respectful and inclusive company culture and to reinforce the importance of inclusion at AAM. Refer to Item 1. Business -Human Capital Management, for specific DEI highlights.
Previous report
The increase in net sales in 2023, as compared to 2022, primarily reflects approximately $193 million as a result of our acquisition of Tekfor that was completed in June of 2022 and increased production volumes on certain vehicle programs that we support, including those associated with program launches in 2023 from our new and incremental business backlog. These increases were partially offset by a reduction in sales of approximately $107 million associated with the net effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments.
Previous report
The change in cost of goods sold reflects approximately $196 million as a result of our acquisition of Tekfor that was completed in June of 2022. The remainder of the change in cost of goods sold primarily reflects the impact of increased production volumes, as well as increased manufacturing costs, primarily labor costs, and the impact of production inefficiencies at certain of our locations due, in part, to labor shortages. For the year ended December 31, 2023, material costs were approximately 57% of total cost of goods sold, as compared to approximately 60% for the year ended December 31, 2022. The decrease in material costs as a percentage of cost of goods sold was primarily the result of lower metal costs and increased labor costs in 2023, as compared to 2022.
Previous report
In March 2022, we entered into the Amended and Restated Credit Agreement (Amended and Restated Credit Agreement). As a result, we expensed $0.2 million of debt refinancing costs related to the Amended and Restated Credit Agreement in 2022. See Note 4 - Long-Term Debt for further detail on the Amended and Restated Credit Agreement.
Previous report
In December 2022, we entered into the Refinancing Facility Agreement No.1 (Refinancing Facility Agreement), under the Amended and Restated Credit Agreement and established a new Term Loan B Facility of $675.0 million. As a result, we expensed $0.4 million of debt refinancing costs related to the Refinancing Facility Agreement. See Note 4 - Long-Term Debt for further detail on the Refinancing Facility Agreement.
Previous report
In 2022, prior to entering into the Refinancing Facility Agreement, we made voluntary prepayments totaling $100.0 million on our then outstanding term loan B facility. As a result, we expensed approximately $0.6 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of this borrowing.
Previous report
Also in 2022, we used the proceeds from our upsized Term Loan A Facility to voluntarily redeem a portion of our 6.25% Notes due 2026. This resulted in a principal payment of $220.0 million and $0.2 million in accrued interest. We also expensed approximately $1.8 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing, and approximately $3.4 million for the payment of an early redemption premium.
Previous report
Gain on bargain purchase of business On June 1, 2022, our acquisition of Tekfor became effective, which resulted in a gain on bargain purchase of $13.6 million for the year ended December 31, 2022. See Note 16 - Acquisitions and Dispositions for additional detail on this acquisition.
Previous report
Our effective income tax rate for the year ended December 31, 2023 varies from our effective income tax rate for the year ended December 31, 2022 primarily as a result of the impact of the discrete items noted above, the mix of earnings on a jurisdictional basis, and as a result of the $13.6 million gain on bargain purchase of business as a result of the Tekfor acquisition in 2022, which was not subject to income tax.
Previous report
In the first quarter of 2023, we moved a plant location that was previously reported under our Driveline segment to our Metal Forming segment in order to better align our product and process technologies. The amounts in the tables below for years ended December 31, 2022 and December 31, 2021 have been recast to reflect this reorganization.
Previous report
On June 1, 2022, our acquisition of Tekfor became effective and we began consolidating the results of Tekfor on that date, which are reported in our Metal Forming segment for the years ended December 31, 2023 and December 31, 2022.
Previous report
For the year ended December 31, 2023, as compared to the year ended December 31, 2022, Segment Adjusted EBITDA for the Metal Forming segment was reduced by approximately $14 million as a result of the effect of metal market pass-throughs to our customers and the impact of foreign exchange translation. In 2023, Metal Forming Segment Adjusted EBITDA was also impacted by $7 million of expense related to a field action with one of our largest customers. The remainder of the change in Segment Adjusted EBITDA for the Metal Forming segment was attributable to increased manufacturing costs, primarily labor costs, as well as the impact of production inefficiencies at certain of our locations due, in part, to labor shortages.
Previous report
Impact of Supply Chain Constraints In both 2023 and 2022, we experienced an adverse impact on cash flows from operating activities as a result of the significant supply chain constraints that continued to impact the automotive industry, including volatility in metal, commodity and utility costs, shortages of certain raw materials and components, increased transportation costs, higher labor costs and labor shortages. We expect these supply chain constraints and the associated volatility in our operations to continue into 2024.
Previous report
On June 1, 2022, our acquisition of Tekfor became effective and we paid approximately $80 million, net of cash acquired, which was funded entirely with cash on hand. Also in 2022, we made payments for the acquisition of a supplier in Mexico and began to pay the deferred consideration of $2.5 million per year for 2022 through 2025 associated with our acquisition of Emporium that was completed in 2021. See Note 16 - Acquisitions and Dispositions for further detail.
Previous report
In March 2022, Holdings and AAM, Inc. entered into the Amended and Restated Credit Agreement. See Note 4 - Long-Term Debt for further detail on the Amended and Restated Credit Agreement. As a result, we expensed $0.2 million of debt refinancing costs, paid accrued interest of $1.0 million, and paid debt issuance costs of $4.5 million in 2022 related to the Amended and Restated Credit Agreement.
Previous report
In 2022, prior to entering into the Refinancing Facility Agreement, we made voluntary prepayments totaling $100.0 million on our then outstanding term loan B facility. As a result, we expensed approximately $0.6 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of this borrowing.
Previous report
In the first quarter of 2022, we used the proceeds from the upsized Term Loan A Facility to voluntarily redeem a portion of our 6.25% Notes due 2026. This resulted in a principal payment of $220.0 million and $0.2 million in accrued interest. We also expensed approximately $1.8 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing, and approximately $3.4 million for the payment of an early redemption premium.
Previous report
Repayment of Tekfor Group Indebtedness Upon the acquisition of Tekfor, we assumed $23.4 million of existing Tekfor indebtedness, of which we repaid $10.7 million in 2022.
Reworded paragraphs (79)
Previous wording
As a leading global tier 1 automotive and mobility supplier, AAM designs, engineers and manufactures Driveline and Metal Forming technologies to support electric, hybrid and internal combustion vehicles. Headquartered in Detroit with over 80 facilities in 18 countries, AAM is bringing the future faster for a safer and more sustainable tomorrow.
Current wording
As a leading global tier 1 automotive and mobility supplier, AAM designs, engineers and manufactures Driveline and Metal Forming technologies to support electric, hybrid and internal combustion vehicles. Headquartered in Detroit, Michigan, with over 75 facilities in 16 countries, AAM is bringing the future faster for a safer and more sustainable tomorrow.
Previous wording
We are a primary supplier of driveline components to General Motors Company (GM) for its full-size rear-wheel drive (RWD) light trucks, sport utility vehicles (SUV), and crossover vehicles manufactured in North America, supplying a significant portion of GM's rear axle and four-wheel drive and all-wheel drive (4WD/AWD) axle requirements for these vehicle platforms. We also supply GM with various products from our Metal Forming segment. Sales to GM were approximately 39% of our consolidated net sales in 2023, 40% in 2022, and 37% in 2021.
Current wording
We are a primary supplier of driveline components to General Motors Company (GM) for its full-size rear-wheel drive (RWD) light trucks, sport utility vehicles (SUV), and crossover vehicles manufactured in North America, supplying a significant portion of GM's rear axle and four-wheel drive and all-wheel drive (4WD/AWD) axle requirements for these vehicle platforms. We also supply GM with various products from our Metal Forming segment. Sales to GM were approximately 42% of our consolidated net sales in 2024, 39% in 2023, and 40% in 2022.
Previous wording
We also supply driveline system products to Stellantis N.V. (Stellantis) for programs including the heavy-duty Ram full-size pickup trucks and its derivatives. In addition, we sell various products to Stellantis from our Metal Forming segment. Sales to Stellantis were approximately 16% of our consolidated net sales in 2023, 18% in 2022 and 19% in 2021.
Current wording
We also supply driveline system products to Stellantis N.V. (Stellantis) for programs including the heavy-duty Ram full-size pickup trucks and its derivatives. In addition, we sell various products to Stellantis from our Metal Forming segment. Sales to Stellantis were approximately 13% of our consolidated net sales in 2024, 16% in 2023, and 18% in 2022.
Previous wording
We are also a supplier to Ford Motor Company (Ford) for driveline system products on certain vehicle programs including the Bronco Sport, Maverick, Edge, Escape and Lincoln Nautilus, and we also sell various products to Ford from our Metal Forming segment. Sales to Ford were approximately 12% of our consolidated net sales in 2023, 2022 and 2021.
Current wording
We are also a supplier to Ford Motor Company (Ford) for driveline system products on certain vehicle programs including the Bronco Sport, Maverick, Edge, Escape and Lincoln Nautilus, and we also sell various products to Ford from our Metal Forming segment. Sales to Ford were approximately 13% of our consolidated net sales in 2024, and 12% in 2023 and 2022.
Previous wording
There are a number of significant trends affecting the markets in which we compete. Intense competition, volatility in the price of raw materials, including steel, aluminum, and other metallic materials, and resources used in vehicle electrification and electronic components, labor shortages and increased labor costs, fluctuations in exchange rates and interest rates and significant pricing pressures remain. At the same time, there is a focus on investing in future products that will incorporate the latest technology and meet changing customer demands as certain original equipment manufacturers (OEMs) place increased emphasis on the development of battery and hybrid electric vehicles. The ability to respond timely to the continued advancement of technology and product innovation, as well as the ability to enhance cost reduction initiatives and continue to source programs on a global basis, are critical to attracting and retaining business in our global markets.
Current wording
There are a number of significant trends affecting the markets in which we compete. Intense competition, volatility in the price and availability of raw materials, labor shortages and increased labor costs, fluctuations in exchange rates and interest rates, and significant pricing pressures remain. At the same time, there is a focus on investing in future products that will incorporate the latest technology and meet evolving customer demands. The ability to respond timely to the continued advancement of technology and product innovation, as well as the ability to enhance cost reduction initiatives and continue to source programs and maintain a resilient supply chain on a global basis, are critical to attracting and retaining business in our global markets.
Previous wording
INDUSTRY SHIFT TO VEHICLE ELECTRIFICATION AND INCREASED DEMAND FOR EMISSIONS REDUCTIONSThe electrification of vehicles continues to expand, driven by a shift in focus by certain OEMs toward battery and hybrid electric vehicles, government regulations related to emissions, such as the Corporate Average Fuel Economy standards, and consumer demand for greater vehicle performance, enhanced functionality, increased electronic content and vehicle connectivity, reduced environmental impact and affordable convenience options. As vehicle electrification and electronic components become an increasingly larger focus for OEMs and suppliers, the industry has seen, and will likely continue to see, competition to develop and market new and alternative technologies and fuel types, including from new market entrants such as non-traditional automotive companies and technology companies. Further, some traditional automotive industry participants are developing strategic partnerships with technology companies as each party seeks to leverage the existing customer relationships and technical knowledge of the partner, and expedite the development and commercialization of this new technology.
Current wording
Additionally, competition to develop and market new and alternative technologies and fuel types, including from new market entrants such as non-traditional automotive companies and technology companies continues to increase. Further, some traditional automotive industry participants are developing strategic partnerships with technology companies as each party seeks to leverage the existing customer relationships and technical knowledge of the partner, and expedite the development and commercialization of new technologies.
Previous wording
We have continued to enhance our product portfolio to allow us to meet our customers' needs for high performance vehicles with reduced emissions and reduced environmental impact. Through our e-drive systems, e-Beam axle technology, lightweight axles, high-efficiency axles, all-wheel drive systems, high-strength connecting rod technology and refined vibration control systems, we have significantly advanced our efforts to improve ride and handling performance, while reducing emissions and mass. To date, our hybrid and electric driveline systems have been awarded multiple contracts and received multiple awards, and our efforts have positioned us to compete in the evolving global marketplace.
Current wording
We are responding, in part, with ongoing research and development (R&D) activities, reviewing our capital investment plans and continuing to enhance our product portfolio to allow us to meet our customers' needs for high performance vehicles with reduced emissions and reduced environmental impact. We are improving existing products to reduce emissions through lightweighting and efficiency initiatives, such as higher speed transmissions, and downsized engines and continuing to develop new technologies, such as hybrid and electric driveline systems and related subsystems and components. Through lightweight and high-efficiency axles, all-wheel drive systems, high-strength connecting rod technology, refined vibration control systems, and hybrid and electric vehicle components, including our e-drive systems and e-Beam axle technology, we have significantly advanced our efforts to improve ride and handling performance, while reducing emissions and mass. Our efforts have positioned us to compete in the evolving global marketplace.
Previous wording
INCREASED FOCUS ON ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) INITIATIVES AND REPORTING There has been a growing focus on ESG initiatives and reporting, including those related to Diversity, Equity, and Inclusion (DEI), by industry stakeholders, including customers, suppliers, providers of debt and equity capital, regulators and those in the workforce. These topics are increasingly driving decisions made by our stakeholders. Particularly within the automotive industry, trends toward electrification and reduced emissions have increased focus on the environmental impact of OEMs and suppliers. The ability of OEMs and suppliers to continually communicate and meet expectations on ESG programs and initiatives, and comply with expanding regulatory requirements, will impact their competitive advantage to attract and retain business, as well as a skilled workforce.
Current wording
INCREASED FOCUS ON ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) INITIATIVES AND REPORTING There has been a growing focus on ESG initiatives and reporting by industry stakeholders, including customers, suppliers, providers of debt and equity capital, regulators and those in the workforce. These topics are increasingly driving decisions made by our stakeholders. The ability of OEMs and suppliers to continually communicate and meet expectations on ESG programs and initiatives, comply with expanding regulatory requirements, and manage the cost of complying with such regulatory requirements, will impact their competitive advantage to attract and retain business, as well as a skilled workforce.
Previous wording
We have responded to this trend by implementing and launching programs and initiatives addressing each topic under ESG, such as E 4 (E-to-the-fourth), AAM’s energy and environmental sustainability program to drive continuous improvement in our operations by reducing energy consumption, greenhouse gas (GHG) emissions and water use while minimizing waste and lessening the environmental impact of our production operations. Also, as part of our continued focus on reducing GHG emissions, we have committed to reaching net-zero carbon emissions by 2040, and have received the validation of our net-zero emissions targets by the climate-action organization Science Based Targets Initiative (SBTi). The SBTi is a partnership between CDP (formerly known as the Climate Disclosure Project), the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF) that drives ambitious climate action in the private sector by enabling companies to set greenhouse gas emissions reduction targets that are in line with what the latest climate science deems necessary to meet the goals of international agreements on climate change, such as the Paris Agreement.
Current wording
We have responded to this trend by implementing and launching programs and initiatives addressing each topic under ESG, such as E 4 (E-to-the-fourth), AAM’s energy and environmental sustainability program to drive continuous improvement in our operations by reducing energy consumption, greenhouse gas (GHG) emissions and water use while minimizing waste and lessening the environmental impact of our production operations. Also, as part of our continued focus on reducing GHG emissions, we have committed to reaching net-zero carbon emissions by 2040, and have received the validation of our net-zero emissions targets by the climate-action organization Science Based Targets Initiative (SBTi). The SBTi is a partnership between CDP (formerly known as the Climate Disclosure Project), the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF) that drives ambitious climate action in the private sector by enabling companies to set greenhouse gas emissions reduction targets that are in line with what the latest climate science deems necessary to meet the goals of international agreements on climate change.
Previous wording
An in-depth review of non-financial metrics and strategies related to our ESG initiatives and programs is included in our annual Sustainability Report, which includes more details on our sustainability programs, initiatives and future objectives. This report and other ESG areas of focus, such as AAM’s leadership, are made available to stakeholders through our company website. While evolving expectations, expanding regulatory requirements and reporting standards are driving increased ESG reporting, this trend aligns with our cultural values and commitment to profitably grow our business in a way that is sustainable and socially responsible.
Current wording
An in-depth review of non-financial metrics and strategies related to our ESG initiatives and programs is included in our annual Sustainability Report, which includes more details on our sustainability programs, initiatives and future objectives. This report and other ESG areas of focus, such as AAM’s leadership, are made available to stakeholders through our company website. While evolving expectations, expanding regulatory requirements and reporting standards are driving increased ESG reporting and increased costs of compliance, this trend aligns with our cultural values and commitment to profitably grow our business in a way that is sustainable and socially responsible.
Previous wording
CONSUMER PREFERENCE AND OEM PRODUCTION FAVORING LIGHT TRUCKS, CROSS-OVER VEHICLES (CUVs) AND SPORT-UTILITY VEHICLES (SUVs) There continues to be increased demand for light trucks, CUVs and SUVs in certain markets, while demand for passenger cars has decreased. This increase in demand for light trucks, CUVs and SUVs has been driven by changes in consumer preference as technology advancements have made these vehicles lighter and more efficient. Certain OEMs are responding to this change in consumer preference by shifting their focus to developing and manufacturing these types of vehicles, resulting in a significant reduction of passenger car vehicle programs, especially in North America. We have benefited from this trend as a significant portion of our business supports light truck, CUV and SUV programs in North America.
Current wording
GLOBAL CONSUMER PREFERENCE AND OEM PRODUCTION FAVORING LIGHT TRUCKS, SPORT UTILITY VEHICLES AND CROSSOVER VEHICLES There has been ongoing demand for light trucks, SUVs and CUVs in certain markets, while demand for passenger cars has decreased. This increase in demand for light trucks, SUVs and CUVs has been driven by changes in consumer preference as technology advancements have made these vehicles lighter and more efficient. Certain OEMs are responding to this change in consumer preference by shifting their focus to developing and manufacturing these types of vehicles, resulting in a significant reduction of passenger car vehicle programs, especially in North America. We have benefited from this trend as a significant portion of our business supports light truck, SUV and CUV programs in North America.
Previous wording
The cyclical nature of the automotive industry, volatile commodity prices, the shifting demands of consumer preference, regulatory requirements and trade agreements require OEMs and suppliers to remain agile with regard to product development and global capability. A critical objective for OEMs and suppliers is the ability to meet these global demands while effectively managing costs. Some OEMs and suppliers may be preparing for these challenges through merger and acquisition activity, development of strategic partnerships and reduction of vehicle platform complexity. In order to effectively drive technology development, recognize cost synergies, and increase global footprint, the industry may continue to see consolidation in the supply base as companies recognize and respond to the need for scalability.
Current wording
The cyclical nature of the automotive industry, volatile commodity prices, the shifting demands of consumer preference, regulatory requirements and trade agreements require OEMs and suppliers to remain agile with regard to product development and global capability. A critical objective for OEMs and suppliers is the ability to meet these global demands while effectively managing costs and capital investment. Some OEMs and suppliers may be preparing for these challenges through merger and acquisition activity, restructuring actions, development of strategic partnerships and reduction of vehicle platform complexity. In order to effectively drive technology development, recognize cost synergies, optimize capacity utilization, and increase global footprint, the industry may continue to see consolidation in the supply base as companies recognize and respond to the need for scalability.
Previous wording
In addition to AAM's technology development relationships and organic growth in technology and processes, our joint venture partnerships and strategic acquisitions, including the Tekfor acquisition during 2022, have provided us with complementary technologies, expanded our product portfolio, diversified our global customer base, and strengthened our long-term financial profile through greater scale. The synergies achieved, or expected to be achieved through our strategic initiatives, enhance AAM's ability to compete in today's technological and regulatory environment, while remaining cost competitive through increased scale and integration.
Current wording
In addition to AAM's technology development relationships and organic growth in technology and processes, AAM's pending acquisition of Dowlais provides a significant opportunity for AAM to leverage complementary technologies, expand our product portfolio, diversify our global customer base, and strengthen our long-term financial profile through greater scale. The anticipated synergies of this acquisition are expected to enhance AAM's ability to compete in today's technological environment, while remaining cost competitive through increased scale and integration.
Previous wording
With population growth, increased government regulations to ease congestion and generational shifts in preferences, it is expected that the markets for autonomous vehicles and ride-sharing services will continue to grow, which could cause a change in the type of vehicles utilized. However, the growth in these areas will be dependent on, among other things, cost and availability to end users, continued establishment of infrastructure and advancements in technological capabilities.
Current wording
With population growth, increased government regulations to ease congestion and generational shifts in preferences, it is expected that the markets for autonomous vehicles, ride-sharing, vehicle subscription services and micro-mobility services will continue to grow, which could cause a change in the type of vehicles utilized. However, the growth in these areas will be dependent on, among other things, cost and availability to end users, continued establishment of infrastructure and advancements in technological capabilities.
Previous wording
Our results of operations, financial condition and cash flows are significantly impacted by fluctuations in production volumes on the vehicle programs that we support. The following table represents historical and forecasted light vehicle production volumes in North America as our business is most significantly impacted by production volume fluctuations in this region. As our business is dependent on certain automotive segments, primarily the light truck, SUV and CUV segments, production volume fluctuations for the light vehicle market as a whole may not necessarily be indicative of the vehicle programs that we support.
Current wording
Our results of operations, financial condition and cash flows are significantly impacted by fluctuations in production volumes on the vehicle programs that we support. The following table represents historical and forecasted light vehicle production volumes in North America as our business is most significantly impacted by production volume fluctuations in this region. As our business is also dependent on certain automotive segments, primarily the light truck, SUV and CUV segments, production volume fluctuations for the light vehicle market as a whole may not necessarily be indicative of the vehicle programs that we support.
Previous wording
Production volumes in North America increased in 2023, as compared to 2022, as the impact of supply chain constraints lessened. We expect production volumes in North America to be approximately 15.8 million units in 2024 and we expect volumes in all other geographic regions in which we operate to be flat to modest increases as compared to 2023.
Current wording
Production volumes in North America were flat in 2024, as compared to 2023. We expect production volumes in North America to be approximately 15.1 million units in 2025. We expect volumes in other major geographic regions in which we operate to be flat to modest decreases in 2025, as compared to 2024.
Previous wording
Gross margin was 10.3% in 2023 as compared to 12.1% in 2022. Gross profit and gross margin were impacted by the factors discussed in Net sales and Cost of goods sold above.
Current wording
Gross margin was 12.1% in 2024 as compared to 10.3% in 2023. Gross profit and gross margin were impacted by the factors discussed in Net sales and Cost of goods sold above.
Previous wording
SG&A as a percentage of net sales was 6.0% in 2023 as compared to 5.9% in 2022. R&D expense, net of engineering, design and development recoveries, was $155.4 million in 2023, as compared to $144.0 million in 2022. In addition to the increase in R&D expense, the change in SG&A expense in 2023, as compared to 2022, was primarily attributable to increased compensation-related expense, including approximately $4.0 million associated with the impact of an additional five months of expense in 2023 for Tekfor as we completed the acquisition in June of 2022.
Current wording
SG&A as a percentage of net sales was 6.3% in 2024 as compared to 6.0% in 2023. R&D expense, net of engineering, design and development (ED&D) recoveries, was $159.0 million in 2024, as compared to $155.4 million in 2023. In addition to the increase in net R&D expense, the change in SG&A primarily reflects higher incentive compensation expense and professional fees related to our ongoing tax litigation as further described in Note 13 - Income Taxes.
Previous wording
AMORTIZATION OF INTANGIBLE ASSETS Amortization expense for the year ended December 31, 2023 was $85.6 million as compared to $85.7 million for the year ended December 31, 2022.
Current wording
AMORTIZATION OF INTANGIBLE ASSETS Amortization expense for the year ended December 31, 2024 was $82.9 million as compared to $85.6 million for the year ended December 31, 2023.
Previous wording
RESTRUCTURING AND ACQUISITION-RELATED COSTS Restructuring and acquisition-related costs were $25.2 million in 2023 and $30.2 million in 2022. As part of our restructuring actions, we incurred severance charges of approximately $7.2 million, as well as implementation costs, consisting primarily of plant exit costs and professional fees, of approximately $11.1 million during 2023. In 2022, we incurred severance charges of approximately $3.5 million, as well as implementation costs, consisting primarily of plant exit costs and professional fees, of approximately $18.2 million. We expect to incur approximately $10 million to $20 million of total restructuring costs in 2024.
Current wording
RESTRUCTURING AND ACQUISITION-RELATED COSTS Restructuring and acquisition-related costs were $18.0 million in 2024 and $25.2 million in 2023. As part of our restructuring actions, we incurred severance charges of approximately $6.5 million, as well as implementation costs, consisting primarily of plant exit costs, of approximately $3.5 million during 2024. In 2023, we incurred severance charges of approximately $7.2 million, as well as implementation costs, consisting primarily of plant exit costs and professional fees, of approximately $11.1 million. We expect to incur approximately $20 million to $30 million of total restructuring costs in 2025. See Note 12 - Restructuring and Acquisition-Related Costs for further detail.
Previous wording
We incurred integration charges of $6.9 million in 2023 as we furthered the integration of Tekfor. This compares to $8.5 million of acquisition-related costs and integration charges incurred in 2022 primarily related to the acquisition of Tekfor. Acquisition-related costs primarily consist of advisory, legal, accounting, valuation and certain other professional or consulting fees incurred, and integration expenses primarily reflect costs for information technology infrastructure and enterprise resource planning systems, and consulting fees incurred in conjunction with integration activities. We expect to incur up to $5 million of integration costs in 2024 as we complete our integration activities related to the Tekfor acquisition. See Note 2 - Restructuring and Acquisition-Related Costs for further detail.
Current wording
Also in 2024, we incurred integration charges of $2.3 million as we furthered our integration of Tekfor. This compares to $6.9 million of integration charges incurred in 2023 associated with Tekfor. Integration expenses primarily reflect costs for information technology infrastructure and enterprise resource planning systems, and consulting fees incurred in conjunction with integration activities.
Previous wording
OPERATING INCOME Operating income was $146.6 million in 2023 as compared to $243.9 million in 2022. Operating margin was 2.4% in 2023 as compared to 4.2% in 2022. The changes in operating income and operating margin in 2023, as compared to 2022, were primarily due to the factors discussed in Net sales, Cost of goods sold and SG&A above.
Current wording
OPERATING INCOME Operating income was $241.4 million in 2024 as compared to $146.6 million in 2023. Operating margin was 3.9% in 2024 as compared to 2.4% in 2023. The changes in operating income and operating margin in 2024, as compared to 2023, were primarily due to the factors discussed in Net sales, Cost of goods sold and SG&A above.
Previous wording
INTEREST EXPENSE Interest expense was $201.7 million in 2023 and $174.5 million in 2022. The change in interest expense in 2023, as compared to 2022, was primarily the result of increased interest rates on our variable rate debt as the weighted-average interest rate of our total debt outstanding was 6.8% in 2023 and 5.7% in 2022. We expect our interest expense in 2024 to be approximately $190 million to $200 million.
Current wording
INTEREST EXPENSE Interest expense was $186.0 million in 2024 and $201.7 million in 2023. The decrease in interest expense in 2024, as compared to 2023, was primarily due to lower outstanding borrowings as a result of our debt reduction initiatives. The weighted-average interest rate of our total debt outstanding was 6.6% in 2024 and 6.8% in 2023. We expect our interest expense in 2025 to be approximately $170 million to $180 million.
Previous wording
INTEREST INCOME Interest income was $26.2 million in 2023 and $17.0 million in 2022. Interest income primarily includes interest earned on cash and cash equivalents, the deferred payment obligation associated with the sale of our former Casting segment, as well as the impact of the interest rate differential on our fixed-to-fixed cross-currency swap. The increase in interest income in 2023, as compared to 2022, is primarily attributable to increased interest rates on our cash and cash equivalents.
Current wording
INTEREST INCOME Interest income was $28.1 million in 2024 and $26.2 million in 2023. Interest income primarily includes interest earned on cash and cash equivalents and the deferred payment obligation associated with the sale of our former Casting segment.
Previous wording
Also in 2023, we made voluntary prepayments totaling $26.0 million on our Term Loan A Facility and $20.2 million on our Term Loan B Facility. As a result, we expensed approximately $1.1 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of these borrowings.
Current wording
In 2023, we made voluntary prepayments totaling $26.0 million on our Term Loan A Facility and $20.2 million on our Term Loan B Facility. As a result, we expensed approximately $1.1 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of these borrowings.
Previous wording
In the fourth quarter of 2023, we voluntarily redeemed a portion of our 6.25% Notes due 2026. This resulted in a principal payment of $50.0 million and $0.9 million in accrued interest. We also expensed approximately $0.2 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of this borrowing.
Current wording
Also in 2023, we voluntarily redeemed a portion of our 6.25% Notes due 2026. This resulted in a principal payment of $50.0 million and we expensed approximately $0.2 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of this borrowing.
Previous wording
Unrealized gain (loss) on equity securities We have an investment in the equity securities of REE Automotive, an e-mobility company. These equity securities are measured at fair value each reporting period with changes in fair value reported as an unrealized holding gain or loss within Other income (expense), net in our Consolidated Statements of Operations. As of December 31, 2023, our investment in REE shares was valued at $0.8 million resulting in an unrealized loss of $1.1 million for the year ended December 31, 2023. This compares to an unrealized loss of $25.5 million associated with our investment in REE shares for the year ended December 31, 2022.
Current wording
Loss on equity securities We had previously invested in the equity securities of REE Automotive, which were measured at fair value each reporting period with changes in fair value reported as a gain or loss within Other income (expense), net in our Consolidated Statement of Operations. During 2024, we sold all of our remaining equity securities of REE Automotive, resulting in a loss of $0.1 million. We recognized an unrealized loss on our investment in REE shares of $1.1 million for the year ended December 31, 2023.
Previous wording
Other income (expense), net We include the net effect of foreign exchange gains and losses, our proportionate share of earnings from equity in unconsolidated subsidiaries, and all components of net periodic pension and postretirement benefit costs other than service costs in Other income (expense), net, which was income of $8.1 million in 2023, as compared to expense of $1.8 million in 2022.
Current wording
Other income (expense), net We include the net effect of foreign exchange gains and losses, our proportionate share of earnings from equity in unconsolidated subsidiaries, and all components of net periodic pension and postretirement benefit costs other than service costs in Other income (expense), net, which was expense of $20.0 million in 2024, as compared to income of $8.1 million in 2023. The change in other income (expense), net was primarily driven by changes in foreign exchange gains and losses in the year ended December 31, 2024, as compared to the year ended December 31, 2023.
Previous wording
INCOME TAX EXPENSE Income tax expense was $9.1 million in 2023, as compared to $2.0 million in 2022. Our effective income tax rate was (37.1)% in 2023, as compared to 3.0% in 2022. In the year ended December 31, 2023, we recognized income tax expense of approximately $36.1 million attributable to both increased valuation allowances on disallowed interest expense in the U.S., as well as net income tax expense resulting from various changes in determinations related to the potential realization of deferred tax assets and the resulting establishment of, and release of, valuation allowances in certain foreign jurisdictions. These income tax expenses were partially offset by a net income tax benefit of approximately $26.1 million resulting from various internal reorganization and restructuring actions during the year, which in turn was partially offset by the associated impact on our foreign derived intangible income and disallowed interest deductions in the U.S. In the year ended December 31, 2022, we recognized a net income tax benefit of $7.5 million related to the release of a valuation allowance in a foreign jurisdiction.
Current wording
INCOME TAX EXPENSE Income tax expense was $27.8 million in 2024, as compared to $9.1 million in 2023. Our effective income tax rate was 44.3% in 2024, as compared to (37.1)% in 2023. In the year ended December 31, 2023, we recognized income tax expense of approximately $36.1 million attributable to both increased valuation allowances on disallowed interest expense in the U.S., as well as net income tax expense resulting from various changes in determinations related to the potential realization of deferred tax assets and the resulting establishment of, and release of, valuation allowances in certain non-U.S. jurisdictions. These income tax expenses were partially offset by a net income tax benefit of approximately $26.1 million resulting from various internal reorganization and restructuring actions during 2023, which in turn was partially offset by the associated impact on our foreign derived intangible income and disallowed interest deductions in the U.S.
Previous wording
For the year ended December 31, 2023, our effective income tax rate varies from the U.S. federal statutory rate primarily as a result of the impact of the discrete items noted above, as well as favorable foreign tax rates and the impact of tax credits. For the year ended December 31, 2022, our effective income tax rate varies from the U.S. federal statutory rate primarily due to the gain on bargain purchase of business, the discrete items noted above and the benefit from foreign derived intangible income deductions in the U.S.
Current wording
In 2024, our effective income tax rate varied from the U.S. federal statutory rate primarily due to tax expense related to global intangible low-taxed income, as well as the impact of certain non-U.S. tax rates and non-U.S. withholding tax, partially offset by the impact of tax credits. Additionally, during the year ended December 31, 2024, we recognized an income tax benefit of $7.9 million as a result of elections made as part of our 2023 income tax return. For the year ended December 31, 2023, our effective income tax rate varies from the U.S. federal statutory rate primarily as a result of the impact of the discrete items noted above, as well as favorable non-U.S. tax rates and the impact of tax credits.
Previous wording
Due to the uncertainty associated with the extent and ultimate impact of the significant supply chain constraints affecting the automotive industry, as well as the potential impact of geopolitical conflicts or events and macroeconomic factors, including sustained or increased inflation, we may experience lower than projected earnings in certain jurisdictions in future periods, and as a result, it is reasonably possible that changes in valuation allowances could be recognized in future periods and such changes could be material to our financial statements.
Current wording
Due to the uncertainty associated with the potential impact of geopolitical conflicts or events, as well as macroeconomic factors, including sustained or increased inflation, renegotiated trade agreements, and tariffs or import restrictions, we may experience lower than projected earnings in certain jurisdictions in future periods and, as a result, it is reasonably possible that changes in valuation allowances could be recognized in future periods and such changes could be material to our financial statements.
Previous wording
NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE (EPS) Net loss was $33.6 million in 2023 as compared to net income of $64.3 million in 2022. Diluted loss per share was $0.29 in 2023 as compared to diluted income per share of $0.53 in 2022. Net income (loss) and EPS were primarily impacted by the factors discussed above.
Current wording
NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE (EPS) Net income was $35.0 million in 2024 as compared to net loss of $33.6 million in 2023. Diluted earnings per share was $0.29 in 2024 as compared to diluted loss per share of $0.29 in 2023. Net income (loss) and EPS were primarily impacted by the factors discussed above.
Previous wording
The increase in Driveline sales for the year ended December 31, 2023, as compared to the year ended December 31, 2022, is primarily the result of increased production volumes on certain vehicle programs that we support, including those associated with program launches in 2023 from our new and incremental business backlog. For the year ended December 31, 2023, as compared to the year ended December 31, 2022, there was a reduction in Driveline sales of approximately $76 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange translation.
Current wording
The increase in Driveline sales for the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily reflects increased production volumes on certain vehicle programs that we support, including those associated with program launches in 2024 from our new and incremental business backlog. This was partially offset by a reduction of approximately $35 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments.
Previous wording
The increase in Metal Forming sales for the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily reflects approximately $193 million associated with the acquisition of Tekfor, as well as the impact of increased production volumes on certain vehicle programs that we support. These increases were partially offset by a net reduction of approximately $31 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange translation.
Current wording
The change in Metal Forming sales for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily the result of the lower production volumes on certain vehicle programs that we support, as well as a reduction of approximately $15 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments. These reductions in sales were partially offset by the timing of commercial recoveries for inflationary costs.
Previous wording
We use Segment Adjusted EBITDA as the measure of earnings to assess the performance of each segment and determine the resources to be allocated to the segments. For the year ended December 31, 2023, as compared to the year ended December 31, 2022, the increase in Segment Adjusted EBITDA for the Driveline segment was primarily attributable to the impact of increased production volumes on certain vehicle programs that we support, as well as an increase of approximately $21 million attributable to the net effect of metal market pass-throughs to our customers and the impact of foreign exchange translation. These favorable impacts were partially offset by increased labor costs and program launch costs.
Current wording
We use Segment Adjusted EBITDA as the measure of earnings to assess the performance of each segment and determine the resources to be allocated to the segments. For the year ended December 31, 2024, as compared to the year ended December 31, 2023, the increase in Segment Adjusted EBITDA for the Driveline segment primarily reflects the impact of increased production volumes on certain vehicle programs that we support, as well as the impact of improved operating performance and lower launch costs. These increases in Segment Adjusted EBITDA for Driveline were partially offset by approximately $25 million of increased SG&A expense primarily resulting from an increase in allocated corporate SG&A expenses in 2024, as compared to 2023.
Previous wording
We define EBITDA to be earnings before interest expense, income taxes, depreciation and amortization. Total Segment Adjusted EBITDA is defined as EBITDA for our reportable segments excluding the impact of restructuring and acquisition-related costs, debt refinancing and redemption costs, loss on the sale of a business, unrealized gains or losses on equity securities, pension curtailment and settlement charges and non-recurring items. We believe that EBITDA and Total Segment Adjusted EBITDA are meaningful measures of performance as they are commonly utilized by management and investors to analyze operating performance and entity valuation. Our management, the investment community and the banking institutions routinely use EBITDA and Total Segment Adjusted EBITDA, together with other measures, to measure our operating performance relative to other Tier 1 automotive suppliers and to assess the relative mix of Adjusted EBITDA by segment. We also believe that Total Segment Adjusted EBITDA is a meaningful measure as it is used for operational planning and decision-making purposes. EBITDA and Total Segment Adjusted EBITDA are also key metrics used in our calculation of incentive compensation. These 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.
Current wording
We define EBITDA to be earnings before interest expense, income taxes, depreciation and amortization. Total Segment Adjusted EBITDA is defined as EBITDA for our reportable segments excluding the impact of restructuring and acquisition-related costs, debt refinancing and redemption costs, gains or losses on equity securities, pension curtailment and settlement charges, impairment charges and non-recurring items. We believe that EBITDA and Total Segment Adjusted EBITDA are meaningful measures of performance as they are commonly utilized by management and investors to analyze operating performance and entity valuation. Our management, the investment community and the banking institutions routinely use EBITDA and Total Segment Adjusted EBITDA, together with other measures, to measure our operating performance relative to other Tier 1 automotive suppliers and to assess the relative mix of Adjusted EBITDA by segment. We also believe that Total Segment Adjusted EBITDA is a meaningful measure as it is used for operational planning and decision-making purposes. EBITDA and Total Segment Adjusted EBITDA are also key metrics used in our calculation of incentive compensation. These 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.
Previous wording
Our primary liquidity needs are to fund debt service obligations, capital expenditures, R&D spending, including further development of our electrification product portfolio, and working capital requirements, in addition to advancing our strategic initiatives. At December 31, 2023 we had approximately $1.5 billion of liquidity consisting of approximately $520 million of cash and cash equivalents, approximately $892 million of available borrowings under our Revolving Credit Facility and approximately $85 million of available borrowings under foreign credit facilities. We have no significant debt maturities before 2026. We believe that operating cash flow, available cash and cash equivalent balances and available committed borrowing capacity under our Senior Secured Credit Facilities and foreign credit facilities will be sufficient to meet these needs.
Current wording
Our primary liquidity needs are to fund debt service obligations, capital expenditures, R&D spending, including further development of our electrification product portfolio, and working capital requirements, in addition to advancing our strategic initiatives. At December 31, 2024 we had over $1.5 billion of liquidity consisting of approximately $553 million of cash and cash equivalents, approximately $892 million of available borrowings under our Revolving Credit Facility and approximately $78 million of available borrowings under non-U.S. credit facilities. We have no significant debt maturities before 2027. We believe that operating cash flow, available cash and cash equivalent balances and available borrowing capacity under our Senior Secured Credit Facilities and non-U.S. credit facilities will be sufficient to meet these needs.
Previous wording
OPERATING ACTIVITIES Net cash provided by operating activities was $396.1 million in 2023 as compared to $448.9 million in 2022. The following factors impacted cash provided by operating activities:
Current wording
OPERATING ACTIVITIES Net cash provided by operating activities was $455.4 million in 2024 as compared to $396.1 million in 2023. The following factors impacted cash provided by operating activities in 2024 as compared to 2023:
Previous wording
Accounts receivable For the year ended December 31, 2023, we experienced an increase in cash flow from operating activities of approximately $46 million related to the change in our accounts receivable balance from December 31, 2022 to December 31, 2023, as compared to the change in our accounts receivable balance from December 31, 2021 to December 31, 2022. This change was primarily attributable to the timing of sales to customers in the applicable periods. The change was also the result of timing of collections on customer receivables as we participate in an early payment program offered by our largest customer, which allows us to sell certain of our North American receivables from this customer to a third party at our discretion. We utilize this program from time to time.
Current wording
Accounts receivable For the year ended December 31, 2024, we experienced an increase in cash flow from operating activities of approximately $63 million related to the change in our accounts receivable balance from December 31, 2023 to December 31, 2024, as compared to the change in our accounts receivable balance from December 31, 2022 to December 31, 2023. This change was primarily the result of timing of sales to customers in the applicable periods, as well as the timing of collections on customer receivables due, in part, to our participation in an early payment program offered by our largest customer. This program allows us to sell certain of our North American receivables from this customer to a third party at our discretion, and we utilize this program from time to time.
Previous wording
Interest paid Interest paid in 2023 was $186.4 million as compared to $172.6 million in 2022. The change in interest paid was primarily the result of increased interest rates on our variable rate debt. See Note 4 - Long-Term Debt for additional detail.
Current wording
Interest paid Interest paid in 2024 was $184.6 million as compared to $186.4 million in 2023. See Note 4 - Long-Term Debt for additional detail.
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Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Accounts payable and accrued expenses For the year ended December 31, 2024, we experienced a decrease in cash flow from operating activities of approximately $123 million related to the change in our accounts payable and accrued expenses balance from December 31, 2023 to December 31, 2024, as compared to the change in our accounts payable and accrued expenses balance from December 31, 2022 to December 31, 2023. This change was primarily attributable to the timing of payments to suppliers within the applicable periods.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
The effect on our pension plans of a 0.5% decrease in both the discount rate and expected return on assets is shown below as of December 31, 2023, our valuation date.