10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-14303

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	38-3161171
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
ONE DAUCH DRIVE, DETROIT, MICHIGAN	48211-1198
(Address of principal executive offices)	(Zip Code)

313-758-2000

(Registrant’s telephone number, including area code)

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

Title of Each Class	Name of Each Exchange on Which Registered
COMMON STOCK, PAR VALUE $0.01 PER SHARE	NEW YORK STOCK EXCHANGE
PREFERRED SHARE PURCHASE RIGHTS, PAR VALUE $0.01 PER SHARE	NEW YORK STOCK EXCHANGE

Securities registered pursuant to Section 12(g) of the Act: None 

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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

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

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

The closing price of the Common Stock on June 30, 2006 as reported on the New York Stock Exchange was $17.11 per share and the aggregate market value of the registrant’s Common Stock held by non-affiliates was approximately $752.2 million.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of February 20, 2006, the number of shares of the registrant’s Common Stock, $0.01 par value, outstanding was 52,095,516 shares.

Documents Incorporated By Reference

Portions of the registrant's Annual Report to Stockholders for the year ended December 31, 2006 and Proxy Statement for use in connection with its Annual Meeting of Stockholders to be held on April 26, 2007, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after December 31, 2006, are incorporated by reference in Part I (Items 1, 1A, 1B, 2, 3 and 4), Part II (Items 5, 6, 7, 7A and 8, 9, 9A, 9B), Part III (Items 10, 11, 12, 13 and 14) and Part IV (Item 15) of this Report.

Internet Website Access to Reports

The website for American Axle & Manufacturing Holdings, Inc. is www.aam.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are available free of charge through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. The Securities and Exchange Commission also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

TABLE OF CONTENTS - ANNUAL REPORT ON FORM 10-K

Year Ended December 31, 2006

			Page Number
Cautionary Statements			1
Part I	Item 1	Business	2
	Item 1A	Risk Factors	5
	Item 1B	Unresolved Staff Comments	8
	Item 2	Properties	9
	Item 3	Legal Proceedings	10
	Item 4	Submission of Matters to a Vote of Security Holders and Executive Officers of the Registrant	10
Part II	Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14
	Item 6	Selected Financial Data	14
	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operation	14
	Item 7A	Quantitative and Qualitative Disclosures About Market Risk	14
	Item 8	Financial Statements and Supplementary Data	14
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	14
	Item 9A	Controls and Procedures	14
	Item 9B	Other Information	14
Part III	Item 10	Directors and Executive Officers and Corporate Governance	15
	Item 11	Executive Compensation	15
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	15
	Item 13	Certain Relationships and Related Transactions, and Director Independence	15
	Item 14	Principal Accounting Fees and Services	15
Part IV	Item 15	Exhibits and Financial Statement Schedules	16
Signatures			21
Schedule II		Valuation and Qualifying Accounts	22
Report of Independent Registered Public Accounting Firm			23
Exhibit 12		Computation of Ratio of Earnings to Fixed Charges	24
Exhibit 21		Subsidiaries of the Registrant	25
Exhibit 23		Consent of Independent Registered Public Accounting Firm	26
Exhibit 31.1		Certification of  Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act	27
Exhibit 31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act	28
Exhibit 32		Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	29
Exhibit 10-45		Employment Agreement Amendment between American Axle & Manufacturing Holdings, Inc. and Richard E. Dauch dated November 15, 2006
Exhibit 10-46		Amended and Restated American Axle & Manufacturing, Inc. Supplemental Executive Retirement Program dated December 22, 2006
Exhibit 13		Annual Report to Stockholders

Cautionary Statements

Certain statements in this Annual Report on Form 10-K are forward-looking in nature and relate to trends and events that may affect our future financial position and operating results. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The terms “will,” “expect,” “anticipate,” “intend,” “project” and similar words or expressions are intended to identify forward-looking statements. These statements speak only as of the date of this Annual Report. The statements are based on our current expectations, are inherently uncertain, are subject to risks and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including, but not limited to:

·   reduced purchases of our products by General Motors Corporation, DaimlerChrysler or other customers;

·   reduced demand for our customers’ products (particularly light trucks and sport utility vehicles produced by General Motors Corporation and DaimlerChrysler);

·   our ability and our suppliers’ ability to maintain satisfactory labor relations and avoid work stoppages;

·   our customers’ and their suppliers’ ability to maintain satisfactory labor relations and avoid work stoppages;

·   our ability to achieve cost reductions through ongoing restructuring actions;

·   additional restructuring actions that may occur;

·   our ability to achieve the level of cost reductions required to sustain global cost competitiveness;

·   supply shortages or price increases in raw materials, utilities or other operating supplies;

·   our ability and our customers’ and suppliers’ ability to successfully launch new product programs on a timely basis;

·   our ability to attract new customers and programs for new products;

·   our ability to develop and produce new products that reflect the market demand;

·   our ability to respond to changes in technology or increased competition;

·   adverse changes in laws, government regulations or market conditions including increases in fuel prices affecting our products or our customers’ products (including the Corporate Average Fuel Economy regulations);

·   adverse changes in the economic conditions or political stability of our principal markets (particularly North America, Europe, South America and Asia);

·   liabilities arising from legal proceedings to which we are or may become a party or claims against us or our products;

·   risks of noncompliance with environmental regulations or risks of environmental issues that could result in unforeseen costs at our facilities;

·   availability of financing for working capital, capital expenditures, research and development or other general corporate purposes, including our ability to comply with financial covenants;

·   our ability to attract and retain key associates;

·   other unanticipated events and conditions that may hinder our ability to compete.

It is not possible to foresee or identify all such factors and we make no commitment to update any forward-looking statement or to disclose any facts, events or circumstances after the date hereof that may affect the accuracy of any forward-looking statement.

1

Part 1

Item 1. Business

(a)   General Development of Business

General

As used in this report, except as otherwise indicated in information incorporated by reference, references to “our Company,” "we," "our," "us" or “AAM” mean American Axle & Manufacturing Holdings, Inc. (Holdings) and its subsidiaries and predecessors, collectively.

We are a premier Tier I supplier to the automotive industry and a worldwide leader in the manufacture, engineering, design and validation of driveline and drivetrain systems and related components and chassis modules for light trucks, sport utility vehicles (SUVs), passenger cars and crossover vehicles. Driveline and drivetrain systems include components that transfer power from the transmission and deliver it to the drive wheels. Our driveline, drivetrain and related products include axles, chassis modules, driveshafts, power transfer units, transfer cases, chassis and steering components, driving heads, crankshafts, transmission parts and metal-formed products.

Holdings, a Delaware corporation, is a successor to American Axle & Manufacturing of Michigan, Inc., a Michigan

corporation, pursuant to a migratory merger between these entities in 1999.

(b)   Financial Information About Segments

Incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report to Stockholders (Annual Report), section entitled “Financials - Notes to Consolidated Financial Statements, Note 12 - Segment and Geographic Information.”

(c)   Narrative Description of Business

Company Overview

We are the principal supplier of driveline components to General Motors Corporation (GM) for its rear-wheel drive (RWD) light trucks and SUVs manufactured in North America, supplying substantially all of GM’s rear axle and front four-wheel drive/ all-wheel drive (4WD/AWD) axle requirements for these vehicle platforms. Sales to GM were approximately 76% of our next sales in 2006, 78% in 2005 and 80% in 2004.

We are the sole-source supplier to GM for certain axles and other driveline products for the life of each GM vehicle program covered by a Lifetime Program Contract (LPC). Substantially all of our sales to GM are made pursuant to the LPCs. The LPCs have terms equal to the lives of the relevant vehicle programs or their respective derivatives, which typically run 6 to 12 years, and require us to remain competitive with respect to technology, design and quality. We have been successful in competing, and we will continue to compete for future GM business upon the expiration of the LPCs.

We are also the principal supplier of driveline system products for the Chrysler Group’s heavy-duty Dodge Ram full-size pickup trucks (Dodge Ram program) and its derivatives. As part of this program, we supply a fully integrated computer-controlled chassis system for the Dodge Ram Power Wagon. Sales to DaimlerChrysler Corporation (DaimlerChrysler) were approximately 14% of our total net sales in 2006, 13% in 2005 and 11% in 2004. 

In addition to GM and DaimlerChrysler, we supply driveline systems and other related components to PACCAR Inc., Ford Motor Company, SsangYong Motor Company, Harley-Davidson and other original equipment manufacturers (OEMs) and Tier I supplier companies such as Magna International, Inc. and The Timken Company. Our net sales to customers other than GM were $758.5 in 2006 as compared to $754.4 million in 2005 and $728.0 million in 2004.  This marked the fifth consecutive year of growth in non-GM sales for AAM.

We compete in a $27 billion global served market that consists of driveline, drivetrain and related components and chassis modules for light trucks, SUVs, passenger cars and crossover vehicles.

The following chart sets forth the percentage of total revenues attributable to our products for the periods indicated:

	Year ended December 31,
	2006			2005			2004
Axles and driveshafts		85.0	%		83.9	%		84.9	%
Chassis components, forged products and other		15.0	%		16.1	%		15.7	%
Total		100.0	%		100.0	%		100.0	%

2

Industry Trends and Competition

Incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report, section entitled “Financials - Management’s Discussion and Analysis - Industry Trends and Competition.”

Productive Materials

We believe that we have adequate sources of supply of productive materials and components for our manufacturing needs. Most raw materials (such as steel) and semi-processed or finished items (such as castings) are available within the geographical regions of our operating facilities from qualified sources in quantities sufficient for our needs.

For further information regarding productive materials, see Exhibit 13 to this Form 10-K, Annual Report, section entitled “Financials - Management’s Discussion and Analysis - Industry Trends and Competition.”

Research and Development (R&D)

Since March 1, 1994, we have spent approximately $600 million in R&D focusing on new product and process development. We plan to continue to invest in the development of new product, process and systems technologies to improve efficiency and flexibility in our operations and continue to deliver innovative new products, chassis modules and integrated driveline systems to our customers.

In 2006, R&D spending in product, process and systems development increased 13.0% to $83.2 million as compared to $73.6 million in 2005 and $68.6 million in 2004. The focus of this increasing investment is to develop innovative driveline and drivetrain systems and components for passenger cars, light trucks and SUVs in the global marketplace. Product development in this area includes power transfer units, transfer cases, driveline and transmission differentials, multi-piece driveshafts, independent rear drive axles and independent front drive axles. We continue to focus on electronic integration in our existing products. We also continue to support the development of hybrid vehicle systems. Our efforts in these areas have resulted in the development of prototypes and various configurations of these driveline systems for several OEMs throughout the world.

Backlog

We typically enter into agreements with our customers to provide axles or other driveline or driveline products for the life of our customers’ vehicle programs. Our new and incremental business backlog includes formally awarded programs and incremental content and volume including customer requested engineering changes. Our backlog may be impacted by various assumptions such as production volume estimates, changes in program launch timing and fluctuation in foreign currency exchange rates.

Our new and incremental business backlog was approximately $1.1 billion at December 31, 2006. We expect to launch over half of our new and incremental business backlog in the 2007, 2008 and 2009 calendar years. The balance of the backlog is planned to launch between 2010 and 2012. 

3

Patents and Trademarks

We maintain and have pending various U.S. and foreign patents and trademarks and other rights to intellectual property relating to our business, which we believe are appropriate to protect our interest in existing products, new inventions, manufacturing processes and product developments. We do not believe that any single patent or trademark is material to our business nor would expiration or invalidity of any patent or trademark have a material adverse effect on our business or our ability to compete.

Cyclicality and Seasonality

Incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report, section entitled “Financials - Management’s Discussion and Analysis - Cyclicality and Seasonality.”

Environmental Matters

Incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report, section entitled “Financials - Management’s Discussion and Analysis - Legal Proceedings.”

Associates

As of December 31, 2006, we employed approximately 10,000 associates, approximately 7,000 of which are employed in the United States. Approximately 5,500 associates are represented by the United Automobile, Aerospace and Agricultural Implement Workers of America (UAW). Approximately 4,500 associates represented by the UAW at our master agreement facilities in Michigan and New York are subject to a collective bargaining agreement that expires February 25, 2008. An additional 1,000 associates at MSP and Colfor are also represented by the UAW under collective bargaining agreements that expire April 17, 2009 and June 2, 2010, respectively. Approximately 200 associates are represented by the International Association of Machinists (IAM) under a collective bargaining agreement which runs through May 4, 2008. In addition, approximately 500 associates at Albion, approximately 2,100 associates at our Silao, Mexico facility (Guanajuato Gear & Axle and Guanajuato Forge) and approximately 400 associates at our Brazilian majority-owned subsidiary are represented by labor unions that are subject to collective bargaining agreements. The collective bargaining agreements at Albion, certain of which may be terminated upon six-month notice, expire in 2008 and the agreements in Mexico and Brazil expire annually.

Credit and Working Capital Practices

Incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report, section entitled “Financials - Management’s Discussion and Analysis - Liquidity and Capital Resources.”

(d)   Financial Information About Geographic Areas

International operations are subject to certain additional risks inherent in conducting business outside the United States, such as changes in currency exchange rates, price and currency exchange controls, import restrictions, nationalization, expropriation and other governmental action.

For further financial information regarding foreign and domestic sales and export sales, see Exhibit 13 to this Form 10-K, Annual Report, section entitled “Financials - Notes to Consolidated Financial Statements, Note 12 - Segment and Geographic Information.”

4

Item 1A. Risk Factors

The following industry and market factors could have an adverse effect (which could be material) on our business, results of operations or financial condition in the future:

Our business is significantly dependent on sales to GM and DaimlerChrysler.

We are the principal supplier of driveline components to GM for its rear-wheel drive (RWD) light trucks and SUVs manufactured in North America, supplying substantially all of GM’s rear axle and front 4WD/AWD axle requirements for these vehicle platforms. We sell products to GM under LPCs, which have terms equal to the lives of the relevant vehicle programs or their respective derivatives of typically 6 to 12 years. The LPCs establish pricing for products sold to GM and require us to remain competitive with respect to technology, design and quality. Substantially all of our sales to GM are made pursuant to the LPCs. Sales to GM were approximately 76% of our total sales in 2006, 78% in 2005 and 80% in 2003. We will compete for future GM business upon the termination of the LPCs with GM. There can be no assurance that we will remain competitive with respect to technology, design and quality to GM’s reasonable satisfaction. Pricing negotiated with GM in future agreements may be more or less favorable than the LPCs and other currently applicable agreements. A significant reduction in our sales to GM or a significant reduction by GM of its production of RWD light trucks or SUVs could have a material adverse effect on our results of operations and financial condition. Disputes arising from any current or future agreements with GM could have a material adverse impact on our relations and our results of operations and financial condition.

We are also the principal supplier of driveline system products for the Chrysler Group’s heavy-duty Dodge Ram full-size pick up trucks (Dodge Ram program) and their derivatives. In total, sales to DaimlerChrysler accounted for approximately 14% of our sales in 2006, 13% in 2005 and 11% in 2004. A significant reduction in our sales to DaimlerChrysler or a significant reduction by DaimlerChrysler of its production of the Dodge Ram program could have a material adverse effect on our results of operations and financial condition.

Our business is dependent on the rear-wheel drive light truck and SUV market segments in North America.

A substantial portion of our revenue is derived from products supporting RWD light truck and SUV platforms in North America. Sales and production of light trucks and SUVs could be affected by many factors, including changes in consumer demand; product mix shifts favoring other types of light vehicles, such as front-wheel drive based crossover vehicles and passenger cars; fuel prices; and government regulation, such as the Corporate Average Fuel Economy regulations (CAFE). A reduction in this market segment could have a material adverse impact on our results of operations and financial condition.

Our business could be adversely affected by work stoppages at GM or DaimlerChrysler.

A substantial number of employees of our largest two customers, GM and DaimlerChrysler, and their key suppliers are represented by trade unions, including the United Automobile, Aerospace and Agricultural Implement Workers of America (UAW). GM and DaimlerChrysler each have agreements with the UAW that expire in September 2007. Because sales to GM and DaimlerChrysler account for approximately 90% of our sales, work stoppages at GM, DaimlerChrysler or any of their key suppliers could adversely affect our results of operations and financial condition.

Our business could be adversely affected if we fail to maintain satisfactory labor relations.

Substantially all of our hourly associates worldwide are members of industrial trade unions employed under the terms of collective bargaining agreements. There can be no assurance that future negotiations with our labor unions will be resolved favorably or that we will not experience a work stoppage that could have a material adverse impact on our results of operations and financial condition. In addition, there can be no assurance that such future negotiations will not result in labor cost increases or other terms and conditions that could adversely affect our results of operations and financial condition or our ability to compete for future business.

5

Our business could be adversely affected if we fail to improve our U.S. cost structure.

We may not be able to achieve the level of cost reductions required to sustain global cost competitiveness in our industry segment, particularly in the U.S. A significant portion of our U.S. operations have labor agreements that are not globally cost competitive. Substantially all of our hourly associates in the U.S. are represented by the UAW. Approximately 80% of our union represented associates are covered by a national collective bargaining agreement with the UAW that expires in February 2008. This agreement provides guaranteed wage and benefit levels throughout its term and ensures significant income and employment security for our UAW represented associates. This agreement limits our ability to close plants and divest businesses. This agreement may also limit our ability to change local work rules and practices to encourage flexible manufacturing and other efficiency-related improvements. Our ability to compete for future business may be adversely impacted by this agreement with the UAW and we may be unsuccessful in other cost reduction efforts related to material costs, health care, energy and other cost drivers.

We may incur additional special charges and asset impairment charges.

We incurred special charges and asset impairments totaling $377.9 million in 2006. We may incur additional special charges and asset impairments in the future as a result of our continued efforts to achieve cost reductions through restructuring actions. See Exhibit 13 to this Form 10-K, Annual Report, section entitled “Financials - Management’s Discussion and Analysis - Results of Operations” incorporated by reference herein.

Our business could be adversely affected by an increase in the price of raw materials.

Worldwide commodity market conditions have resulted in ongoing increases in the cost of steel and other metallic materials. Accordingly, the cost of such steel and metallic materials needed for our products may continue to increase. If we are unable to pass these cost increases on to our customers, it could have a material adverse effect on our results of operations and financial condition.

Our business could be adversely affected by disruptions in our supply chain.

We depend on a limited number of suppliers for certain key components and materials needed for our products. We rely upon, and expect to continue to rely upon, certain suppliers for critical components and materials that are not readily available in sufficient volume from other sources. These supply chain characteristics make us susceptible to supply shortages, price increases or work stoppages at a supplier. There can be no assurance that the suppliers of these materials will be able or willing to meet our future needs on a timely basis. A significant disruption in the supply of these materials could have a material adverse effect on our results of operations and financial condition.

Our company and our customers may not be able to successfully launch new product programs on a timely basis.

Certain of our customers are preparing to launch new product programs for which we will supply newly developed driveline system products and related components. Some of these new product program launches have required, and will continue to require, substantial capital investment by AAM. We may not be able to install and certify the equipment needed to produce products for these new product programs in time for the start of production. There can be no assurance that we will successfully complete the transition of our manufacturing facilities and resources to support these new product programs or any other future product programs. Accordingly, the launch of new product programs may adversely affect production rates or other operational efficiency and profitability measures at our facilities. In addition, our customers may not successfully execute the launch of these product programs, or any additional future product program for which we will supply products, on schedule.

Our company may not realize all of the revenue expected from our new and incremental business backlog.

The realization of incremental revenues from awarded business is inherently subject to a number of risks and uncertainties, including the accuracy of customer estimates relating to the number of vehicles to be produced in new and existing product programs and the timing of such production. It is also possible that our customers may choose to delay or cancel a product program for which we have been awarded new business. Our revenues, operating results, and financial position could be adversely affected relative to our current financial plans if we do not realize substantially all the revenue from our new and incremental business backlog.

6

We are under continuing pressure from our customers to reduce our prices.

Annual price reductions are a common practice in the automotive industry. The majority of our products are sold under long-term contracts with prices scheduled at the time the contracts are established. Certain of our contracts require us to reduce our prices in subsequent years and most of our contracts allow us to adjust prices for engineering changes. If we must accommodate a customer’s demand for higher annual price reductions and are unable to offset the impact of any such price reductions through continued technology improvements, cost reductions and other productivity initiatives, our results of operations and financial condition could be adversely affected .

Our business faces substantial competition.

The automotive industry is highly competitive. Our competitors include the driveline component manufacturing facilities of certain existing original equipment manufacturers (OEMs), as well as many other domestic and foreign companies possessing the capability to produce some or all of the products we supply. Some of our competitors are affiliated with OEMs and others have economic advantages as compared to our business, such as lower labor and benefit costs. Technology, design, quality, delivery and cost are the primary elements of competition in our industry segment. As a result of these competitive pressures and other industry trends, OEMs and suppliers are developing strategies to reduce cost. These strategies include supply base consolidation and global sourcing. Our business may be adversely affected by increased competition from suppliers benefiting from OEM affiliate relationships or financial and other resources that we do not have, including governmental assistance. Our business may also be adversely affected if we do not sustain our ability to meet customer requirements relative to technology, design, quality, delivery and cost.

Our company’s global operations are subject to political and other economic risks and uncertainties.

International operations are subject to certain risks inherent in conducting business outside the U.S., such as changes in currency exchange rates, tax laws, price and currency exchange controls, import restrictions, nationalization, expropriation and other governmental action.

In addition, the U.S. economy may also be adversely affected by political events and domestic or international terrorist events and hostilities. These uncertainties could have a material adverse effect on the continuity of our business and our results of operations and financial condition. As we continue to expand our business globally, our success will depend, in part, on our ability to anticipate and effectively manage these and other risks.

Our business could be adversely affected by the cyclical nature of the automotive industry.

Our operations are cyclical because they are directly related to worldwide automotive production, which is itself cyclical and dependent on general economic conditions and other factors, such as interest rates, fuel prices and consumer confidence. Our business may be adversely affected by an economic decline that results in a reduction of automotive production and sales by our largest customers. Our business may also be adversely affected by reduced demand for the product programs we currently support, or if we fail to obtain sales orders for new or redesigned products that replace our current product programs.

Our company faces rising costs for pension and other postretirement benefit obligations.

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

7

We may incur material losses and costs as a result of product liability and warranty claims and litigation.

We are exposed to warranty and product liability claims in the event that our products fail to perform as expected, and we may be required to participate in a recall of such products. Our largest customer, GM, has recently extended their warranty protection for new and used vehicles to 5 years or 100,000 miles. Other OEMs have also similarly extended their warranty programs. This trend will put additional pressure on the supply base to improve quality systems. This trend may also result in higher cost recovery claims by OEMs to suppliers whose products incur a higher rate of warranty claims. Historically, we have experienced negligible warranty-related expenditures due to contractual agreements with our customers and ongoing improvements in the quality, reliability and durability of our products. If our customers demand higher warranty-related cost recoveries, or if our products fail to perform as expected, it could have a material adverse impact on our results of operations or financial condition.

We are also involved in various legal proceedings incidental to our business. Although we believe that none of these matters is likely to have a material adverse effect on our results of operations or financial condition, there can be no assurance as to the ultimate outcome of any such legal proceeding or any future legal proceedings.

Our business is subject to costs associated with environmental, health and safety regulations.

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

Our company’s ability to operate effectively could be impaired if we lose key personnel.

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

Our business may be adversely affected by a violation of financial covenants

Our Revolving Credit Facility contains financial covenants which require us to comply with a leverage ratio and to maintain a minimum level of net worth. A violation of either of these covenants could result in a default under this facility, which would permit the lenders to accelerate the repayment of any borrowings outstanding at that time. A default or acceleration under the Revolving Credit Facility may result in defaults under our other debt agreements and may adversely affect our results of operations and financial condition.

Item 1B. Unresolved Staff Comments

None

8

Item 2. Properties

The following is a summary of our principal facilities:

Name	Sq. Feet	Type of Interest	Function
Detroit Gear & Axle Detroit, MI	2,535,000	Owned	Rear and front axles, forged products.
Guanajuato Gear & Axle,  Guanajuato, Mexico	1,394,000	Owned	Rear axles and driveshafts, front axles and front auxiliary driveshafts
Guanajuato Forge  Guanajuato, Mexico	111,000	Owned	Forged products
Buffalo Gear, Axle & Linkage  Buffalo, NY	1,199,000	Owned	Rear axles and steering linkages
Three Rivers Driveline  Three Rivers, MI	813,040	Owned	Rear axles and driveshafts, front auxiliary driveshafts and universal joints
Albion Automotive  Glasgow, Scotland  Lancashire, England	464,000 135,000	Leased Leased	Front and rear axles for medium and heavy-duty Crankshafts and fabricated parts
Colfor Manufacturing, Inc.  Malvern, OH  Minerva, OH  Salem, OH	234,000 190,000 189,000	Owned Owned Owned	Forged products Forged products Forged products
Tonawanda Forge  Tonawanda, NY	400,000	Owned	Forged products
Cheektowaga Plant  Cheektowaga, NY	116,000	Owned	Machining of forged products
AAM do Brasil  Araucária, Brazil	264,000	Owned	Machining of forged and cast products
Corporate Headquarters  Detroit, MI	252,000	Owned	Executive and administrative offices
Changshu Gear & Axle  Changshu, China	191,000	Owned	Rear axles
MSP - Industries  Oxford, MI	125,000	Leased	Forged products
Detroit South Campus  Detroit, MI	120,000	Owned	Quality Engineering technical, process development and safety training centers
Technical Center  Rochester Hills, MI	104,000	Owned	R&D, design engineering, metallurgy, testing and validation
AAM Europe  Bad Homburg, Germany	24,000	Leased	European headquarters and technical center
AAM Poland  Olawa, Poland	14,500	Owned	Transmission differentials
AAM India  Pune, India	6,600	Leased	Engineering, information technologies and support services

9

Item 3. Legal Proceedings

Incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report, section entitled “Financials - Management’s Discussion and Analysis - Legal Proceedings.”

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

None

Executive Officers of the Registrant

Name __________	Age	Position
Richard E. Dauch(3)…………………….	64	Co-Founder, Chairman of the Board & Chief Executive Officer
Yogendra N. Rahangdale………………	59	President & Chief Operating Officer
David C. Dauch ………………………..	42	Executive Vice President - Commercial & Strategic Development
Richard F. Dauch ……………………...	46	Executive Vice President - Worldwide Manufacturing
John J. Bellanti…………………………	52	Vice President - Manufacturing Services, Capital Planning & Cost Estimating
Marion A. Cumo, Sr.…………………..	64	Vice President - Special Projects
Thomas O. Delanoy……………………	55	Vice President - Materials Management & Logistics
Michael C. Flynn………………………	49	Vice President - Procurement
John E. Jerge………………...…………	45	Vice President - Human Resources
Patrick S. Lancaster……………………	59	Vice President, Chief Administrative Officer & Secretary
Allan R. Monich ………………………	53	Vice President - Quality Assurance & Customer Satisfaction
Steven J. Proctor…………………….…	50	Vice President - Sales & Marketing
Alberto L. Satine………………………	50	Vice President - Strategic & Business Development
Abdallah F. Shanti...…………………..	46	Vice President - Information Technology, Electronic Product Integration & Chief Information Officer
Michael K. Simonte…………………...	43	Vice President - Finance & Chief Financial Officer
John S. Sofia…………………………..	47	Vice President - Engineering & Product Development
Patrick J. Spohn……………………….	47	Vice President & Controller

10

Richard E. Dauch, age 64,is Co-Founder, Chairman of the Board & Chief Executive Officer of AAM, and is also Chairman of the Executive Committee of the Board of Directors. He has been Chief Executive Officer and a member of the Board of Directors since the Company began operations in March 1994. In October 1997, he was named Chairman of the Board of Directors. He was also President of AAM from March 1994 through December 2000. Prior to March 1994, he spent 12 years at Chrysler Corporation where he established the just-in-time materials management system and the three-shift manufacturing vehicle assembly process. He is a retired officer from the Chrysler Corporation. Mr. Dauch’s last position at Chrysler, in 1991 was Executive Vice President of Worldwide Manufacturing. Mr. Dauch also served as Group Vice President of Volkswagen of America, where he established the manufacturing facilities and organization for the successful launch of the first major automotive transplant in the United States. Mr. Dauch has more than 40 years of experience in the automotive industry. Mr. Dauch has been named the 1996 Worldwide Automotive Industry Leader of the Year by the Automotive Hall of Fame, the 1997 Manufacturer of the Year by the Michigan Manufacturer’s Association, and the 1999 Michiganian of the Year by The Detroit News. Mr. Dauch also served as Chairman of the National Association of Manufacturers (N.A.M.). He has lectured extensively on the subject of manufacturing and authored the book, Passion for Manufacturing, which is distributed in colleges and universities globally and in several languages. Mr. Dauch is the father of David C. Dauch and Richard F. Dauch.

Yogendra (Yogen) N. Rahangdale, age 59, has been President & Chief Operating Officer since October 2005. Prior to that, he served as Executive Vice President - Operations & Planning (since May 2004); Executive Vice President & Chief Technology Officer (since September 2003); Group Vice President & Chief Technology Officer (since January 2001); Vice President, Manufacturing and Procurement Services (since March 2000); Vice President, Manufacturing Services (since April 1999); Executive Director, Manufacturing Services (since March 1998) and Director, Corporate Manufacturing Planning (since joining our Company in August 1995). Prior to joining our Company, Mr. Rahangdale spent 12 years with Chrysler Corporation in a variety of positions including Manager, Paint & Energy Management.

David C. Dauch, age 42, has been Executive Vice President - Commercial & Strategic Development since January 2005. Prior to that, he served as Senior Vice President, Commercial (since May 2004); Senior Vice President, Sales, Marketing & Driveline Division (since September 2003); Vice President, Manufacturing - Driveline Division (since January 2001); Vice President, Sales and Marketing (since 1998) and Director of Sales, GM Full-Size Truck Programs (since May 1996). Mr. Dauch joined our Company in July 1995 as Manager, Sales Administration. Prior to joining our Company, Mr. Dauch held various positions at Collins & Aikman Products Company, including Sales Manager. Mr. Dauch is a member of the Board of Directors of Collins & Aikman. David C. Dauch is a son of Richard E. Dauch.

Richard F. Dauch, age 46, has been Executive Vice President - Worldwide Manufacturing since October 2005. Prior to that, he served as President - Metal Formed Products Division (since January 2005); Vice President, Metal Formed Products Division (since May 2004); Vice President, Investor Relations (since September 2003); Vice President, Financial Planning (since September 2002); Vice President, Sales and Marketing (since January 2002); Vice President, Sales (since January 2001); Vice President, Manufacturing - Driveline Division (since July 1999); Vice President, Manufacturing (since August 1998); Director, Strategic and Capacity Planning (since February 1998) and Plant Manager, Detroit Gear & Axle Plant (since May 1996). Mr. Dauch joined our Company in May 1995 as Corporate Manager, Labor Relations, and served in that position until May 1996. Prior to joining our Company, Mr. Dauch served as a Senior Business Manager and Business Unit Manager with United Technologies Corporation from July 1992. Prior to his automotive career, Mr. Dauch served in the U.S. Army for eleven years, with assignments including Platoon Leader and Company Commander. Richard F. Dauch is a son of Richard E. Dauch.

John J. Bellanti, age 52, has been Vice President - Manufacturing Services, Capital Planning & Cost Estimating since July 2006. Prior to that, he served as Vice President - Engineering & Chief Technology Officer (since May 2004); Vice President, Engineering & Product Development (since September 2003); Executive Director, Manufacturing Services (since March 2000); Director, Manufacturing Engineering (since June 1998); Director Advanced Programs (since May 1996) and Plant Manager, Detroit Forge Plant (since joining our Company in March 1994). Prior to joining our Company, Mr. Bellanti, worked 22 years at General Motors in various manufacturing and engineering positions, most recently serving as Production Manager. Mr. Bellanti was on the Board of Directors for the North American Forging Industry Association from 1999 through 2003, serving as President of that Association in 2002.

11

Marion A. Cumo, Sr., age 64, has been Vice President - Special Projects since October 2005. Prior to that, he served as Vice President - Driveline Division (since May 2004); Vice President, Program Management & Launch (since September 2002); Vice President, Materials Management and Logistics (since May 1996) and Vice President, Quality Assurance and Customer Satisfaction (since joining our Company in March 1994). Prior to joining our Company, Mr. Cumo spent 11 years working as a manufacturing executive at Chrysler Corporation. His most recent title at Chrysler was General Plants Manager of Assembly Operations. After leaving Chrysler, Mr. Cumo became president of Tri-County Chrysler Products in Peebles/West Union, Ohio, and also worked as an automotive manufacturing consultant. Mr. Cumo began his career at General Motors and has over 39 years experience in the global automotive industry including positions with General Motors, Volkswagen of America and Chrysler Corporation.

Thomas O. Delanoy, age 55, has been Vice President - Materials Management & Logistics since October 2004. Prior to that, he served as Executive Director Production Control and Materials Management (since September 2002); Director, Materials Management (since March 2000); Director of Business Integration (since December 1998); Plant Manager, Detroit Forge Plant (since May 1996); Plant Manager, Detroit Gear & Axle Plant (since August 1994) and Production Manager (since joining our Company in March 1994). Prior to joining our Company, Mr. Delanoy served at Chrysler Corporation in a variety of executive manufacturing positions.

Michael C. Flynn, age 49, has been Vice President - Procurement since November 2005. Prior to that, he served as Executive Director, Sales (since June 2004); Director, Sales (since August 2002); Manager, Manufacturing (since June 2001); Director, Direct Material Purchasing (since February 1998); Manager, Released Programs (since July 1997); and Platform Manager (since July 1996) and Purchasing Agent (since joining our Company in March 1994). Prior to joining our Company, Mr. Flynn served at General Motors for 11 years in a variety of manufacturing, purchasing and engineering positions.

John E. Jerge, age 45, has been Vice President - Human Resources since September 2004. Prior to that, he served as Executive Director, Labor Relations (since April 2004); Director, Labor Relations (since January 2003); Plant Manager, Detroit Gear & Axle Plant (since March 2000); Plant Manager, Buffalo Gear Axle & Linkage (since November 1997); Manufacturing Manager, Buffalo Gear Axle & Linkage (since March 1996); Area manager of Axles and Area Manager of Linkage (since joining our Company in March 1994). Prior to joining our Company, Mr. Jerge began his automotive career at Chrysler Corporation in 1984 where he progressed through a variety of manufacturing, engineering and plant management positions.

Patrick S. Lancaster, age 59, has been Vice President, Chief Administrative Officer & Secretary since September 2003. Prior to that, he served as Group Vice President, Chief Administrative Officer & Secretary (since January 2001); Vice President & Secretary (since March 2000); Vice President, General Counsel & Secretary (since November 1997) and General Counsel & Secretary (since June 1994). Mr. Lancaster is a member of the State Bar of Michigan.

Allan R. Monich, age 53, has been Vice President - Quality Assurance & Customer Satisfaction since July 2006. Prior to that, he served as Vice President - Program Management & Capital Planning (since October 2005); Vice President - Program Management & Launch (since May 2004); Vice President, Manufacturing Forging Division (since October 2001); Vice President, Human Resources (since 1998); Vice President, Personnel (since November 1997) and Plant Manager for the Buffalo Gear & Axle Plant in Buffalo, NY since the formation of our Company in March 1994. Prior to joining our Company in March 1994, he worked for General Motors for 22 years in the areas of manufacturing, quality assurance, sales and engineering, including four years as a Plant Manager.

Steven J. Proctor, age 50, has been Vice President - Sales & Marketing since June 2004. Prior to that, he served as Executive Director, Driveline Sales & Marketing (since September 2003); President and Chief Operating Officer of AAM do Brasil (since September 1999); Director, GMT-360, I-10/GMT-355 (since December 1998); Director, Worldwide Programs (since February 1998); Director, Strategic Planning (since July 1996) and Director, General Motors Programs (since joining our Company in March 1994). Prior to joining our Company, Mr. Proctor worked for General Motors for 20 years in the areas of product and industrial engineering, production, material management and sales.

12

Alberto L. Satine, age 50, has been Vice President - Strategic & Business Development since November 2005. Prior to that, he served as Vice President - Procurement (since January 2005); Executive Director, Global Procurement Direct Materials (since January 2004); General Manager, Latin American Driveline Sales and Operations (since August 2003) and General Manager of International Operations (since joining our Company in May 2001). Prior to joining our Company, Mr. Satine held several management positions at Dana Corporation, including the position of President of Dana’s Andean Operations in South America from 1997 to 2000 and General Manager of the Spicer Transmission Division in Toledo, Ohio from 1994 to 1997.

Abdallah F. Shanti, age 46, has been Vice President - Information Technology, Electronic Product Integration & Chief Information Officer since January 2005. Prior to that, he served as Vice President, Procurement, Information Technology & Chief Information Officer (since September 2002) and Executive Director, Information Technology & Chief Information Officer (since joining our Company in December 1999). Prior to joining our Company, Mr. Shanti served as Vice President, Global Information Technology at LucasVarity PLC. Mr. Shanti began his career with GM/Electronic Data Systems Corporation in 1984 where he served in a variety of information technology leadership roles providing services for automotive and manufacturing corporations. Mr. Shanti has over 22 years of experience in the global automotive industry including positions with General Motors, where he most recently served as General Director, Systems Engineering; LucasVarity PLC; Perot Systems Corporation and GM/Electronic Data Systems Corporation.

Michael K. Simonte, age 43, has been Vice President - Finance & Chief Financial Officer (CFO) since January 2006. Simonte previously served as Vice President & Treasurer (since May 2004); and Treasurer (since September 2002). Simonte joined AAM in December 1998 as Director, Corporate Finance. In that role, he coordinated all of the financial accounting, planning and reporting activities of the company until he was appointed as Treasurer in September 2002. Prior to joining our Company, Mr. Simonte served as Senior Manager at the Detroit office of Ernst & Young LLP. Mr. Simonte is a certified public accountant.

John S. Sofia, age 47, has been Vice President - Engineering & Product Development since July 2006. Prior to that, he served as Vice President - Quality Assurance & Customer Satisfaction (since October 2004); Director, Advanced Quality Planning (since August 2002); Plant Manager, Detroit Forge (since April 2001); Director, Product Engineering (since June 2000); Manager of the Current Production & Process Engineering Group (since September 1997) and Engineering Manager, (since joining our Company in May 1994). Prior to joining our Company, Mr. Sofia served at Chrysler Corporation in a variety of manufacturing and engineering positions.

Patrick J. Spohn, age 47, has been Vice President & Controller since January 2006. Prior to that, he served as Corporate Controller (since August 1999); Finance Manager, Detroit Gear & Axle Plant (since November 1997) and Manager, Financial Planning & Analysis (since January 1997). Mr. Spohn has over 25 years of experience in the global automotive industry including 11 years at ITT Automotive where he most recently served as Division Controller, Switches and Controller of Precision Die Castings.

13

Part II

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

Market Information

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

Dividends

In April 2004, we declared our first quarterly cash dividend of $0.15 per share. On an annualized basis, the dividend payout equates to $0.60 per share. We paid $31.0 million, $30.4 million and $23.0 million to stockholders of record under the quarterly cash dividend program during 2006, 2005 and 2004, respectively.

Securities Authorized for Issuance Under Equity Compensation Plans

The information regarding our equity compensation plans is incorporated by reference from Item 12 of this Form 10-K “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

Item 6. Selected Financial Data

Incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report, section entitled “Five Year Financial Summary.”

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

Incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report, section entitled “Financials - Management’s Discussion and Analysis.”

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report, section entitled “Financials - Management’s Discussion and Analysis - Market Risk.”

Item 8. Financial Statements and Supplementary Data

Incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report, sections entitled “Financials - Consolidated Financial Statements” and “Financials - Notes to Consolidated Financial Statements.”

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

None

Item 9A. Controls and Procedures

Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that (1) our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”))were effective as of December 31, 2006, and (2) no change in internal control over financial reporting occurred during the fourth fiscal quarter ended December 31, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting and the Report of Independent Registered Public Accounting Firm are incorporated by reference from Item 8 of this Form 10-K “Financial Statements and Supplementary Data.”

There has been no change in our internal control over financial reporting during the fourth fiscal quarter ended December 31, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None

14

Part III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by Item 401(b), (d) (e) and (f) of Regulation S-K about our executive officers is furnished in Part I of this Form 10-K, Annual Report under the caption “Executive Officers of the Registrant.” All other information required by Item 10 is incorporated herein by reference from our Proxy Statement which we expect to file on or about March 22, 2007.

We have adopted a code of ethics that applies to our Chief Executive Officer, Chief Administrative Officer and Chief Financial Officer and the senior financial executives who report directly to our Chief Financial Officer. This code of ethics is contained within our code of business conduct which is available on our website at www.aam.com. We will post any amendment to or waiver from the provisions of the Code of Business Conduct that applies to executive officers or directors of the Company.

Item 11. Executive Compensation

The information required by Item 11 is incorporated by reference from our Proxy Statement.

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

The following table summarizes information as of December 31, 2006 relating to our equity compensation plans pursuant to which grants of stock options, restricted stock, restricted stock units and other rights to acquire shares of our common stock may be made from time to time.

Equity Compensation Plan Information

	(a)		(b)		(c)
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted -average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders		6,776,763	$	23.10		3,656,015
Equity compensation plans not approved by security holders		-		-		-
Total		6,776,763	$	23.10		3,656,015

The information required by Item 12 under Item 403 of Regulation S-K is incorporated by reference from our Proxy Statement.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by Item 13 under Items 404 and 407(a) of Regulation S-K is incorporated by reference from our Proxy Statement.

Item 14. Principal Accounting Fees and Services

The information required by Item 9(e) of Schedule 14A is incorporated by reference from our Proxy Statement.

15

Part IV

Item 15. Exhibits and Financial Statement Schedules

The following documents are filed as a part of this report:

1.   All Financial Statements

Management’s Report on Internal Control Over Financial Reporting

Reports of Independent Registered Public Accounting Firm

Consolidated Statements of Operations

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Consolidated Statements of Stockholders’ Equity

Notes to Consolidated Financial Statements

The above financial statements are filed as Exhibit 13 to this Form 10-K.

2.   Financial Statement Schedules

Schedule II - Valuation and Qualifying Accounts and the report of Deloitte & Touche LLP, Independent Registered Public Accounting Firm, on our consolidated financial statement schedule (Schedule II) for the years ended December 31, 2006, 2005 and 2004 are filed as part of this form 10-K.

All other schedules have been omitted because they are not applicable or not required.

3.   Exhibits

The following exhibits were previously filed unless otherwise indicated:

Number	Description of Exhibit
3.01	Amended and Restated Certificate of Incorporation
		(Incorporated by reference to Exhibit 3.01 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
3.02	Bylaws
		(Incorporated by reference to Exhibit 3.01 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
4.01	Specimen Certificate for shares of the Company's Common Stock
		(Incorporated by reference to Exhibit 4.01 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
4.02	5.25% Senior Notes due 2014, Indenture, dated as of February 11, 2004, among AAM, Inc., as issuer, the Company, as guarantor, and BNY Midwest Trust Company, as trustee
		(Incorporated by reference to Exhibit 4.02 filed with American Axle & Manufacturing Holdings, Inc. Form 10-K for the year ended December 31, 2003)
4.03	Senior Convertible Notes due 2024, Indenture, dated as of February 11, 2004, among the Company, as issuer, AAM, Inc., as guarantor, and BNY Midwest Trust Company, as trustee

		(Incorporated by reference to Exhibit 4.03 filed with American Axle & Manufacturing Holdings, Inc. Form 10-K for the year ended December 31, 2003)
10.01	Asset Purchase Agreement, dated February 18, 1994, between AAM, Inc. and GM, and all amendments thereto
		(Incorporated by reference to Exhibit 10.01 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
++10.02	Component Supply Agreement, dated February 28, 1994, between AAM, Inc. and GM
		(Incorporated by reference to Exhibit 10.02 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.03	Amendment No. 1 to Component Supply Agreement, dated February 28, 1994, between AAM, Inc. and GM
		(Incorporated by reference to Exhibit 10.02(a) filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
++10.04	Amendment No. 2 to Component Supply Agreement, dated February 7, 1996, between AAM, Inc. and GM
		(Incorporated by reference to Exhibit 10.02(b) filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
++10.05	Amended and Restated Memorandum of Understanding (MOU), dated September 2, 1997, between AAM, Inc. and GM
		(Incorporated by reference to Exhibit 10.02(f) filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.06	MOU Extension Agreement, dated September 22, 1997, between AAM, Inc. and GM
		(Incorporated by reference to Exhibit 10.02(g) filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
++10.07	Agreement dated February 17, 1997, between AAM, Inc. and GM
		(Incorporated by reference to Exhibit 10.05 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))

++10.08	Letter dated December 13, 1996, by AAM, Inc.
		(Incorporated by reference to Exhibit 10.05(a) filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.09	The Amended and Restated American Axle & Manufacturing of Michigan, Inc. Management Stock Option Plan
		(Incorporated by reference to Exhibit 10.08 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.10	Nonqualified Stock Option Agreement, dated October 30, 1997, between AAM, Inc. and Richard E. Dauch
		(Incorporated by reference to Exhibit 10.09 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))

16

17

Number	Description of Exhibit
10.11	Indemnification Agreement, dated February 28, 1994, between AAM, Inc. and GM
		(Incorporated by reference to Exhibit 10.10 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
‡10.12	Employment Agreement, dated November 6, 1997, by and between the Company and Richard E. Dauch
		(Incorporated by reference to Exhibit 10.11 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.13	Letter Agreement, dated August 18, 1997, between AAM Acquisition, Inc. and Richard E. Dauch
		(Incorporated by reference to Exhibit 10.11(a) filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.14	Recapitalization Agreement, dated as of September 19, 1997, among AAM, Inc., the Company, Jupiter Capital Corporation, Richard E. Dauch, Morton E. Harris and AAM Acquisition, Inc.
		(Incorporated by reference to Exhibit 10.12 filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))

10.15	Disposition Agreement, dated as of December 10, 1998, between American Axle & Manufacturing of Michigan, Inc. and Richard E. Dauch
		(Incorporated by reference to Exhibit 10.13(a) filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
++10.16	Lifetime Program Contract for New M-SUV Products, between GM and AAM, Inc.
		(Incorporated by reference to Exhibit 10.22(c) filed with American Axle & Manufacturing Holdings, Inc. Registration Statement on Form S-1 (Registration No. 333-53491))

10.17	Letter Agreement, dated as of December 15, 1998, as amended January 11, 2000, between B.G. Mathis and the Company
		(Incorporated by reference to Exhibit 10.01 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended March 31, 2000)

++10.18	Settlement Agreement dated as of July 28, 2000 by and between AAM, Inc. and GM
		(Incorporated by reference to Exhibit 10.01 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended September 30, 2000)
‡10.19	Amendment dated December 20, 2000 to Employment Agreement dated as of November 6, 1997 by and between the Company and Richard E. Dauch
		(Incorporated by reference to Exhibit 10.07 filed with American Axle & Manufacturing Holdings, Inc. Form 10-K for the year ended December 31, 2000)
10.20	Lifetime Program Contract between General Motors Corporation North American Operations (Buyer) and AAM, Inc. (Seller)
		(Incorporated by reference to Exhibit 10.01 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended June 30, 2001)
10.21	Agreement dated as of June 14, 2001 by and between GM and AAM, Inc.
		(Incorporated by reference to Exhibit 10.02 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended June 30, 2001)

18

Number	Description of Exhibit
++10.22	Agreement dated as December 21, 2001 by and between GM and AAM, Inc.
		(Incorporated by reference to Exhibit 10.47 filed with American Axle & Manufacturing Holdings, Inc. Form 10-K for the year ended December 30, 2001)
‡10.23	Second Amendment, dated as of December 10, 2001, to the Employment Agreement, dated as of November 6, 1997, by and between the Company, a Delaware corporation and Richard E. Dauch
		(Incorporated by reference to Exhibit 10.49 filed with American Axle & Manufacturing Holdings, Inc. Form 10-K for the year ended December 30, 2001)
10.24	Lifetime Program Contract for GMT-900 Products, between GM and AAM, Inc.
		(Incorporated by reference to Exhibit 10.51 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended June 30, 2003)
10.25	Continuity Agreement dated as of September 29, 2003 between the Company and Richard E. Dauch
		(Incorporated by reference to Exhibit 10.52 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended September 30, 2003)
10.26	Continuity Agreements dated as of September 29, 2003 between the Company and certain officers
		(Incorporated by reference to Exhibit 10.53 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended September 30, 2003)
10.27	Senior Unsecured Revolving Credit Facility, dated as of January 9, 2004, among the Company, AAM, Inc., the lenders named therein and JPMorgan Chase Bank, as Administrative Agent
		(Incorporated by reference to Exhibit 10.40 filed with American Axle & Manufacturing Holdings, Inc. Form 10-K for the year ended December 30, 2003)

10.28	Guarantee Agreement, dated as of January 9, 2004, among the Company, AAM, Inc., the Subsidiary Guarantors and JPMorgan Chase Bank, as Administrative Agent
		(Incorporated by reference to Exhibit 10.41 filed with American Axle & Manufacturing Holdings, Inc. Form 10-K for the year ended December 31, 2003)
++10.29	Sourcing Letter Agreement dated as of February 26, 2004 by and between GM and AAM, Inc.
		(Incorporated by reference to Exhibit 10.42 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended March 31, 2004)
++10.30	Letter Agreement dated April 22, 2004 by and between DaimlerChrysler Corporation and AAM, Inc.
		(Incorporated by reference to Exhibit 10.43 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended June 30, 2004)

19

Number	Description of Exhibit
10.31	Forms of Restricted Stock and Restricted Stock Unit Agreements under 1999 Stock Incentive Plan
		(Incorporated by reference to Exhibit 10.45 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended September 30, 2004)
10.32	Form of 2002 Stock Option Agreement
	(Incorporated by reference to Exhibit 10.2 of Current Report on Form 8-K dated October 26, 2005.)
10.33	Form of 2003 Stock Option Agreement
		(Incorporated by reference to Exhibit 10.2 of Current Report on Form 8-K dated October 26, 2005.)
10.34	Form of 2004 Stock Option Agreement
		(Incorporated by reference to Exhibit 10.3 of Current Report on Form 8-K dated October 26, 2005.)
10.35	Form of 2005 Stock Option Agreement
		(Incorporated by reference to Exhibit 10.4 of Current Report on Form 8-K dated October 26, 2005.)
10.36	Form of Nonqualified Stock Option Agreement
		(Incorporated by reference to Exhibit 10.5 of Current Report on Form 8-K dated October 26, 2005.)
10.37	Employment Agreement Extension between American Axle & Manufacturing Holdings, Inc. and Richard E. Dauch dated November 3, 2005
		(Incorporated by reference to Exhibit 99.1 of Current Report on Form 8-K dated November 3, 2005.)
10.38	Restricted Stock Award Agreement between American Axle & Manufacturing Holdings, Inc. and Richard E. Dauch dated November 3, 2005
		(Incorporated by reference to Exhibit 99.2 of Current Report on Form 8-K dated November 3, 2005.)
10.39	Restricted Stock Unit Award Agreement between American Axle & Manufacturing Holdings, Inc. and Richard E. Dauch dated November 3, 2005
		(Incorporated by reference to Exhibit 99.3 of Current Report on Form 8-K dated November 3, 2005.)
10.40	Restated 1999 American Axle & Manufacturing Holdings, Inc. Stock Incentive Compensation Plan
		(Incorporated by reference to Exhibit 10.51 filed with American Axle & Manufacturing Holdings, Inc. Form 10-K for the year ended December 31, 2005)
10.41	Form of Restricted Stock Unit Award Agreement for Non-Employee Directors
		(Incorporated by reference to Exhibit 10.52 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended March 31, 2006)
10.42	Credit Agreement dated as of June 28, 2006, amended as of August 9, 2006, among American Axle & Manufacturing, Inc., American Axle & Manufacturing Holdings, Inc. and JP Morgan Chase Bank, N.A., and Bank of America, N.A.
		(Incorporated by reference to Exhibit 10.53 filed with American Axle & Manufacturing Holdings, Inc. Form 10-Q for the quarterly period ended September 30, 2006)
10.43	Amendment to Senior Unsecured Revolving Credit Facility, dated as of January 9, 2004, amended as of December 11, 2006, among the Company, AAM, Inc., the lenders named therein and JPMorgan Chase Bank, as Administrative Agent
		(Incorporated by reference to Exhibit 99.1 of Current Report on Form 8-K dated December 11, 2006.)
10.44	Amended and Restated American Axle & Manufacturing Holdings, Inc. Incentive Compensation Plan for Executive Officers
		(Incorporated by reference to Exhibit 99.1 of Current Report on Form 8-K dated February 2, 2007)
*10.45	Employment Agreement Amendment between American Axle & Manufacturing Holdings, Inc. and Richard E. Dauch dated November 15, 2006
*10.46	Amended and Restated American Axle & Manufacturing, Inc. Supplemental Executive Retirement Program dated December 22, 2006
*12	Computation of Ratio of Earnings to Fixed Charges
*13	Annual Report to Stockholders for the year ended December 31, 2006, sections entitled “Financials – Management’s Discussion and Analysis,” “Financials – Consolidated Financial Statements,” “Financials – Notes to Consolidated Financial Statements” and “Five Year Financial Summary” **
*21	Subsidiaries of the Company
*23	Consent of Deloitte & Touche LLP

*31.1	Certification of  Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act
*31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act

*32	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	(All other exhibits are not applicable.)

++Confidentiality Requests Approved by the SEC

‡Reflects Management or Compensatory Contract

*Filed herewith

20

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

(Registrant)

   Date: February 20, 2007

   By: /s/ Michael K. Simonte_________

   Name: Michael K. Simonte

   Title: Vice President - Finance &                               Chief Financial Officer

                                                                                                                                         (Chief Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated.

Signature	Title	Date
/s/ Richard E. Dauch	Co-Founder, Chairman of the Board &	February 20, 2007
Richard E. Dauch	Chief Executive Officer
/s/ Michael K. Simonte	Vice President - Finance &	February 20, 2007
Michael K. Simonte	Chief Financial Officer
/s/ Elizabeth A. Chappell	Director	February 20, 2007
Elizabeth A. Chappell
/s/ Forest J. Farmer	Director	February 20, 2007
Forest J. Farmer
/s/ Richard C. Lappin	Director	February 20, 2007
Richard C. Lappin
/s/ B.G. Mathis	Director	February 20, 2007
B.G. Mathis
/s/ William P. Miller II	Director	February 20, 2007
William P. Miller II
/s/ Larry K. Switzer	Director	February 20, 2007
Larry K. Switzer
/s/ Thomas K. Walker	Director	February 20, 2007
Thomas K. Walker
/s/ Dr. Henry T. Yang	Director	February 20, 2007
Dr. Henry T. Yang

21

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

			Additions -
	Balance at		Charged to		Deductions -			Balance
	Beginning of		Costs and		See Notes			At End of
	Period		Expenses		Below			Period
	(In millions)
Year Ended December 31, 2004:
Allowance for doubtful accounts	$	2.8		0.4		0.7	(1)	$	2.5
Allowance for deferred taxes		34.9		-		2.4	(2)		32.5
Inventory valuation allowance		14.8		6.7		8.9	(3)		12.6
LIFO reserve		10.4		3.9		-			14.3
Year Ended December 31, 2005:
Allowance for doubtful accounts		2.5		1.0		0.4	(1)		3.1
Allowance for deferred taxes		32.5		-		1.3	(2)		31.2
Inventory valuation allowance		12.6		11.9		4.2	(3)		20.3
LIFO reserve		14.3		0.3		-			14.6
Year Ended December 31, 2006:
Allowance for doubtful accounts		3.1		0.7		2.6	(1)		1.2
Allowance for deferred taxes		31.2		13.4		5.6	(2)		39.0
Inventory valuation allowance		20.3		20.0		5.6	(3)		34.7
LIFO reserve		14.6		-		0.8			13.8
(1) Uncollectible accounts charged off net of recoveries.
(2) Adjustments associated with our assessment of the uncertainty of realizing the full benefit of deferred tax assets (principally related to acquired foreign NOLs and capital allowance carryforwards).
(3) Inventory adjustments for physical quantity discrepancies and write-offs of excess and obsolete inventories.

22

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

American Axle & Manufacturing Holdings, Inc.:

We have audited the consolidated financial statements of American Axle & Manufacturing Holdings, Inc. and subsidiaries (the Company) as of December 31, 2006 and 2005, and for each of the three years in the period ended December 31, 2006, management's assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2006, and the effectiveness of the Company's internal control over financial reporting as of December 31, 2006, and have issued our reports thereon dated February 15, 2007 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the adoption of Statement of Financial Accounting Standards (SFAS) No.123 R - Share Based Payments on January 1, 2006 and the adoption of the balance sheet provisions of SFAS No. 158 - Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans on December 31, 2006); such consolidated financial statements and reports are included in your 2006 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedule of the Company listed in Item 15. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ DELOITTE & TOUCHE LLP

Detroit, Michigan

February 15, 2007

23

EX-10.45

AMENDMENT TO EMPLOYMENT AGREEMENT

AMENDMENT dated as of November 15, 2006 to the Employment Agreement dated as of November 6, 1997 by and between American Axle & Manufacturing Holdings, Inc., a Delaware corporation (the “Company”), and Richard E. Dauch (the “Employee”), as amended (“Employment Agreement”):

Section 3 of the Employment Agreement is hereby amended to add the following paragraph:

(x) Post Retirement Benefits. The Company shall provide the Employee and his eligible dependents with medical, dental and vision coverage upon his retirement from the Company. The terms of such coverage shall be substantially equivalent to the group medical, dental and vision plans offered to American Axle & Manufacturing, Inc. salaried retirees as of 12/31/07.

IN WITNESS WHEREOF, the parties have executed this Amendment to Employment Agreement as of the date above.

AMERICAN AXLE & MANUFACTURING

 HOLDINGS, INC

By:/s/ Richard E. Dauch    By:/s/ Forest J. Farmer

Richard E. DauchForest J. Farmer

 Chairman of the Compensation Committee

 of the Board of Directors

EX-10.46

AMERICAN AXLE & MANUFACTURING, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PROGRAM

AMENDED AND RESTATED PLAN DOCUMENT

EFFECTIVE JANUARY 1, 2007

TABLE OF CONTENTS

Page

ARTICLE IINTRODUCTION

1.1Purpose of Plan

1.2Purpose of Amendment

1.3Top Hat Pension Benefit Plan

1.4Funding

1.5Effective Date

ARTICLE IIDEFINITIONS

2.1Actuarial Equivalent Value.

2.2Average Monthly Base Salary

2.3Average Monthly Incentive Compensation

2.4Average Total Direct Compensation

2.5Base Salary

2.6Board of Directors

2.7Cash Balance Plan

2.8Code

2.9Compensation Committee

2.10Corporation

2.11Credited Service

2.12Disability or Disabled

2.13Employee

2.14Final Average Compensation

2.15Frozen Benefit

2.16Grandfathered Participant

2.17Health Care Program

2.18Joint and Survivor Annuity

2.19Management Benefits Committee

2.20Non-Grandfathered Participant

2.21Participant

2.22Salaried Savings Plan

2.23Salaried Retirement Plan

2.24Specified Employee

2.25Spouse

ARTICLE IIIPARTICIPATION AND ELIGIBILITY

3.1Participation

3.2Eligibility for Retirement Benefits.

3.3Eligibility for Pre-Retirement Surviving Spouse Benefits

3.4Determination of Eligibility

ARTICLE IVBENEFITS

4.1Current Benefit Formula

4.2Prior Benefit Formula.

4.3Time and Form of Payment of Benefits

4.4Pre-Retirement Surviving Spouse Benefit

ARTICLE VADMINISTRATION

5.1Management Benefits Committee

5.2Administrator

5.3Compensation

5.4Agent for Service of Process

5.5Indemnification

ARTICLE VICLAIMS PROCEDURE

6.1Filing of Claim

6.2Denial of Claim

6.3Appeal.

6.4Review of Appeal

6.5Decision on Appeal

ARTICLE VIIMISCELLANEOUS

7.1No Contract of Employment

7.2Non-Assignability of Benefits

7.3Withholding

7.4Amendment and Termination

7.5No Fiduciary Relationship Created

7.6Unsecured General Creditor Status of Employee

7.7Severability

7.8Governing Laws

7.9Binding Effect

7.10Number and Gender

7.11Headings

7.12Entire Agreement

i

1

ARTICLE I

INTRODUCTION

American Axle & Manufacturing, Inc. (the "Corporation") previously adopted and maintains the AMERICAN AXLE & MANUFACTURING, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PROGRAM (the "Plan") for the purpose of providing supplemental retirement benefits to employees who are eligible under the terms and conditions of this Plan. The Plan is hereby amended and restated, effective January 1, 2007, as follows.

1.1 Purpose of Plan.

The purpose of the Plan is to provide certain eligible employees of the Corporation a level of retirement benefits that result in total benefits which are competitive with benefits available to retiring executives of other major industrial companies.

1.2 Purpose of Amendment.

The purpose of this Amendment is to, (i) freeze accrued benefits under the current Plan formula for all participants other than Grandfathered Participants as of  December 31, 2006, and (ii) to institute a new benefit formula for current, Non-Grandfathered, participants and future participants, effective January 1, 2007.

1.3 "Top Hat" Pension Benefit Plan.

The Plan is an "employee pension benefit plan" within the meaning of ERISA. However, the Plan is unfunded and maintained for a select group of management or highly compensated employees and, therefore, it is intended that the Plan will be exempt from Parts 2, 3 and 4 of Title I of ERISA. The Plan is not intended to qualify under Code Section 401(a).

1.4 Funding.

The Plan is unfunded. All benefits will be paid from the general assets of the Corporation, although assets may, but are not required to be placed in a grantor trust, of which the Corporation is the grantor, within the meaning of subpart E, Part I, subchapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. Participants have no ownership, either actual or beneficial, in the assets of the trust so the trust shall not affect the unfunded status of the Plan.

1.5 Effective Date.

The Plan is effective March 1, 1994. The amended and restated Plan is effective as of January 1, 2007.

2

ARTICLE II

DEFINITIONS

For purposes of the Plan, the following words and phrases shall have the respective meanings set forth below, unless their context clearly requires a different meaning:

2.1   Actuarial Equivalent Value.

“Actuarial Equivalent Value” means:

(a)In the case of a benefit payable pursuant to the Salaried Retirement Plan, a benefit of equal value when computed on the basis of the GAR Unisex mortality table and      interest rate assumption of 7.25%.

(b)In the case of a benefit payable pursuant to the Cash Balance Plan, the hypothetical value of the Participant’s Cash Balance Account; and

(c)In the case of a Frozen Benefit payable to a Non-Grandfathered Participant, pursuant to this Plan, a benefit of equal value when computed on the basis of GAR Unisex table and interest rate assumption of 7.25%.

2.2 Average Monthly Base Salary.

"Average Monthly Base Salary" means the monthly average of the Employee's Base Salary for the highest 60 of the 120 months immediately preceding the earlier of (i) his or her termination of employment, (ii) transfer to the hourly rolls, or (iii) in the case of a Non-Grandfathered Participant, December 31, 2006. For purposes of determining "Average Monthly Base Salary", the following provisions shall apply:

(a) For any month for which the Employee received Base Salary at less than his or her full monthly Base Salary rate, his or her full monthly Base Salary rate last received preceding such month shall be used for such month.

(b) For any month during which an Employee was on the hourly payroll and subsequent to which the Employee commenced service as a salaried Employee, his or her monthly Base Salary rate immediately following the commencement of such service as a salaried Employee shall be used for such month.

2.3 Average Monthly Incentive Compensation.

"Average Monthly Incentive Compensation" means the amount determined by dividing the total of the highest five of the last ten years of bonus awards by the Corporation to an Employee immediately preceding the earlier of (i) his or her termination of employment, (ii) transfer to the hourly rolls, or (iii) in the case of a Non-Grandfathered Participant, December 31, 2006, by 60. The bonus amount is to be based on the total bonus amount on the date of the award, irrespective of whether any portion of such bonus is deferred. Bonus awards related to an Employee's year of retirement are not taken into account. If an Employee does not have five years of awards, then a $0 award will be used for each year necessary to make a total of five years.

2.4  Average Total Direct Compensation.

"Average Total Direct Compensation" means the sum of Average Monthly Base Salary plus Average Monthly Incentive Compensation.

2.5 Base Salary.

"Base Salary" means the salary paid by the Corporation for a work week of not more than 40 hours, exclusive of any other compensation.

An Employee's Base Salary for purposes of determining benefits paid under this Plan shall include elective deferrals of Base Salary pursuant to (i) a cash or deferred arrangement under Code Section 401(k) as provided under the Salaried Savings Plan, (ii) an arrangement under Code Section 125 or 132(f)(4); and (iii) under the American Axle & Manufacturing Holdings, Inc. Executive Deferred Compensation Plan.

2.6 Board of Directors.

"Board of Directors" means the Board of Directors of the Corporation.

2.7 Cash Balance Plan.

"Cash Balance Plan" means the American Axle & Manufacturing, Inc. and Affiliated Corporation Salaried Cash Balance Pension Plan.

2.8 Code.

"Code" means the Internal Revenue Code of 1986, as amended. Reference to a section of the Code shall include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes that section.

2.9 Compensation Committee.

"Compensation Committee" means the Compensation Committee of the Board of Directors of the Corporation.

2.10 Corporation.

"Corporation" means American Axle & Manufacturing, Inc.

2.11 Credited Service.

"Credited Service" shall have the same meaning as that term is defined in Section 6.2 of the Salaried Retirement Plan and/or Section 6.1 of the Cash Balance Plan. Notwithstanding any provision of the Plan, the Salaried Retirement Plan or the Cash Balance Plan to the contrary, a Transitioned Employee (as defined in Section 1.35 of the Salaried Retirement Plan) shall receive credit for Credited Service with General Motors Corporation for purposes of determining such an Employee's eligibility for benefits under the Plan, but not for purposes of the amount of an Employee's benefit.

Notwithstanding any provision of this Plan to the contrary, no Employee will be credited with any years of Credited Service for periods following a layoff or leave of absence which commenced prior to the date such Employee attains age 62.

2.12 Disability or Disabled.

"Disability" or "Disabled". An Employee shall be deemed to be suffering from a Disability only if he or she is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under the American Axle & Manufacturing, Inc. Disability Plan.

2.13 Employee.

"Employee" means:

(a) General Definition. “Employee” shall mean a regular employee of the Corporation compensated by salary or by commission or partly by salary and partly by commission who is (i) working in the United States, or (ii) a citizen of or domiciled in the United States and who has been or may hereafter be hired in the United States by the Corporation and who is sent out of the United States by the Corporation to work in foreign operations, and whose services, if discontinued, would be discontinued by recalling said employee to the United States and terminating his or her services in the United States and (iii) a nonresident alien receiving income from the Corporation’s United States payroll.

(b) Temporary, Part-Time and Flexible Service Employees. The term “Employee” shall not include employees who are classified by the Corporation as (i) Temporary Employees, including per diem employees, (ii) Part-Time Employees, or (iii) Flexible Service Employees.

(c) Controlled Group Employees. The term “Employee” shall not include employees of affiliated employers; provided, however, that service with any such entity shall, if such an individual later becomes an Employee, be counted under this Plan for eligibility purposes.

(d) Leased Employees. The term “Employee” shall not include any Leased Employee (within the meaning of Code Section 414(n)) or any individual classified as a Leased Employee by the Corporation. If a Leased Employee later becomes an Employee, service as a Leased Employee shall be counted under this Plan for eligibility purposes.

(e) Union Employees. The term “Employee” shall not include employees represented by a labor organization who are covered by a collective bargaining agreement so long as retirement benefits are the subject of good faith bargaining and so long as the collective bargaining agreement does not expressly provide for participation in this Plan.

(f) Directors. The term “Employee” shall not include members of the Board of Directors of American Axle & Manufacturing, Inc., or of any committee appointed by any such Board of Directors, who are not regular employees of the Corporation.

(g) Independent Contractors. The term “Employee” shall not include an independent contractor or any individual classified as an independent contractor by the Corporation regardless of any later classification or reclassification of any such individual as a common law employee of the Corporation.

2.14         Final Average Compensation

“Final Average Compensation” means the annual average of the Employee’s Base Salary, plus bonuses, from the Corporation for the five consecutive calendar years that results in the highest such average for the Participant. If the Employee has less than 5 full calendar years of employment, only his or her full calendar years of employment shall be used to determine the Employee’s Final Average Compensation.

2.15         Frozen Benefit

“Frozen Benefit” means, in the case of a Non-Grandfathered Participant, his or her accrued benefit under this Plan determined as of December 31, 2006.

2.16         Grandfathered Participant.

The term “Grandfathered Participant” means an individual who (i) is actively employed by the Corporation on December 31, 2006, (ii) is an active Participant in this Plan and in the Salaried Retirement Plan on December 31, 2006, and (iii) if he or she continues in the employ of the Corporation on a full-time basis, will be eligible for Early or Normal Retirement under the Salaried Retirement Plan on or before December 1, 2011.

2.17 Health Care Program.

"Health Care Program" means the American Axle & Manufacturing, Inc. Salaried Health Care Program.

2.18 Joint and Survivor Annuity.

"Joint and Survivor Annuity" means an immediate annuity which provides a reduced benefit for the life of the Employee with a survivor annuity for the life of the Employee's Spouse equal to 65% of the amount of the annuity which is payable during the life of the Employee. Such reduced benefit shall equal the benefit otherwise payable to an Employee under Article IV multiplied by 95%, if the age of the Employee and his or her Spouse is within five years of each other. If an Employee's Spouse is five or more years younger than the Employee, 95% is decreased by 1/2% for each full year over five years that the Spouse is younger than the Employee, and if such Spouse is five or more years older than the Employee, 95% shall be increased by 1/2%, but not to exceed 100%, for each full year over five years that the Spouse is older than the Employee.

2.19 Management Benefits Committee.

"Management Benefits Committee" means the committee appointed pursuant to Section 5.1.

2.20         Non-Grandfathered Participant.

The term “Non-Grandfathered Participant” means any Participant in the Plan who is not a Grandfathered Participant.

2.21         Participant.

“Participant” means an Employee meeting the requirements of Article III.

2.22         Salaried Savings Plan.

 

“Salaried Savings Plan” means the American Axle and Manufacturing, Inc. Salaried Savings Plan.

2.23 Salaried Retirement Plan.

"Salaried Retirement Plan" means the American Axle & Manufacturing, Inc. Retirement Program for Salaried Employees.

2.24 Specified Employee.

"Specified Employee" means a key employee as defined in Section 416(i) of the Code without regard to paragraph (5) thereof.

2.25 Spouse.

"Spouse" means the legally married husband or wife of an Employee. The legality of the marriage shall be determined pursuant to the laws of the state in which the Employee is domiciled.

3

ARTICLE III

PARTICIPATION AND ELIGIBILITY

3.1 Participation.

To be eligible for a benefit under this Plan as set forth in Article IV, an Employee must:

(1) Be Salary Band 16 or above and an active employee of the Corporation or an affiliated entity on his or her date of death, retirement or commencement of his or her Disability.

(2) Be credited with 10 or more Years of Credited Service; and

(3) Have attained age 55 at the time of his or her retirement or death or commencement of his or her Disability.

An individual shall not be deemed to be actively employed if he or she is laid off or on a leave of absence.

3.2            Eligibility for Retirement Benefits.

(a)Non-Grandfathered Participant.A Non-Grandfathered Participant shall, upon meeting the requirements set forth in Section 3.1, be eligible for the greater of:

(1)his or her benefit determined pursuant to Section 4.1; or

(2)his or her Frozen Basic Benefit determined pursuant to Section 4.2(a); or

(3)if the Participant shall have attained age 62 at the time of his or her retirement or death or commencement of his or her Disability, his or her Frozen Alternative Benefit determined pursuant to Section 4.2(b).

(b)Grandfathered Participant. A Grandfathered Participant shall (i) not be entitled to a benefit pursuant to Section 4.1, and (ii) not have his or her Basic or Alternative Benefit pursuant to Sections 4.2(a) and (b) frozen. A Grandfathered Participant shall, upon meeting the requirements of Section 3.1, be eligible for the greater of:

(1)his or her Basic Benefit determined pursuant to Section 4.2(a);

(2)if he or she shall have attained age 62 at the time of his or her retirement or death or commencement of his or her Disability, his or her Alternative Benefit      determined pursuant to Section 4.2(b); or

(3)if he or she continues in the employ of the Corporation after December 1, 2011, the greater of his or her benefit under, (i) Section 3.2(b)(1) or (2) determined as of     December 31, 2011, or (ii) Section 4.1 determined as of his or her termination of employment with the Corporation, but with his or her Frozen Benefit being determined as of December 31, 2011.

3.3 Eligibility for Pre-Retirement Surviving Spouse Benefits.

The Spouse of an Employee who is eligible for a benefit who dies before benefit payments begin will be entitled to receive benefit payments in accordance with Section 4.3.

3.4 Determination of Eligibility.

The Management Benefits Committee shall determine each Employee's eligibility for benefits under this Plan.

4

ARTICLE IV

BENEFITS

4.1           Current Benefit Formula.

In the case of a Non-Grandfathered Participant retiring on or after December 31, 2006, he or she shall receive a benefit equal to 12.5% of his or her Final Average Compensation times the Participant’s years of Credited Service, less the sum of:

(a)The lump sum Actuarial Equivalent Value of his or her benefits payable pursuant to:

(1)the Salaried Retirement Plan;

(2)the Cash Balance Plan;

(3)his or her Frozen Benefit under this Plan; and

    (b)the Participant’s AAM Retirement Contribution Account established pursuant to Section 3.2(b) of the Salaried Savings Plan.

4.2           Prior Benefit Formula.

(a) Amount of Basic Benefit. The Basic Benefit shall, subject to Section 4.2(b), be a monthly benefit equal to 2% of a Participant’s Average Monthly Base Salary multiplied by his or her years of Credited Service, less the sum of:

(1) All monthly benefits payable to the eligible Employee under the Salaried Retirement Plan and/or the Cash Balance Plan before reduction for any survivor option, plus

(2) 2% of the eligible Employee's monthly age 65 primary Social Security benefit multiplied by his or her years of Credited Service.

For purposes of calculating Basic Benefits, the following shall apply:

(1) The monthly age 65 primary Social Security benefit will be determined and applied to the Basic Benefit formula at death or retirement, regardless of the Employee's age at death or retirement and regardless of the Employee's eligibility for Social Security benefits.

(2) The monthly age 65 primary Social Security benefit will be determined at death or retirement using the maximum monthly Social Security benefit amount payable at age 65 in the year the Employee retires or dies.

(b) Rules Applicable to Basic Benefits.

(1) At age 62 and one month, for those retiring prior to age 62 with a Basic Benefit, the Basic Benefit will be redetermined, taking into account the lower non-contributory basic benefit payable under the Salaried Retirement Plan when Temporary Benefits under the Salaried Retirement Plan are reduced or eliminated.

(2) The "Special" benefit (Part B Medicare reimbursement) paid under the Health Program will not be taken into account in determining any monthly benefit amount payable under Section 4.2(a).

(3) Post-retirement increases under the Salaried Retirement Plan or the Cash Balance Plan will not reduce any monthly benefit amount payable under this Section 4.2(a).

(4) Any benefits payable under this Section 4.2(b) to a retiree or eligible surviving spouse will be offset by benefits payable under certain other Corporation-provided programs (e.g., Long-Term Disability Benefits).

(5) The award or denial of a Social Security disability insurance benefit that affects the monthly amount of benefits payable under the Salaried Retirement Plan will be taken into account in determining any monthly benefit amount payable under this Section 4.2(a).

(c) Amount of Alternative Benefit. The Alternative Benefit shall, subject to Section 4.2(d), be a monthly benefit equal to 1.5% of a Participant’s Average Total Direct Compensation, multiplied by his or her years of Credited Service, less the sum of:

(1) All monthly benefits determined under the terms of the Salaried Retirement Plan and/or the Cash Balance Plan before reduction for any survivor option, plus

(2) 100% of the monthly age 65 primary Social Security benefit, plus

(3) Any benefits payable under certain other Corporation-provided programs (e.g., Extended Disability Benefits).

For purposes of calculating Alternative Benefits, the following shall apply:

(1) Differing time periods over the last 10 years of employment with the Corporation may be used for the blended calculation of Average Monthly Base Salary and Average Monthly Incentive Compensation.

(2) The monthly age 65 primary Social Security benefit is the monthly age 65 primary Social Security benefit payable in the year of the Employee's death or retirement, regardless of the Employee's age at such time and regardless of the Employee's eligibility for Social Security benefits.

(3) The monthly age 65 primary Social Security benefit will not be redetermined for any subsequent Social Security increase.

(d) Rules Applicable to Alternative Benefits.

(1) Post-retirement increases under the Salaried Retirement Plan or the Cash Balance Plan will not reduce any monthly benefit amount payable under Section 4.2(c).

(2) The "Special" Medicare benefit payable under the Health Care Program will not be taken into account in determining any monthly benefit amount payable under Section 4.2(c).

(3) Benefits payable under Section 4.2(c) are not guaranteed and may be reduced or eliminated at any time, and from time to time, without prior notice by the Compensation Committee, the Management Benefits Committee and the Board of Directors.

(4) Until age 70, each of the conditions precedent requirements contained in the American Axle & Manufacturing, Inc. Executive Incentive Compensation Program will be applied to the continued eligibility for payment of an Alternative Benefit. Therefore, receipt of Alternative Benefits will cease immediately, effective as of the month immediately following the date of initial violation, upon determination by the Corporation that a retired executive receiving an Alternative Benefit (i) did not refrain from all activity which is competitive with the Corporation, or (ii) acted in a manner inimical or contrary to the best interests of the Corporation. Any Alternative Benefits also may be suspended if the retired executive does not respond to an Annual Questionnaire regarding items (i) and (ii).

4.3 Time and Form of Payment of Benefits.

(a)           Non-Grandfathered Participants. Payments to Non-Grandfathered Participants pursuant to Section 4.1(a) shall commence six months after the date of the Participant’s separation from service and shall be payable in one lump sum payment. If the Participant dies prior to the receipt of all of his or her benefits pursuant to Section 4.1(a), the Spouse will receive a death benefit equal to the amount payable to the Participant. The death benefit shall be payable in one lump sum as soon as practicable after the death of the Participant. If a Participant is not survived by his Spouse his or her benefits will be forfeited.

(b) Payment of Basic and Alternative Benefits.A Participant, whether a Grandfathered or Non-Grandfathered Participant, entitled to benefits pursuant to Section 4.2(a) or (c), shall have their benefits paid as follows:

(1)Commencement of Benefits. Benefit payments shall commence as soon as practicable after an Employee separates from service with the Corporation; provided,       however, that the portion of a Specified Employee's benefit that was not vested within the meaning of Code Section 409A on December 31, 2004, may not be made before the date which is six months after the date of separation from service.

(2)Single Life Annuity. Except as provided in Section 4.3(b)(3), an Employee entitled to a Basic Benefit or an Alternative Benefit will receive his or her benefit in the form of a single life annuity for the Employee's lifetime.

(3)Automatic Survivor Benefit.

(A)Basic Benefit. An Employee entitled to a Basic Benefit or Alternative Benefit who has a Spouse who is otherwise eligible for survivor benefits under the  Salaried Retirement Plan or the Cash Balance Plan, will receive his or her benefit determined in the form of a Joint and Survivor Annuity.

(B)Alternative Benefit. An Employee who (i) has attained age 62 or such earlier age specified in a special separation program, (ii) has been credited with 10    or more years of Credited Service, and (iii) on the date Alternative Benefits begin, has a Spouse who is otherwise eligible for survivor benefits under the Salaried Retirement Plan or the Cash Balance Plan, will receive his or her benefit in the form of a Joint and Survivor Annuity.

4.4 Pre-Retirement Surviving Spouse Benefit.

(a)The pre-retirement surviving spouse benefit payable pursuant to Section 4.1 to an eligible Spouse shall be equal to the Participant’s benefit calculated pursuant to Section 4.1 and shall be payable in one lump sum payment as soon as administratively practicable following the Participant’s death.

(b)Basic and Alternative Benefits. The pre-retirement surviving spouse benefit payable to the eligible spouse of a Grandfathered or Non-Grandfathered participant pursuant to Sections 4.2(a) or (c) shall equal the amount that the Spouse would have been entitled to receive under the Joint and Survivor Annuity if the Employee had retired with an immediate Joint and Survivor Annuity on the day before his death. In the event that an Employee is eligible for both a Basic Benefit and an Alternative Benefit on his date of death, the Pre-Retirement Surviving Spouse Benefit will equal the Pre-Retirement Surviving Spouse Benefit based on the Employee's Basic Benefit or Alternative Benefit, whichever is greater.

5

ARTICLE V

ADMINISTRATION

5.1 Management Benefits Committee.

The Compensation Committee shall appoint a Management Benefits Committee for the Plan.

(a) Appointment and Removal of Management Benefits Committee. The Management Benefits Committee shall consist of three or more individuals appointed by, and serving at the discretion of, the Compensation Committee. A member of the Management Benefits Committee may (i) resign upon 30 days written notice to the Compensation Committee, or (ii) be removed from the Management Benefits Committee at any time at the discretion of the Compensation Committee.

(b) Decisions by Management Benefits Committee. The Management Benefits Committee shall act by majority vote either at a meeting of the Management Benefits Committee or by written consent. Meetings may be attended telephonically.

(c) Authority. The Management Benefits Committee shall have the following duties and authority under the Plan.

(1) Compliance. The Management Benefits Committee shall monitor the performance of the Plan to ensure that the Plan is administered in accordance with its terms and in compliance applicable law or regulation.

(2) Discretionary Authority. The Management Benefits Committee shall have full and exclusive discretionary authority to determine all questions arising in the administration, application and interpretation of the Plan including the authority to correct any defect or reconcile any inconsistency or ambiguity in the Plan and the authority to determine an Employee's or other individual’s eligibility to receive a benefit from the Plan and the amount of that benefit. The Management Benefits Committee shall determine all Claims appeals as set forth in Section 6.5 of this Plan and shall have the authority to determine all questions of fact relating to such an appeal. Any determination by the Management Benefits Committee pursuant to this Section 5.1(c)(2) or the Claims Procedure shall be binding and conclusive on all parties.

(3) Plan Amendments. The Management Benefits Committee shall have the authority to make such Plan amendments as are administrative in nature so long as such amendments do not have a material adverse financial impact on the Corporation.

(4) Adoption of Plan. The Management Benefits Committee may provide for the adoption of the Plan by an affiliated employer pursuant to such terms and conditions as the Management Benefits Committee, in its discretion, may determine. The Management Benefits Committee shall have the right to remove an affiliated employer as a Plan sponsor if, in its discretion, it deems such removal to be appropriate.

5.2           Administrator.

The Corporation shall be the Plan Administrator. The American Axle & Manufacturing, Inc. Corporate Benefits Group shall act on its behalf and perform the duties of the Administrator as set forth herein. The Administrator shall administer the Plan in accordance with all applicable laws and regulations and, except as otherwise expressly provided to the contrary herein, shall have all powers and discretionary authority to carry out that obligation. Specifically, but not by way of limitation, the Administrator shall:

(a) Procedures and Forms. Establish such administrative procedures and prepare, or cause to be prepared, such forms, as may be necessary or desirable for the proper administration of the Plan;

(b) Advisors. Retain the services of such consultants and advisors as may be appropriate to the administration of the Plan;

(c) Claims. Have the discretionary authority to determine all claims filed pursuant to Section 6.2 of this Plan and shall have the authority to determine issues of fact relating to such claim;

(d) Payment of Benefits. Direct, or establish procedures for, the payment of benefits from the Plan; and

(e) Plan Records. Maintain, or cause to be maintained, all documents and records necessary or appropriate to the maintenance of the Plan.

5.3           Compensation.

Members of the Management Benefits Committee and the Plan Administrator shall serve without compensation from the Plan for their services as such.

5.4           Agent for Service of Process.

The Administrator shall be the agent for service of process on the Plan. If the Corporation is the Administrator, the agent for service of process on the Corporation shall be the agent for service of process on the Plan.

5.5           Indemnification.

The Corporation shall indemnify each member of the Compensation Committee, the Management Benefits Committee, the Administrator and individuals employed by, and acting on behalf of, the Plan Administrator from and against any and all claims, losses, damages, expenses and liability arising from their acts or failure to act with regard to the Plan and their duties and obligations as set forth herein unless such acts or omissions are judicially determined to be the result of such individual’s gross negligence, willful misconduct or criminal act.

6

ARTICLE VI

CLAIMS PROCEDURE

6.1          Filing of Claim.

   The Plan Administrator shall provide written notice to any Participant or beneficiary who submits a claim for benefits within 90 days (45 days in case of a disability benefit) of the receipt of the claim, unless special circumstances (which, in the case of disability benefits, must be beyond the control of the Plan) require an extension. The extension shall not exceed 90 days (30 days in case of a disability benefit) beyond the initial 90-day (or 45-day) period. If an extension is necessary, the claimant shall receive a notice, before the initial 90-day (or 45-day) period expires, which explains why the extension is necessary and when a decision on the claim is expected. In the case of a disability benefit, if, prior to the end of the extended review period, the Plan Administrator determines that, due to matters outside the control of the Plan, a decision cannot be rendered within the extension period, the period for making a determination may be extended for an additional 30 days, provided the Plan Administrator notifies the claimant before the expiration of the first extension period of the circumstances requiring the extension and the date the Plan expects to render a decision. In the case of either the first or second extension of the review period, the notice to the claimant must explain the standards on which entitlement to the benefit is based, the unresolved issues that prevent a decision, and the additional information needed to resolve the issues. The claimant shall have 45 days within which to provide the specified information.

6.2         Denial of Claim.

The Plan Administrator shall provide, in a written or electronic notice to all claimants who are denied a claim for benefits, the following information written in a manner calculated to be understood by the claimant:

(a)the specific reason or reasons for denial;

(b)specific reference to pertinent Plan provisions on which the denial is based;

(c)a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary;

(d)an explanation of the Plan's claim review procedures and the time limits applicable to such procedures including a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of, all documents, records and other information relevant to the claimant’s claim for benefits;

(e)a statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review; and, if applicable in the case of a  disability benefit,

(f)the specific rule, guideline, protocol or similar criterion (if any) that was relied on in making the benefit determination, or a statement that the rule, guideline, protocol or      other similar criterion was relied on and will be provided to the claimant free of charge upon request;

(g)if a disability claim, the identity of the medical or vocational experts whose advice was obtained by the Plan Administrator in the process of deciding the claim, regardless

      of whether the advice was relied upon.

6.3         Appeal.

A claimant whose claim has been denied may request a review of the denial by the Management Benefits Committee by making written application within 90 days (180 days in case of a disability benefit) after the receipt of written notification of a denial of a claim. The claimant may submit written comments, documents, records and other information relating to the claim for benefits.

6.4         Review of Appeal.

The Management Benefits Committee’s decision on review shall take into account all comments, documents, records and other information submitted as part of the request for review, whether or not submitted as part of the initial benefit determination. In the case of a disability benefit, the review of a denied claim shall be conducted by a reviewer, which is neither the individual who made the adverse benefit determination nor a subordinate of that individual. The reviewer shall not give deference to the original adverse determination, and if the claim denial was based in whole or in part on a medical judgment, shall consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment, but who was not consulted in connection with the original adverse claim determination, or a subordinate of that individual.

6.5         Decision on Appeal.

The decision on review shall be made within 60 days (45 days in case of a disability benefit) after the receipt of a request for review, unless special circumstances require an extension period. The extension shall not exceed 120 days (90 days in case of a disability benefit) from the request for review. If circumstances require an extension, the claimant shall receive a notice before the initial 60-day (or 45-day) period expires, which explains why the extension is necessary and when a decision on review is accepted. The decision on review shall be provided in a written or electronic notice, shall be written in a manner calculated to be understood by the claimant, and in the event of an adverse determination shall include:

(a)the specific reason or reasons for the adverse determination;

(b)specific references to pertinent Plan provisions on which the denial is based;

(c)statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of, all documents, records and other information relevant to the claimant’s claim for benefits;

(d)for disability benefits, if an internal rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination, either the specific rule, guideline, protocol, or other similar criterion or a statement that such rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination and that a copy will be provided free of charge to the claimant upon request; and

(e)a statement of the claimant’s right to bring an action under ERISA Section 502(a) and for disability claims, the following statement: “You and your Plan may have other      voluntary alternative dispute resolution options, such as mediation. One way to find out what may be available is to contact your local U.S. Department of Labor Office and your State insurance regulatory agency.

7

ARTICLE VII

MISCELLANEOUS

7.1 No Contract of Employment.

The adoption and maintenance of the Plan shall not be deemed to be a contract between the Corporation and any person or to be consideration for the employment of any person. Nothing herein contained shall be deemed to give any person the right to be retained in the employ of the Corporation or to restrict the right of the Corporation to discharge any person at any time nor shall the Plan be deemed to give the Corporation the right to require any person to remain in the employ of the Corporation or to restrict any person's right to terminate his or her employment at any time.

7.2 Non-Assignability of Benefits.

No Employee or other distributee of benefits under the Plan shall have any power or right to transfer, assign, anticipate, hypothecate or otherwise encumber any part or all of the amounts payable hereunder, which are expressly declared to be unassignable and non-transferable. Any such attempted assignment or transfer shall be void. No amount payable hereunder shall, prior to actual payment thereof, be subject to seizure by any creditor of any such Participant or beneficiary for the payment of any debt judgment or other obligation, by a proceeding at law or in equity, nor transferable by operation of law in the event of the bankruptcy, insolvency or death of such Participant or beneficiary hereunder.

7.3 Withholding.

All deferrals and payments provided for hereunder shall be subject to applicable withholding and other deductions as shall be required under any applicable local, state or federal law.

7.4 Amendment and Termination.

(a) Board of Directors. The Board of Directors shall have the right to amend, in whole or in part, any or all of the provisions of the Plan or to terminate the Plan at any time and without the consent of any other party or person.

(b) Management Benefits Committee. The Management Benefits Committee shall have the right, at any time, without the consent of any other party or person, to modify or amend any or all of the provisions of the Plan, but only to the extent provided in Section 5.1(c).

(c) Limitations. Except as provided in Section 4.1(d)(3), no amendment or termination of this Plan shall impair the rights of an Employee to the extent earned as of the date of amendment or termination.

7.5 No Fiduciary Relationship Created.

Nothing contained in this Plan, and no action taken pursuant to its provisions by any party hereto, shall create, nor be construed to create, a fiduciary relationship between the Corporation, the Board of Directors, any officers of the Corporation, the Compensation Committee, the Management Benefits Committee and the Employee or any other person.

7.6 Unsecured General Creditor Status of Employee.

(a) The payments to a Participant, his or her Beneficiary or any other distributee hereunder shall be made from assets which shall continue, for all purposes, to be a part of the general, unrestricted assets of the Corporation; no person shall have nor acquire any interest in any such assets by virtue of the provisions of this Plan.

(b) The Corporation's obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. To the extent that the Employee or other distributee acquires a right to receive payments from the Corporation under the provisions hereof, such right shall be no greater than the right of any unsecured general creditor of the Corporation; no such person shall have nor require any legal or equitable right, interest or claim in or to any property or assets of the Corporation.

7.7 Severability.

If any provision of this Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions hereof; instead, each provision shall be fully severable and the Plan shall be construed and enforced as if said illegal or invalid provision had never been included herein.

7.8 Governing Laws.

All provisions of the Plan shall be construed in accordance with the laws of Michigan except to the extent preempted by federal law.

7.9 Binding Effect.

This Plan shall be binding on each Participant and his or her heirs and legal representatives and on the Corporation and its successors and assigns.

7.10 Number and Gender.

Wherever appropriate herein, words used in the singular shall be considered to include the plural and words used in the plural shall be considered to include the singular. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender.

7.11 Headings.

The headings of Articles and Sections herein are included solely for convenience, and if there is any conflict between such headings and the text of the Plan, the text shall control.

7.12 Entire Agreement.

This document and any amendments contain all the terms and provisions of the Plan and shall constitute the entire Plan, any other alleged terms or provisions being of no effect.

IN WITNESS WHEREOF, the Corporation has adopted this amended and restated Plan on the 22nd day of December  2006.

AMERICAN AXLE & MANUFACTURING, INC.

By:  /s/ John E. Jerge

Its:  Vice President, Human Resources

BH522297v8

EX-12

EXHIBIT 12 - COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
	Year Ended December 31,
		2006			2005			2004			2003			2002
		(Unaudited)
		(In millions, except for ratios)
Fixed Charges:
Interest expense, including amortization of debt issuance
costs…………………………………………………………..................................	$	39.0		$	27.9		$	25.8		$	47.5		$	51.0
Estimated interest portion of rents……………………….......................................		8.9			10.3			11.7			12.2			15.8
Capitalized interest……………………………………………..................................		7.2			5.7			5.8			6.0			8.2
Total fixed charges as defined……………………………………….......................		55.1			43.9			43.3			65.7			75.0
Earnings (Loss):
Income (loss) from continuing operations before income tax
expense………………………………………………………...................................		(355.5	)		80.0			235.8			303.2			273.8
Total fixed charges as defined…………………………………................................		55.1			43.9			43.3			65.7			75.0
Fixed charges not deducted in the determination of income (loss)
from continuing operations before income tax expense.....................................		(7.2	)		(5.7	)		(5.8	)		(6.0	)		(8.2	)
Total earnings (loss) as defined………………………………………………….....	$	(307.6	)	$	118.2		$	273.3		$	362.9		$	340.6
Ratio of earnings (loss) to fixed charges…………………………………………..		(5.58	)		2.69			6.31			5.52			4.54

24

EX-13

OVERVIEW

American Axle & Manufacturing Holdings, Inc. (Holdings) and its subsidiaries (collectively, we, our, us or AAM) is a premier Tier I supplier to the automotive industry and a worldwide leader in the manufacture, engineering, design and validation of driveline and drivetrain systems and related components and chassis modules for light trucks, sport utility vehicles (SUVs), passenger cars and crossover vehicles. Driveline and drivetrain systems include components that transfer power from the transmission and deliver it to the drive wheels. Our driveline, drivetrain and related products include axles, chassis modules, driveshafts, power transfer units, transfer cases, chassis and steering components, driving heads, crankshafts, transmission parts and metal-formed products.

We are the principal supplier of driveline components to General Motors Corporation (GM) for its rear-wheel drive (RWD) light trucks and SUVs manufactured in North America, supplying substantially all of GM’s rear axle and front four-wheel drive/all-wheel drive (4WD/AWD) axle requirements for these vehicle platforms. Sales to GM were approximately 76% of our total net sales in 2006, 78% in 2005 and 80% in 2004.

We are the sole-source supplier to GM for certain axles and other driveline products for the life of each GM vehicle program covered by a Lifetime Program Contract (LPC). Substantially all of our sales to GM are made pursuant to the LPCs. The LPCs have terms equal to the lives of the relevant vehicle programs or their respective derivatives, which typically run 6 to 12 years, and require us to remain competitive with respect to technology, design and quality. We have been successful in competing, and we will continue to compete for future GM business upon the expiration of the LPCs.

We are also the principal supplier of driveline system products for the Chrysler Group’s heavy-duty Dodge Ram full-size pickup trucks (Dodge Ram program) and its derivatives. As part of this program,we supply a fully integrated, computer-controlled chassis system for the Dodge Ram Power Wagon. Sales to DaimlerChrysler Corporation (DaimlerChrysler) were approximately 14% of our total net sales in 2006, 13% in 2005 and 11% in 2004.

In addition to GM and DaimlerChrysler, we supply driveline systems and other related components to PACCAR Inc., Ford Motor Company (Ford), SsangYong Motor Company, Harley-Davidson and other original equipment manufacturers (OEMs) and Tier I supplier companies such as Magna International, Inc. and The Timken Company. Our net sales to customers other than GM were $758.5 million in 2006 as compared to $754.4 million in 2005 and $728.0 million in 2004. This marked the fifth consecutive year of growth in non-GM sales for AAM.

In 2006, we made significant adjustments to our business to meet the unprecedented structural change occurring in the domestic automotive industry including the continuing market share erosion of our major customers. As part of these adjustments, we took actions to realign and resize our production capacity and cost structure to meet current and projected operational and market requirements. These restructuring actions included the reduction of our workforce, redeployment of machinery and equipment to support new programs and the rationalization of U.S. production capacity. We also constructed new regional manufacturing facilities in Changshu, China and Olawa, Poland, and have further expanded our Mexican and Brazilian operations. The costs associated with these restructuring actions had a significant impact on our 2006 consolidated financial statements. We believe that these actions position us for future growth in the global automotive industry. We incurred special charges and recognized asset impairments as a result of these actions. The impact of these charges is explained in the section entitled “Results of Operations.”

1

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

INDUSTRY TRENDS AND COMPETITION

There are a number of key trends affecting the highly competitive automotive industry. The industry is global with an increased emphasis on new consumer markets, geographically diverse production facilities and supplier consolidation. Pricing pressures are significant. U.S. manufacturing costs, including labor and certain raw materials, are rapidly escalating. Advancing technology and product development are critical to attracting and retaining business. This has caused significant financial distress on the U.S. domestic supply base. As a result, OEMs and suppliers are aggressively developing strategies to reduce costs, which include producing in low cost regions and sourcing on a global basis. The driveline and drivetrain systems segment of the industry in which we compete reflects these trends, and we expect them to continue.

GLOBAL AUTOMOTIVE PRODUCTION Global automotive production is increasing in Eastern Europe, Asia (particularly China, India, South Korea and Thailand) and South America. The rate of growth of automotive production in these regions is expected to be greater than the traditional automotive production centers of North America, Western Europe and Japan. We continue to expand our existing facilities in Mexico and Brazil and have offices in India, China and South Korea to support these growing markets. We expect our activity in these markets to increase significantly over the next several years. In 2006, we began construction of new manufacturing facilities in China and Poland. Production in our Changshu, China plant started in December 2006 and we plan to begin production in our Olawa, Poland facility in early 2007.

CHANGE IN CONSUMER DEMAND AND PRODUCT MIX SHIFT In the U.S., customer demand for full-frame light truck and SUV-type vehicles is shifting to smaller AWD passenger cars and crossover vehicles with smaller displacement engines and higher fuel economy. In Europe, the penetration rate of AWD applications on front-wheel drive passenger cars is expected to increase. A significant portion of our current revenue stream is tied to full-size and mid-size SUVs. If demand softens for these products, our revenue stream from these products will be impacted. Our research and development (R&D) efforts have led to new business awards for products that support AWD and RWD passenger cars and crossover vehicles and position us to compete as this product mix shift continues. AAM’s new and incremental business backlog now includes awards for new products supporting passenger car and crossover vehicle programs that represent future annual sales of nearly $600 million by 2012.

DECLINING U.S. DOMESTIC OEM MARKET SHARE Competition from offshore and transplant OEMs continues to intensify, resulting in the decline of the U.S. market share for GM and Ford and a decrease in their U.S. domestic vehicle production levels by 6% in 2006 as compared to 2005. Since approximately 76% of our 2006 revenue is derived from net sales to GM, this continuing trend is significant for us. We continue to aggressively pursue business with other OEMs.

FINANCIAL DISTRESS OF U.S. DOMESTIC SUPPLY BASE The declining market share of the U.S. domestic OEMs has resulted in the under-utilization of industry capacity, which has significantly pressured the U.S. domestic supply base. Steel and metallic material prices have risen significantly, and higher energy and fuel costs have exacerbated the financial pressure on the industry. Over the past few years, several key automotive suppliers have filed for bankruptcy protection. The declining market share of the U.S. domestic OEMs caused by global competition has created a major structural change in the U.S. domestic automotive industry targeted at dramatically reducing cost. This has increased the financial pressure on the supply base. As a result of these pressures, the U.S. domestic OEMs and several suppliers, including AAM, recently have undertaken wide-scale capacity reduction initiatives, workforce reductions and other restructuring actions and costs.

2

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

PRICE PRESSURE Year-over-year price reductions are a common competitive practice in the automotive industry. The majority of our products are sold under long-term contracts with prices scheduled at the time the contracts are established. Certain of our contracts require us to reduce our prices in subsequent years and most of our contracts allow us to adjust prices for engineering changes. We do not believe that the price reductions we have committed to our customers will have a material adverse impact on our future operating results because we intend to offset such price reductions through continued cost reductions and other productivity initiatives. We also continue to increase the value of our products through our technology improvements such as electronic integration and mass reduction efforts to improve vehicle efficiency and fuel economy.

INCREASING ELECTRONIC INTEGRATION The electronic content of vehicles continues to expand, largely driven by consumer demand for greater vehicle performance, functionality and affordable convenience options. This demand is a result of increased communication abilities in vehicles as well as increasingly stringent regulatory standards for energy efficiency, emissions reduction and increased safety. As electronics continue to become more reliable and affordable, we expect this trend to continue. The increased use of electronics provides greater flexibility in vehicles and enables the OEMs to better control vehicle stability, fuel efficiency and safety while improving the overall driving experience. Suppliers with enhanced capability in electronic integration have increased opportunities to improve their value added position with the OEMs through better pricing and more sourcing opportunities.

   We are continuing to invest in the development of advanced products focused on vehicle safety and performance leveraging electronics technology as a key differentiator. For example, our electronically controlled stabilizer bar provides enhanced safety and performance for off-road applications as well as a seamless transition to on-road driving. Our electronic traction control system imbedded in our advanced 4WD/AWD products provide enhanced reliability and responsiveness in all weather conditions. Our advanced technology teams have developed several hybrid electric vehicles to demonstrate our capability in this growing segment. We have increased our focus on electronics by investing in product development that is consistent with market demands.

SUPPLY BASE CONSOLIDATION The OEMs have continued to reduce their supply base, preferring stronger relationships with a smaller number of suppliers capable of designing, engineering, testing, validating and manufacturing systems and modules on a global basis. The trend is to move away from regional suppliers and toward suppliers that can serve global markets in a cost efficient manner. The financial strength of a supplier is also an important factor in sourcing decisions as the OEMs work to protect their continuity of supply. We believe our engineering capabilities, global manufacturing footprint and financial resources position us well in this environment.

Supply base consolidation is not limited to Tier I suppliers. The competitive pressures of the automotive industry have forced the consolidation of our supply base as well. We have expanded our global purchasing and supplier development activities in order to procure materials cost-effectively while ensuring continuity of high quality supply.

STEEL AND OTHER METALLIC MATERIAL PRICING Worldwide commodity market conditions have resulted in higher steel and other metallic material prices. We are focused on mitigating the impact of this trend through commercial agreements with our customers, strategic sourcing arrangements with suppliers and technology advancements that result in using less metallic content in the manufacture of our products.

 The majority of our sales contracts with our largest customers provide price adjustment provisions for metal market price fluctuations. We do not have metal market price provisions with all of our customers for all of the parts that we sell. We also have agreed to share in the risk of metal market price fluctuations in certain contracts. As a result, we are experiencing higher net costs for raw materials. These cost increases have come in the form of metal market adjustments and base price increases. We have contracts with our steel suppliers that ensure continuity of supply. We also have validation and testing capabilities that enable us to strategically utilize steel sources on a global basis.

OEM EXTENSION OF WARRANTY PROGRAMS GM and Ford have extended standard warranty programs to their customers. This trend will put additional pressure on the need for robust quality systems throughout the supply chain and may increase warranty-related expenditures for the supply base. In our 13 year history, we have experienced negligible warranty charges from our customers due to our contractual agreements and ongoing improvements we have made in the quality, reliability and durability of our products. We do not expect warranty obligations will have a material adverse impact on our future operating results.

3

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

RESULTS OF OPERATIONS

NET SALES Net sales were $3,191.7 million in 2006 as compared to $3,387.3 million in 2005 and $3,599.6 million in 2004. As compared to 2005, our sales in 2006 reflect flat customer production volumes for the major full-size truck and SUV programs we currently support for GM and DaimlerChrysler and a decrease of over 30% in products supporting GM’s mid-size light truck and SUV programs.

The decreases in net sales resulting from lower GM light truck production volumes in 2006, 2005 and 2004 were partially offset by metal market price adjustments. Our 2005 and 2004 sales were also positively impacted by higher production of the Dodge Ram program.

Our content-per-vehicle (as measured by the dollar value of our products supporting GM’s North American light truck platforms and the Dodge Ram program) was $1,225 in 2006 versus $1,201 in 2005 and $ 1,173 in 2004. Increased AAM content appearing on GM’s all-new, full-size SUVs and pickup trucks was the primary driver of content growth in 2006.

Our 4WD/AWD penetration rate was 61.9% in 2006 as compared to 63.7% in 2005 and 62.6% in 2004. We define 4WD/AWD penetration as the total number of front axles we produce divided by the total number of rear axles we produce for the vehicle programs on which we sell product.

In 2006 there were a total of $377.9 million of special charges and asset impairments that we do not consider indicative of our ongoing operating activities. The following table details these charges in 2006 (in millions):

Special attrition program (SAP)	$	131.4
Supplemental unemployment benefits (SUB)		27.1
Curtailment and special terminationbenefits related to the SAP		9.7
Salaried workforce reductions		7.5
Environmental obligations		2.5
Other		3.2
Total special charges	$	181.4
Asset impairments	$	196.5

4

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

GROSS PROFIT (LOSS) Gross profit (loss) was a loss of $128.6 million in 2006 as compared to a profit of $304.7 million in 2005 and $474.5 million in 2004. Gross margin was negative 4.0% in 2006 as compared to 9.0% in 2005 and 13.2% in 2004.

Special attrition program and supplemental unemployment benefitsIn the third quarter of 2006, we signed a supplemental new hire agreement with the UAW that will reduce our total labor cost (including benefits) for new hire associates. In conjunction with this agreement, we offered a special attrition program (SAP) to approximately 6,000 UAW represented associates at AAM’s master agreement facilities in the fourth quarter of 2006. This program was designed to reduce our workforce. Approximately 1,500 associates participated in this attrition program. As a result, we recorded a special charge in 2006 of $131.4 million for the cost of this program.

In the third quarter of 2006, we recorded a special charge of $91.2 million relating to supplemental unemployment benefits (SUB) estimated to be payable to UAW associates who are expected to be permanently idled through the end of the current collective bargaining agreement that expires in February 2008. The results of the SAP reduced the number of employees expected to be permanently idled. Therefore, we revised our estimate of SUB to be paid pursuant to the current agreement and reduced this liability to $13.2 million at December 31, 2006. In total, we incurred $77.1 million of supplemental unemployment benefits and other related benefit costs for associates on layoff in 2006 as compared to $53.0 million in 2005.

Curtailment and special termination benefits related to the SAP As a result of the SAP, we recorded a special charge of $9.7 million for the curtailment of certain pension and other postretirement benefits and related special termination benefits.

Salaried workforce reductions In 2006, we offered a salaried retirement incentive program to eligible salaried associates in the U.S. to voluntarily retire. As a result of 67 associates participating in this program, we recorded a special charge to cost of sales of $2.7 million in 2006.

In 2006, we also approved a plan to reduce our salaried workforce in 2007. These employees will be provided postemployment benefits based on our Layoff Severance Program and a special transition program. We have recorded a special charge to cost of sales of $3.5 million for this involuntary separation.

Environmental obligations In 2006, based on the impairment and redeployment of assets and determination of certain assets as permanently idled, the methods and timing of environmental liabilities related to our Buffalo Gear, Axle & Linkage facility were reasonably estimable. Based on management’s best estimate of the costs, methods and timing of the settlement of these obligations, we recorded a special charge of $2.5 million.

Other We also recorded a special charge to cost of sales of $3.2 million in 2006 related principally to postemployment benefits payable to associates in our European operations.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

Asset impairments In addition to these special charges, we also recorded asset impairment charges of $196.5 million in the fourth quarter of 2006 associated with plans to idle a portion of our production capacity in the U.S. dedicated to its mid-size light truck product range and other capacity reduction initiatives. These plans resulted in the identification of assets to be disposed that became permanently idled. We recorded a special charge of $39.4 million for these assets. In addition, we performed an impairment assessment in 2006 of certain assets classified as “held for use” located at our Buffalo Gear, Axle & Linkage facility due to impairment indicators such as permanent declines in production volumes of mid-size SUVs and changes in the extent to which these long-lived assets will be used. Based on this analysis, we recorded an additional impairment charge of $142.0 million and reduced the remaining useful lives of certain of these assets. This charge represents the reduction in net book value required to state these assets at their estimated fair value. Certain other long-lived assets classified as “held for sale” were written down to their estimated net realizable value based on quoted market prices. We recorded an impairment charge of $5.7 million for these assets.

As a result of the asset impairments relating to machinery and equipment, certain machine repair parts classified as indirect inventory were also impaired. We recorded a charge of $9.4 million related to the write down of their net book value to their estimated net realizable value at year-end 2006.

The decrease in gross profit in 2006 as compared to 2005 also reflects lower production volumes and increases in non-cash expenses related to depreciation and amortization, pension and other postretirement benefit costs and stock-based compensation costs. Ongoing productivity improvements including material cost reductions and the favorable impact of additional metal market agreements partially offset the decrease in our gross profit in 2006. In addition, we recorded a $3.3 million curtailment gain in 2006 to cost of sales for amendments to our salaried defined benefit pension and other postretirement benefit plans.

Our gross profit in 2005 was adversely impacted by lower GM light truck production volumes, increased supplemental unemployment benefits to our hourly associates, higher energy and material costs, and increased launch costs, which include non-capitalizable project expenses in addition to machine start-up costs.

In 2004, we initiated a voluntary separation program whereby hourly associates could receive lump-sum payments to voluntarily terminate their employment with AAM. We recognized a pre-tax charge of approximately $17.3 million and $23.8 million related to this program in 2005 and 2004, respectively.

In February 2004, our national collective bargaining agreement with the UAW expired. As a result of not reaching an agreement before the expiration of the contract, we experienced a temporary work stoppage of less than two days at six of our North American manufacturing facilities. In 2004, our operating results include costs and expenses of approximately $5.2 million related to overtime and other costs to recover lost production as a result of the work stoppage.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A) SG&A (including R&D) was $197.4 million in 2006 as compared to $199.6 million in 2005 and $189.7 million in 2004. SG&A as a percentage of net sales was 6.2% in 2006, 5.9% in 2005 and 5.3% in 2004.

 Included in SG&A is a special charge of $1.3 million related to our salaried workforce reductions, which is discussed in Gross Profit (Loss).

In addition to this special charge, SG&A reflects higher R&D spending, increased non-cash pension and other postretirement benefits and stock-based compensation expense and higher costs to support our strategic growth initiatives outside of the U.S. These cost drivers were partially offset by ongoing cost controls and reductions in other general and administrative expenses. In addition, we recorded a $3.2 million curtailment gain to SG&A for amendments to our salaried defined benefit pension and other postretirement benefit plans.

R&D  In 2006, R&D spending in product, process and systems development increased 13.0% to $83.2 million as compared to $73.6 million in 2005 and $68.6 million in 2004.

 The focus of this increasing investment is to develop innovative driveline and drivetrain systems and components for passenger cars, light trucks and SUVs in the global marketplace. Product development in this area includes power transfer units, transfer cases, driveline and transmission differentials, multipiece driveshafts, independent rear drive axles and independent front drive axles. We continue to focus on electronics integration in our existing products. We also continue to support the development of hybrid vehicle systems. Our efforts in these areas have resulted in the development of prototypes and various configurations of these driveline systems for several OEMs throughout the world.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

OPERATING INCOME (LOSS) Operating income (loss) was a loss of $326.0 million in 2006 as compared to income of $105.1 million in 2005 and $284.8 million in 2004. Operating margin was negative 10.2% in 2006 as compared to 3.1% in 2005 and 7.9% in 2004. The decreases in operating income and operating margin in 2006 and 2005 were due to the factors discussed in Gross Profit (Loss) and SG&A.

NET INTEREST EXPENSE Net interest expense was $38.8 million in 2006, $27.2 million in 2005 and $25.5 million in 2004. Interest expense increased in 2006 as compared to 2005 and 2004 due to higher interest rates and higher average outstanding borrowings.

OTHER INCOME (EXPENSE) Following are the components of Other Income (Expense) for 2006, 2005 and 2004:

Debt refinancing and redemption costs Debt refinancing costs expensed in 2006 were $2.7 million. These refinancing costs were expensed due to the conversion into cash of $147.3 million of the 2.00% Convertible notes due 2024.

Debt refinancing and redemption costs expensed in 2004 are summarized as follows (dollars in millions):

Call premium on 9.75% Notes	$	14.6
Write-off of unamortized discount anddebt issuance costs:
9.75% Notes		5.7
1997 Bank Credit Facilities		3.2
Debt refinancing and redemption costs	$	23.5

The details of the debt refinancing and redemption costs are more fully explained in the section entitled “Liquidity and Capital Resources — Capitalization and Debt Availability.”

Other, net Other income in 2006 includes $10.1 million related to the resolution of various legal proceedings and claims during the third quarter of 2006, net of costs incurred to resolve these matters. The net effect of foreign exchange gains and losses is also included in this grouping.

INCOME TAX EXPENSE (BENEFIT) Income tax expense (benefit) was a benefit of $133.0 million in 2006 compared to expense of $24.0 million in 2005 and $76.3 million in 2004. Our effective income tax rate was a benefit of 37.4% in 2006, compared to expense of 30.0% in 2005 and 32.4% in 2004. The change in the tax rate in 2006 as compared to 2005 is primarily a result of recognizing the income tax benefit of current year losses in the U.S. and the recognition of foreign tax credit benefits. In addition, the tax rate reflects the impact of an increase in foreign source income, which carries a lower overall effective tax rate than U.S. income.

NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE (EPS) Net income (loss) was a loss of $222.5 million in 2006 as compared to income of $56.0 million in 2005 and $159.5 million in 2004. Diluted earnings (loss) was a loss of $4.42 per share in 2006 as compared to earnings of $1.10 per share in 2005 and $2.98 per share in 2004. Net income (loss) and EPS were primarily impacted by the factors discussed in Gross Profit (Loss) and SG&A.

EARNINGS BEFORE INTEREST EXPENSE, INCOME TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) EBITDA was negative $110.5 million in 2006 as compared to $293.0 million in 2005 and $432.7 million in 2004. The decrease in EBITDA in 2006 and 2005 was primarily due to the factors discussed in Gross Profit (Loss). For an explanation and reconciliation of EBITDA, refer to the section entitled “Supplemental Financial Data.”

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

LIQUIDITY AND CAPITAL RESOURCES

Our primary liquidity needs are to fund capital expenditures, debt service obligations, working capital investments, our quarterly cash dividend program and the SAP and other attrition programs. We believe that operating cash flow and borrowings under our Revolving Credit Facility will be sufficient to meet these needs in the foreseeable future.

OPERATING ACTIVITIES Net cash provided by operating activities was $185.7 million in 2006 as compared to $280.4 million in 2005 and $453.2 million in 2004. Significant factors impacting our 2006 operating cash flow as compared to 2005 were:

§   Lower net income;

§   Payments related to the special attrition and salaried attrition programs;

§   Lower contributions to pension benefit plans;

§   Lower profit sharing payout; and

§   Higher tax payments.

Special attrition program and other attrition programs In 2006, we paid $105.3 million related to our SAP and other attrition programs. We expect to make payments in 2007 of approximately $30 million for these attrition programs.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

Deferred income taxes Net deferred income taxes decreased in 2006 due to the liability recorded for future SUB costs, asset impairments, the recognition of foreign tax credits and a reduction in our foreign deferred tax liabilities. A significant portion of the foreign tax credits will result in carryforward credits, the benefit of which is reflected on our balance sheet as a deferred tax asset on December 31, 2006.

 Our deferred tax asset valuation allowances were $39.0 million at year-end 2006, $31.2 million at year-end 2005 and $32.5 million at year-end 2004. The majority of our allowances relate to foreign net operating losses and capital allowance carryforwards. Although these carryforwards do not expire, we considered prior operating results and future plans, as well as the utilization period of other temporary differences, in determining the amount of our valuation allowances.

Pension and other postretirement benefits We contributed $9.1 million to our pension trusts in 2006 as compared to $34.7 million in 2005 and $35.7 million in 2004. This funding compares to our annual pension expense of $52.1 million in 2006, $41.3 million in 2005 and $39.1 million in 2004. Our regulatory pension funding requirements in 2007 are less than $5 million.

Our cash outlay for other postretirement benefit obligations was $4.7 million in 2006, $3.5 million in 2005 and $2.7 million in 2004. This compares to our annual postretirement benefit expense of $69.2 million in 2006, $70.1 million in 2005 and $69.5 million in 2004. We expect our cash outlay for other postretirement benefit obligations in 2007 to be between $5 million and $10 million.

Accounts receivable Accounts receivable at year-end 2006 were $327.6 million as compared to $328.0 million at year-end 2005 and $334.9 million at year-end 2004. 

Our accounts receivable allowances were $1.2 million at year-end 2006, $3.1 million at year-end 2005 and $2.5 million at year-end 2004.

Inventories At year-end 2006, inventories were $198.4 million as compared to $207.2 million at year-end 2005 and $196.8 million at year end 2004.

Our inventory valuation allowances were $34.7 million at year-end 2006, $20.3 million at year end 2005 and $12.6 million at year-end 2004. The change in our inventory valuation allowances in 2006 as compared to 2005 and 2004 was due to increased reserves for indirect inventories, primarily resulting from the idling and impairment of certain machinery and equipment. We monitor and adjust our allowance as necessary to recognize as an asset only those quantities that we can reasonably estimate will be used.

Accounts payable and accrued expenses Accounts payable decreased $52.2 million at year-end 2006 as compared with year-end 2005 and $17.5 million at year-end 2005 as compared with year-end 2004, primarily due to lower inventory purchases and capital expenditures in the fourth quarter at the end of each year.

Other assets and liabilities Other assets and liabilities decreased $8.0 million in 2006 as compared to 2005 as a result of the receipt of customer payments to implement customer capacity programs, partially offset by an increase in receivables for value added tax in our foreign operations.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

INVESTING ACTIVITIES Capital expenditures were $286.6 million in 2006, $305.7 million in 2005 and $240.2 million in 2004. In 2006, our capital spending supported the 2006 and 2007 model year launch of the GMT 900 program and other major customer program launches. Our 2006 expenditures also supported new regional manufacturing facilities in China and Poland and new equipment to enhance our testing and validation capabilities at our European Headquarters in Bad Homburg, Germany. Other major capital projects included the expansion of our Colfor Manufacturing operations in Minerva, Ohio and expenditures to support passenger car and crossover vehicle programs in our new business backlog.

We expect our capital spending in 2007 to be in the range of $240 million to $250 million. These expenditures will include certain costs related to the realignment and resizing of production capacity that will continue in 2007. Expenditures will also support the future launch of passenger car and crossover vehicle programs within our new business backlog and the continued expansion of our facilities in China and Poland.

We have invested our capital with the objective of improving quality, productivity and long-term profitable growth. Our after-tax return on invested capital (ROIC) was negative 13.4% in 2006, compared to 5.2% in 2005 and 12.7% in 2004. In 2006 our ROIC reflects the impact of the special charges, asset impairments, lower production volumes and increases in non-cash postretirement and stock-based compensation expenses. For an explanation and reconciliation of ROIC, refer to the section entitled “Supplemental Financial Data.”

NET OPERATING CASH FLOW AND FREE CASH FLOW Net operating cash flow was a deficit of $100.9 million in 2006 as compared to a deficit of $25.3 million in 2005 and a surplus of $213.0 million in 2004. Free cash flow was a deficit of $131.9 million in 2006 as compared to a deficit of $55.7 million in 2005 and a surplus of $190.0 million in 2004. For an explanation and reconciliation of net operating cash flow and free cash flow, refer to the section entitled “Supplemental Financial Data.”

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

FINANCING ACTIVITIES Net cash provided by financing activities was $147.3 million in 2006 as compared to $14.8 million in 2005 and a use of $211.3 million in 2004. Total debt outstanding was $672.2 million at year-end 2006, $489.2 million at year-end 2005 and $448.0 million at year-end 2004. Total debt outstanding increased by $183.0 million at year-end 2006 as compared to year-end 2005 primarily due to the funding requirements of the SAP and other attrition programs and the elective purchased buyouts of leased equipment of $37.0 million, net of proceeds from sale-leaseback transactions.

CAPITALIZATION AND DEBT AVAILABILITY Our total capitalization was $1.5 billion at year-end 2006 and 2005. Our net debt to capital ratio was 44.7% at year-end 2006 as compared to 32.8% at year-end 2005 and 31.2% at year-end 2004. For an explanation and reconciliation of net debt to capital, refer to the section entitled “Supplemental Financial Data.”

Revolving credit facility Our senior unsecured revolving credit facility (Revolving Credit Facility) provides up to $600.0 million of revolving bank financing commitments through April 2010 and bears interest at rates based on LIBOR or an alternate base rate, plus an applicable margin. Together with our foreign credit facilities and uncommitted lines of credit, the Revolving Credit Facility is our primary source of day-to-day liquidity.

The Revolving Credit Facility is used for general corporate purposes, which includes payments related to the SAP and other attrition programs and seasonal working capital requirements.

At December 31, 2006, $475.8 million was available under the Revolving Credit Facility, which reflected a reduction of $24.2 million for standby letters of credit issued against the facility. In addition, we utilize foreign credit facilities and uncommitted lines of credit to finance working capital needs.

In January 2004, the unamortized balance of fees and expenses associated with the 1997 Bank Credit Facilities of $3.2 million was expensed when we terminated our bank financing commitments under those facilities.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

Debt refinancing and redemption In February 2004, we issued $250.0 million of 5.25% senior notes due February 2014 (5.25% Notes) and $150.0 million of 2.00% Convertible Notes due 2024 (2.00% Convertible Notes). We received net proceeds from these offerings of approximately $394.0 million, after deducting discounts and commissions of the initial purchasers and other expenses. We used a portion of the net proceeds to repurchase $63.0 million, or 1.59 million shares, of our common stock in privately negotiated transactions. The remainder of the net proceeds was used to redeem all $300.0 million of the outstanding 9.75% Senior Subordinated Notes due March 2009 (9.75% Notes) at a cost of $314.6 million on March 1, 2004, and for other general corporate purposes. In the first quarter of 2004, the $14.6 million call premium and an additional $5.7 million of unamortized discounts and debt issuance costs were expensed as a result of this redemption.

In 2006, the 2.00% Convertible Notes became convertible into cash under the terms of the indenture. A total of $147.3 million of the notes were converted into cash in 2006 and $2.7 million of the notes remain outstanding as of December 31, 2006. The cash conversion rights remain in effect as of the date of this filing. We had been amortizing fees and expenses associated with the 2.00% Convertible Notes over the expected life of the notes. As a result of these conversions, we expensed the proportional amount of unamortized debt issuance costs during 2006, which totaled $2.7 million.

Term loan In 2006, we entered into a $250.0 million senior unsecured term loan (Term Loan) that matures in April 2010. The obligations of AAM, Inc. under the Term Loan are guaranteed by Holdings. Proceeds from this financing were used for general corporate purposes and to finance payments related to the cash conversion of the 2.00% Convertible Notes. Borrowings under the Term Loan bear interest payable at rates based on LIBOR or an alternate base rate, plus an applicable margin.

The weighted-average interest rate of our total debt outstanding was 6.8%, 5.0% and 4.8% during 2006, 2005 and 2004, respectively.

Credit ratings Our current credit ratings and (outlook) are BB (Negative), Ba3 (Negative) and BB (Negative) with Standard & Poors Rating Services, Moody’s Investors Services and Fitch Ratings, respectively.

Dividend program In April 2004, we declared our first quarterly cash dividend of $0.15 per share. On an annualized basis, the dividend payout equates to $0.60 per share. We paid $31.0 million, $30.4 million and $23.0 million to stockholders of record under the quarterly cash dividend program during 2006, 2005 and 2004, respectively.

Stock repurchase program In 2004, AAM’s Board of Directors approved a stock repurchase program under which we could have repurchased up to 5.5 million shares of common stock in the open market or in privately negotiated transactions from time to time through the first quarter of 2006. Including the common stock we acquired in connection with our debt refinancing activities in the first quarter of 2004, we repurchased 5.0 million shares of our common stock for $171.0 million under this stock repurchase program.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

Off-balance sheet arrangements Our off-balance sheet financing relates principally to operating leases for certain facilities and manufacturing machinery and equipment. We lease certain machinery and equipment under operating leases with various expiration dates. Pursuant to these operating leases, we have the option to purchase the underlying machinery and equipment on specified dates. In 2006, we renewed and amended equipment leases totaling $33.6 million, elected to exercise our purchase option for $71.8 million of assets and entered into sale-leaseback transactions amounting to $34.8 million.

Contractual obligations The following table summarizes payments due on our contractual obligations as of December 31, 2006:

	Payments due byperiod
	Total		<1 yr		1-3 yrs		3-5 yrs		>5 yrs
	(Dollars in millions)
Long-term debt	$	669.7	$	61.5	$	5.1	$	353.3	$	249.8
Interest obligations		183.4		41.6		77.3		35.4		29.1
Capital lease obligations		2.5		0.3		0.8		1.0		0.4
Operating leases(1)		88.6		18.3		32.5		27.9		9.9
Purchase obligations(2)		97.1		87.4		9.7		—		—
Other long-term liabilities(3)		398.7		22.6		58.2		71.8		246.1
Total	$	1,440.0	$	231.7	$	183.6	$	489.4	$	535.3

____________

⁽¹⁾Operating leases include all lease payments through the end of the contractual lease terms, including elections for repurchase options, and exclude any non-exercised purchase options on such leased equipment.

⁽²⁾Purchase obligations represent our obligated purchase commitments for capital expenditures.

⁽³⁾Other long-term liabilities represent our pension and postretirement obligations that were actuarially determined through 2016.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

MARKET RISK

Our business and financial results are affected by fluctuations in world financial markets, including interest rates and currency exchange rates. Our hedging policy has been developed to manage these risks to an acceptable level based on management’s judgment of the appropriate trade-off between risk, opportunity and cost. We do not hold financial instruments for trading or speculative purposes.

CURRENCY EXCHANGE RISK Because a majority of our business is denominated in U.S. dollars, we do not currently have significant exposures relating to currency exchange risk. From time to time, we use foreign currency forward contracts to reduce the effects of fluctuations in exchange rates, primarily relating to the Mexican Peso, Euro, Pound Sterling, Brazilian Real and Canadian Dollar. At December 31, 2006, we had currency forward contracts with a notional amount of $33.5 million outstanding. A 10% change in any of these individual currencies would not have had a material impact on our consolidated financial statements in 2006.

 Future business operations and opportunities, including the expansion of our business outside North America, may further increase the risk that cash flows resulting from these activities may be adversely affected by changes in currency exchange rates. If and when appropriate, we intend to manage these risks by utilizing local currency funding of these expansions and various types of foreign exchange contracts.

INTEREST RATE RISK We are exposed to variable interest rates on certain credit facilities. From time to time, we use interest rate hedging to reduce the effects of fluctuations in market interest rates. Generally, we designate interest rate swaps as effective cash flow hedges of the related debt and reflect the net cost of such agreements as an adjustment to interest expense over the lives of the debt agreements. We have hedged a portion of our interest rate risk by entering into an interest rate swap with a notional amount of $200.0 million. This notional amount reduces to $100.0 million in December 2008 and expires in April 2010. This interest rate swap converts variable rate financing based on 3-month LIBOR into fixed U.S. dollar rates. The pre-tax earnings and cash flow impact of a one-percentage-point increase in interest rates (approximately 13% of our weighted-average interest rate at December 31, 2006) on our long-term debt outstanding at December 31, 2006 would be approximately $2.2 million on an annualized basis.

CYCLICALITY AND SEASONALITY

 Our operations are cyclical because they are directly related to worldwide automotive production, which is itself cyclical and dependent on general economic conditions and other factors. Our business is also moderately seasonal as our major OEM customers historically have a two-week shutdown of operations in July and an approximate one-week shutdown in December. In addition, our OEM customers have historically incurred lower production rates in the third quarter as model changes enter production. Accordingly, our third quarter and fourth quarter results may reflect these trends.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

LEGAL PROCEEDINGS

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

 We are subject to various federal, state, local and foreign environmental and occupational safety and health laws, regulations and ordinances, including those regulating air emissions, water discharge, waste management and environmental cleanup. We closely monitor our environmental conditions to ensure that we are in compliance with all laws, regulations and ordinances. GM has agreed to indemnify and hold us harmless against certain environmental conditions existing prior to our asset purchase from GM on March 1, 1994. GM’s indemnification obligations terminated on March 1, 2004 with respect to new claims that may arise against GM. We have made, and will continue to make, capital and other expenditures (including recurring administrative costs) to comply with environmental requirements. Such expenditures were not significant during 2006.

EFFECT OF NEW ACCOUNTING STANDARDS

In December 2004, the FASB issued Statement No. 123(R), (SFAS 123R) “Share-Based Payment.” SFAS 123R replaced FASB Statement No. 123, “Accounting for Stock-Based Compensation” and superseded APB Opinion No. 25, “Accounting for Stock Issued to Employees.” The revised statement requires that the compensation cost relating to share-based payment transactions be recognized in financial statements and measured on the fair value of the equity or liability instruments issued. We adopted SFAS 123R on January 1, 2006. Stock-based compensation expense increased by $4.6 million in 2006 as compared to 2005.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (FIN 48). FIN 48 clarifies the criteria for recognition of income tax benefits in accordance with SFAS No. 109, “Accounting for Income Taxes.” The effective date for this interpretation is January 1, 2007. We do not expect the impact of this interpretation to be significant in 2007.

In September 2006, the FASB issued Statement No. 157, (SFAS 157) “Fair Value Measurements.” Thisstatement clarifies the definition of fair value and establishes a fair value hierarchy. This statement is effective for us on January 1, 2008.

In September 2006, the FASB issued Statement No. 158, (SFAS 158) “Employers Accounting for Defined Benefit Pension and Other Postretirement Plans.” This statement amends FASB Statement Nos. 87, 88, 106 and 132R. This statement requires companies to recognize in its statement of financial position an asset for a plan’s overfunded status or a liability for a plan’s underfunded status, measure a plan’s assets and obligations that determine its funded status as of the end of the employer’s fiscal year and recognize changes in the funded status of a defined benefit postretirement plan in other comprehensive income in the year in which the changes occur.

The effective date for balance sheet recognition of the funded status of pension and other postretirement benefit plans and disclosure provisions is December 31, 2006. The adoption of SFAS 158 resulted in a net increase in stockholders’ equity of $11.4 million in 2006. The effective date for plan assets and benefit obligations to be measured as of the date of the fiscal year-end statement of financial position is January 1, 2008. We have elected to early adopt the measurement date provisions as of January 1, 2007. In the first quarter of 2007, we will record a transition adjustment of approximately $12 million to the opening retained earnings balance related to the net periodic benefit cost for the period between September 30, 2006 and January 1, 2007.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

CRITICAL ACCOUNTING POLICIES

In order to prepare consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP), we are required to make estimates and assumptions that affect the reported amounts and disclosures in our consolidated financial statements. These estimates are subject to an inherent degree of uncertainty and actual results could differ from our estimates.

Other items in our consolidated financial statements require estimation. In our judgment, they are not as critical as those disclosed herein. We have discussed and reviewed our critical accounting policies disclosure with the Audit Committee of our Board of Directors.

PENSION AND OTHER POSTRETIREMENT BENEFITS In calculating our liabilities and expenses related to pension and other postretirement benefits, key assumptions include discount rates, expected long-term rates of return on plan assets and rates of increase in compensation and health care costs.

The discount rates used in the valuation of our U.S. pension and other postretirement benefit obligations were based on an actuarial review of a hypothetical portfolio of long-term, high quality corporate bonds matched against the expected payment stream for each of our plans. In 2006, the discount rates determined on that basis ranged from 5.90% to 6.05% for the valuation of our pension benefit obligations and 5.95% to 6.10% for the valuation of our other postretirement benefit obligations. The discount rate used in the valuation of our foreign pension obligation was based on a review of long-term bonds, including published indices in the applicable market. In 2006, the discount rate determined on that basis was 5.00%. The expected long-term rates of return on our plan assets were 8.50% and 7.50% for our U.S. and foreign plans, respectively, in 2006. We developed these rates of return assumptions based on a review of long-term historical returns for the asset classes represented within our portfolios. The asset allocation for our plans was developed in consideration of the demographics of the plan participants and expected payment stream of the liability. Our investment policy allocates 65-70% of the plans’ assets to equity securities, with the remainder invested in fixed income securities and cash. The rates of increase in compensation and health care costs are based on current market conditions, inflationary expectations and historical information.

All of our assumptions were developed in consultation with our actuarial service providers. While we believe that we have selected reasonable assumptions for the valuation of our pension and other postretirement benefits obligations at year-end 2006, actual trends could result in materially different valuations.

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 September 30, 2006, our valuation date.

			Expected
	Discount		Return on
	Rate		Assets
	(Dollars in millions)
Decline in funded status	$	37.4		N/A
Increase in 2006 expense	$	9.5	$	1.7

Nochanges in benefit levels and no changes in the amortization of gains or losses have been assumed.

An 8.5% annual increase in the per-capita cost of covered health care benefits was assumed for 2007. The rate was assumed to decrease gradually to 5.0% by 2014 and remain at that level thereafter. A 0.5% decrease in the discount rate for our other postretirement benefits would have increased total service and interest cost in 2006 and the postretirement obligation at December 31, 2006 by $5.1 million and $45.5 million, respectively. A 1.0% increase in the assumed health care trend rate would have increased total service and interest cost in 2006 and the postretirement obligation at December 31, 2006 by $17.0 million and $86.1 million, respectively.

17

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

POSTEMPLOYMENT BENEFITS As part of our operations, we will pay postemployment benefits to associates who are temporarily or permanently on layoff. These severance payments or other benefits prior to retirement may relate to a pre-existing plan or a one-time termination plan. Annual net postemployment benefits expense under our benefit plans and the related liabilities are accrued as service is rendered for those obligations that accumulate or vest and when the liability is probable and can be reasonably estimated. Obligations that do not accumulate or vest are recorded when payment of the benefits is probable and the amounts can be reasonably estimated. Due to the complexities inherent in estimating this liability, our actual costs could differ materially. Accordingly, we will continue to review our expected liability and make adjustments as necessary.

In the third quarter of 2006, we recorded a $91.2 million charge for SUB estimated to be payable to the UAW associates who are expected to be permanently idled through the end of the current collective bargaining agreement that expires in February 2008. In prior periods, the cost of SUB and related benefits paid to associates on layoff was expensed as incurred. In the third quarter of 2006, several factors have contributed to a condition in which future SUB costs became both probable and reasonably estimable.

In the fourth quarter of 2006, we paid $101.2 million of postemployment benefits related to participation in the SAP, which reduced the number of associates we expect to be permanently idled. Therefore, we revised our estimate of SUB to be paid pursuant to the current agreement and reduced this liability to $13.2 million as of December 31, 2006.

ENVIRONMENTAL OBLIGATIONS Due to the nature of our operations, we have legal obligations to perform asset retirement activities related to federal, state and local environmental requirements. The process of estimating environmental liabilities is complex and significant uncertainty exists related to the timing and method of the settlement of these obligations. Therefore, these liabilities are not reasonably estimable until a triggering event occurs that allows us to estimate a range of potential settlement dates, the potential methods of settlement and the probabilities associated with the potential settlement dates and potential methods of settlement.

In 2006, based on the impairment and redeployment of assets and determination of certain assets as permanently idled, the methods and timing of certain environmental liabilities related to our Buffalo Gear, Axle & Linkage facility were reasonably estimable. Based on management’s best estimate of the costs, methods and timing of the settlement of these obligations, we recorded a charge of $2.5 million. In the future, we will update our estimated costs and potential settlement dates and methods and their associated probabilities based on available information. Any update may change our estimate and could result in a material adjustment to this liability.

ACCOUNTS RECEIVABLE ALLOWANCES The scope of our relationships with certain customers, such as GM and DaimlerChrysler, is inherently complex and, from time to time, we identify differences in our valuation of receivables due from these customers. Differences in the quantity of parts processed as received by customers and the quantity of parts shipped by AAM is one major type of such difference. Price differences can arise when we and our customer agree on a price change but the customer’s pricing database does not reflect the commercial agreement. In these instances, revenue is fixed and determinable, but payment could fall outside our normal payment terms as we work through the process of resolving these differences.

Substantially all of our transactions with customers occur within the parameters of a purchase order which makes our price fixed and determinable. We sometimes enter into non-routine agreements outside the original scope of the purchase order. These agreements may be temporary, are fixed and determinable, and often have payment terms that are different than our normal terms. We recognize the revenue or cost recovery from such arrangements in accordance with the commercial agreement.

We track the aging of uncollected billings and adjust our accounts receivable allowances on a quarterly basis as necessary based on our evaluation of the probability of collection. The adjustments we have made due to the write-off of uncollectible amounts have been negligible.

 While we believe that we have made an appropriate valuation of our accounts receivable due from GM, DaimlerChrysler and other customers for accounting purposes, unforeseen changes in our ability to enforce commercial agreements or collect aged receivables may result in actual collections that differ materially from current estimates.

18

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

VALUATION OF INDIRECT INVENTORIES As part of our strategy to control our investment in working capital and manage the risk of excess and obsolete inventory, we generally do not maintain large balances of productive raw materials, work-in-process or finished goods inventories. Instead, we utilize lean manufacturing techniques and coordinate our daily production activities to meet our daily customer delivery requirements. The ability to address plant maintenance issues on a real--time basis is a critical element of our ability to pursue such an operational strategy. Our machinery and equipment may run for long periods of time without disruption and suddenly fail to operate as intended. In addition, certain repair parts required to address such maintenance requirements may be difficult or cost prohibitive to source on a real-time basis.

To facilitate our continuous preventive maintenance strategies and to protect against costly disruptions in operations due to machine downtime, we carry a significant investment in inherently slow-moving machine repair parts and other maintenance materials and supplies. At December 31, 2006, such indirect inventories comprised approximately 46% of our total gross inventories. For inventory valuation purposes, we evaluate our usage of such slow-moving inventory on a quarterly basis by part number and adjust our inventory valuation allowances as necessary to recognize as an asset only those quantities that we can reasonably estimate will be used. We have used the same approach in 2006 and 2005 to evaluate the adequacy of our indirect inventory valuation allowances. In 2006, as a result of asset impairments of certain machinery and equipment and related machine repair parts, we recorded a $9.4 million increase to our indirect inventory reserve.

While we believe that we have made an appropriate valuation of such inventories for accounting purposes, unforeseen changes in inventory usage requirements, manufacturing processes, maintenance and repair techniques, or inventory control may result in actual usage of such inventories that differ materially from current estimates.

ESTIMATED USEFUL LIVES FOR DEPRECIATION At December 31, 2006, approximately 81% of our capitalized investment in property, plant and equipment, or $2.3 billion, was related to productive machinery and equipment used in support of our manufacturing operations. The selection of appropriate useful life estimates for such machinery and equipment is a critical element of our ability to properly match the cost of such assets with the operating profits and cash flow generated by their use. We currently depreciate productive machinery and equipment on the straight-line method using composite useful life estimates up to 15 years.

While we believe that the useful life estimates currently being used for depreciation purposes reasonably approximate the period of time we will use such assets in our operations, unforeseen changes in product design and technology standards or cost, quality and delivery requirements may result in actual useful lives that differ materially from the current estimates.

IMPAIRMENT OF LONG-LIVED ASSETS Long-lived assets, excluding goodwill, to be held and used are reviewed for impairment whenever adverse events or changes in circumstances indicate a possible impairment. An impairment loss is recognized when the long-lived assets’ carrying value exceeds the fair value. If business conditions or other factors cause the profitability and estimated cash flows to be generated from an asset to decline, we may be required to record impairment charges at that time. Long-lived assets held for sale are recorded at the lower of their carrying amount or fair value less cost to sell. Significant judgments and estimates used by management when evaluating long-lived assets for impairment include:

§   An assessment as to whether an adverse event or circumstance has triggered the need for an impairment review;

§   Undiscounted future cash flows generated by the assets; and

§   Determination of fair value when an impairment is deemed to exist.

In 2006, we recorded expense of $39.4 million for assets to be disposed identified as permanently idled. In addition, we recorded expense of $142.0 million for the reduction of the net book value required to state certain “held for use” long-lived assets to their estimated fair value and reduced the remaining useful lives of certain of these assets. Certain other long-lived assets classified as “held for sale” were written down to their estimated net realizable value based on quoted market prices. We recorded an expense of $5.7 million for these assets. As a result of the asset impairments relating to machinery and equipment, certain machine repair parts classified as indirect inventory were also impaired. We recorded an expense of $9.4 million related to the write down of their net book value to their estimated net realizable value at year-end 2006.

Management believes that the estimates of future cash flows and fair value assumptions are reasonable; however, changes in assumptions underlying these estimates could affect the evaluations.

VALUATION OF DEFERRED TAX ASSETS AND OTHER TAX LIABILITIES Because we operate in many different geographic locations, including several foreign, state and local tax jurisdictions, the evaluation of our ability to use all recognized deferred tax assets and appropriately record all tax liabilities is inherently complex. In assessing our ability to realize such deferred tax assets, we review the scheduled reversal of deferred tax liabilities, the projections of taxable income in future periods, current and past audit results and the effectiveness of various tax planning strategies in making our assessment. Our consideration of these matters, including the determination of tax liabilities, requires significant management judgment.

While we believe we have made appropriate valuations of our deferred tax assets and liabilities, unforeseen changes in tax legislation, regulatory activities, audit results, operating results, financing strategies, organization structure and other related matters may result in material changes in our deferred tax asset valuation allowances or our tax liabilities.

19

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

FORWARD-LOOKING INFORMATION

Certain statements in this MD&A and elsewhere in this Annual Report are forward-looking in nature and relate to trends and events that may affect our future financial position and operating results. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The terms “will,” “expect,” “anticipate,” “intend,” “project” and similar words or expressions are intended to identify forward-looking statements. These statements speak only as of the date of this Annual Report. The statements are based on our current expectations, are inherently uncertain, are subject to risks and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including, but not limited to:

§   reduced purchases of our products by GM, DaimlerChrysler or other customers;  

§   reduced demand for our customers’ products (particularly light trucks and SUVs produced by GM and DaimlerChrysler);  

§   our ability and our suppliers’ ability to maintain satisfactory labor relations and avoid work stoppages;  

§   our customers’ and their suppliers’ ability to maintain satisfactory labor relations and avoid work stoppages;  

§   our ability to achieve cost reductions through ongoing restructuring actions;  

§   additional restructuring actions that may occur;

§   our ability to achieve the level of cost reductions required to sustain global cost competitiveness;

§   supply shortages or price increases in raw materials, utilities or other operating supplies;

§   our ability and our customers’ and suppliers’ ability to successfully launch new product programs on a timely basis;

§   our ability to attract new customers and programs for new products;

§   our ability to develop and produce new products that reflect the market demand;

§   our ability to respond to changes in technology or increased competition;

§   adverse changes in laws, government regulations or market conditions including increases in fuel prices affecting our products or our customers' products (including the Corporate Average Fuel Economy regulations);

§   adverse changes in the economic conditions or political stability of our principal markets (particularly North America, Europe, South America and Asia);

§   liabilities arising from legal proceedings to which we are or may become a party or claims against us or our products;

§   risks of noncompliance with environmental regulations or risks of environmental issues that could result in unforeseen costs at our facilities;

§   availability of financing for working capital, capital expenditures, R&D or other general corporate purposes, including our ability to comply with financial covenants;

§   ourability to attract and retain key associates;

§   other unanticipated events and conditions that may hinder our ability to compete.

It is not possible to foresee or identify all such factors and we make no commitment to update any forward-looking statement or to disclose any facts, events or circumstances after the date hereof that may affect the accuracy of any forward-looking statement.

20

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

SUPPLEMENTAL FINANCIAL DATA

The following supplemental financial data presented for the years ended December 31, 2006, 2005 and 2004 are reconciliations of non-GAAP financial measures, which are intended to facilitate analysis of our business and operating performance. This information is not and should not be viewed as a substitute for financial measures determined under GAAP. Other companies may calculate these non-GAAP financial measures differently.

Earnings Before Interest Expense, Income Taxes, Depreciation and Amortization (EBITDA)

	2006			2005		2004
	(Dollars in millions)
Net income (loss)	$	(222.5	)	$	56.0	$	159.5
Interest expense		39.0			27.9		25.8
Income taxes		(133.0	)		24.0		76.3
Depreciationand amortization		206.0			185.1		171.1
EBITDA	$	(110.5	)	$	293.0	$	432.7

We believe EBITDA is a meaningful measure of performance as it is 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, together with other measures, to measure our operating performance relative to other Tier I automotive suppliers. EBITDA should not be construed as income from operations, net income or cash flow from operating activities as determined under GAAP.

Net Operating Cash Flow and Free Cash Flow

	2006			2005			2004
	(Dollars in millions)
Net cash flow providedby operating activities	$	185.7		$	280.4		$	453.2
Less: Purchases of property,plant and equipment		286.6			305.7			240.2
Net operating cash flow		(100.9	)		(25.3	)		213.0
Less: Dividends paid		31.0			30.4			23.0
Free cash flow	$	(131.9	)	$	(55.7	)	$	190.0

We believe net operating cash flow and free cash flow are meaningful measures as they are commonly utilized by management and investors to assess our ability to generate cash flow from business operations to repay debt and return capital to our stockholders. Net operating cash flow is also a key metric used in our calculation of incentive compensation.

After-Tax Return on Invested Capital (ROIC)

		2006			2005			2004
	(Dollars in millions)
Net income (loss)	$	(222.5	)	$	56.0		$	159.5
Add: After-tax netinterest expense(1)		24.5			19.0			17.2
After-tax return		(198.0	)		75.0			176.7
Net debt(2)		658.7			485.5			433.6
Add: Stockholders’ equity		813.7			994.8			955.5
Invested capital
End of year		1,472.4			1,480.3			1,389.1
Beginning of year		1,480.3			1,389.1			1,392.0
Average invested capital(3)		1,476.4			1 ,434.7			1,390.6
ROIC(4)		(13.4	%)		5.2	%		12.7	%

⁽¹⁾After-tax net interest expense is equal to tax effecting net interest expense by the applicable effective income tax rate as disclosed in Note 8 to the consolidated financial statements.

⁽²⁾Net debt is equal to total debt less cash and cash equivalents as reconciled in the net debt to capital table appearing on this page.

⁽³⁾Average invested capital is equal to the average of beginning and ending invested capital.

⁽⁴⁾ROIC is equal to after-tax return divided by average invested capital.

We believe ROIC is a meaningful overall measure of business performance because it reflects our earnings performance relative to our investment level. ROIC is also a key metric used in our calculation of incentive compensation.

Net Debt to Capital

		2006			2005			2004
	(Dollars in millions)
Total debt	$	672.2		$	489.2		$	448.0
Less: Cash andcash equivalents		13.5			3.7			14.4
Net debt		658.7			485.5			433.6
Add: Stockholders’ equity		813.7			994.8			955.5
Invested capital		1,472.4			1,480.3			1,389.1
Net debt to capital(1)		44.7	%		32.8	%		31.2	%

⁽¹⁾Net debt to capital is equal to net debt divided by invested capital.

We believe net debt to capital is a meaningful measure of financial condition as it is commonly utilized by management, investors and creditors to assess relative capital structure risk.

21

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

We are responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2006. In making this assessment, we used the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, we believe that as of December 31, 2006, our internal control over financial reporting is effective based on those criteria.

Our independent registered public accounting firm has issued an audit report on our assessment of our internal control over financial reporting. This report appears on page 31.

/s/ Richard E. Dauch	/s/ Michael K. Simonte
Richard E. Dauch Co-Founder, Chairman of the Board & Chief Executive Officer February 15, 2007	Michael K. Simonte Vice President - Finance & Chief Financial Officer (also in the capacity of Chief Accounting Officer) February 15, 2007

             

22

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of American Axle & Manufacturing Holdings, Inc.:

We have audited the accompanying consolidated balance sheets of American Axle & Manufacturing Holdings, Inc. and its subsidiaries (the Company) as of December 31, 2006 and 2005, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of American Axle & Manufacturing Holdings, Inc. and its subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the company’s internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 15, 2007 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

As discussed in Notes 1 and 6, on January 1, 2006 the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 123(R), Share-Based Payment and on December 31, 2006 adopted the balance sheet provisions of SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans.

    /s/ Deloitte & Touche LLP

Deloitte & Touche LLP

Detroit, Michigan

February 15, 2007

23

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of American Axle & Manufacturing Holdings, Inc.:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that American Axle & Manufacturing Holdings, Inc. and its subsidiaries (the Company) maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s Board of Directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1)pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2006 of the Company and our report dated February 15, 2007 expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of Financial Accounting Standards (SFAS) No. 123(R), Share-Based Payment and SFAS No. 158, Employers Accounting for Defined Benefit Pension and other Postretirement Plans.

 /s/ Deloitte & Touche LLP

Deloitte & Touche LLP

 Detroit, Michigan

 February 15, 2007

24

American Axle & Manufacturing Holdings, Inc.

Consolidated Statements of Operations

Year Ended December 31,

(In millions, except per share data)

		2006			2005			2004
Net sales	$	3,191.7		$	3,387.3		$	3,599.6
Cost of goods sold		3,320.3			3,082.6			3,125.1
Gross profit (loss)		(128.6	)		304.7			474.5
Selling, general and administrative expenses		197.4			199.6			189.7
Operating income (loss)		(326.0	)		105.1			284.8
Net interest expense		(38.8	)		(27.2	)		(25.5	)
Other income (expense)
Debt refinancing and redemption costs		(2.7	)		—			(23.5	)
Other, net		12.0			2.1			—
Income (loss) before income taxes		(355.5	)		80.0			235.8
Income tax expense (benefit)		(133.0	)		24.0			76.3
Net income (loss)	$	(222.5	)	$	56.0		$	159.5
Basic earnings (loss) per share	$	(4.42	)	$	1.12		$	3.09
Diluted earnings (loss) per share	$	(4.42	)	$	1.10		$	2.98

See accompanying notes to consolidated financial statements.

25

American Axle & Manufacturing Holdings, Inc.

Consolidated Balance Sheets

December 31,

(In millions, except per share data)

		2006			2005
Assets
Current assets
Cash and cash equivalents	$	13.5		$	3.7
Accounts receivable, net of allowances of$1.2million in 2006 and $3.1million in 2005		327.6			328.0
Inventories, net		198.4			207.2
Prepaid expenses and other		69.2			45.5
Deferred income taxes		30.7			17.0
Total current assets		639.4			601.4
Property, plant and equipment, net		1,731.7			1,836.0
Deferred income taxes		35.7			3.0
Goodwill		147.8			147.8
Other assets and deferred charges		42.9			78.4
Total assets	$	2,597.5		$	2,666.6
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	316.4		$	338.5
Trade payable program liability		12.5			42.6
Accrued compensation and benefits		156.3			115.3
Other accrued expenses		56.1			52.8
Total current liabilities		541.3			549.2
Long-term debt		672.2			489.2
Deferred income taxes		6.8			116.1
Postretirement benefits and other long-term liabilities		563.5			517.3
Total liabilities		1,783.8			1,671.8
Stockholders’ equity
Series A junior participating preferred stock, par value $0.01 per share;
0.1 million shares authorized; no shares outstanding in 2006 or 2005		—			—
Preferred stock, par value $0.01 per share; 10.0 million shares
authorized; no shares outstanding in 2006 or 2005		—			—
Common stock, par value $0.01 per share; 150.0 million shares
authorized; 55.6 million and 55.4 million shares issued and outstanding
in 2006 and 2005, respectively		0.6			0.5
Series common stock, par value $0.01 per share; 40.0 million
shares authorized; no shares outstanding in 2006 or 2005		—			—
Paid-in capital		381.7			385.6
Retained earnings		590.0			843.5
Treasury stock at cost, 5.1 million shares in both 2006 and 2005		(171.8	)		(171.7	)
Unearned compensation		—			(14.8	)
Accumulated other comprehensive income (loss), net of tax
Defined benefit plans		(0.8	)		(52.6	)
Foreign currency translation adjustments		15.5			3.9
Unrecognized gain (loss) on derivatives		(1.5	)		0.4
Total stockholders’ equity		813.7			994.8
Total liabilities and stockholders’ equity	$	2,597.5		$	2,666.6

See accompanying notes to consolidated financial statements.

26

American Axle & Manufacturing Holdings, Inc.

Consolidated Statements of CashFlows

Year Ended December 31,

(In millions)

		2006			2005			2004
Operating activities
Net income (loss)	$	(222.5	)	$	56.0		$	159.5
Adjustments to reconcile net income (loss) to net cashprovided by operating activities
Asset impairment		196.5			—			—
Depreciation and amortization		206.0			185.1			171.1
Deferred income taxes		(184.0	)		(1.1	)		46.3
Stock-based compensation		10.2			5.6			—
Pensions and other postretirement benefits, net of contributions		114.8			72.0			72.1
Loss on retirement of equipment		6.3			7.0			9.2
Debt refinancing and redemption costs		2.7			—			23.5
Changes in operating assets and liabilities
Accounts receivable		2.9			6.5			7.2
Inventories		1.1			(10.6	)		(23.7	)
Accounts payable and accrued expenses		43.7			(32.2	)		18.9
Other assets and liabilities		8.0			(7.9	)		(30.9	)
Net cash provided by operating activities		185.7			280.4			453.2
Investing activities
Purchases of property, plant and equipment		(286.6	)		(305.7	)		(240.2	)
Purchase buyouts of leased equipment		(71.8	)		—			—
Proceeds from sale-leasebacks		34.8			—			—
Net cash used in investing activities		(323.6	)		(305.7	)		(240.2	)
Financing activities
Net borrowings (repayments) under revolving credit facilities		67.2			49.0			(81.9	)
Proceeds from issuance of long-term debt		261.6			—			399.7
Redemption of 9.75% Notes		—			—			(314.6	)
Conversion of 2.00% Notes		(147.3	)		—			—
Payments of long-term debt and capital lease obligations		(1.0	)		(8.4	)		(24.4	)
Debt issuance costs		(4.4	)		—			(9.7	)
Employee stock option exercises		1.3			4.6			13.6
Tax benefit on stock option exercises		1.0			—			—
Dividends paid		(31.0	)		(30.4	)		(23.0	)
Purchase of treasury stock		(0.1	)		—			(171.0	)
Net cash provided by (used in) financing activities		147.3			14.8			(211.3	)
Effect of exchange rate changes on cash		0.4			(0.2	)		0.3
Net increase (decrease) in cash and cash equivalents		9.8			(10.7	)		2.0
Cash and cash equivalents at beginning of year		3.7			14.4			12.4
Cash and cash equivalents at end of year	$	13.5		$	3.7		$	14.4
Supplemental cash flow information
Interest paid	$	44.8		$	31.3		$	33.6
Income taxes paid, net of refunds	$	49.4		$	35.7		$	32.2

See accompanying notes to consolidated financial statements.

27

American Axle & Manufacturing Holdings, Inc.

Consolidated Statements of Stockholders’ Equity

(In millions)

																		Accumulated
	Common Stock																	Other
	Shares Outstanding			Par Value		Paid-in Capital			Retained Earnings			Treasury Stock			Unearned Compensation			Comprehensive Income (Loss)			Comprehensive Income (Loss)
Balance at January 1, 2004		53.6		$	0.5	$	336.2		$	681.4		$	(0.7	)	$	—		$	(62.7	)
Net income										159.5											$	159.5
Unrecognized gain on derivatives, net																			1.0			1.0
Foreign currency translation, net																			3.9			3.9
Minimum pension liabilityadjustment, net																			9.0			9.0
Comprehensive income																					$	173.4
Exercise of stock options, including tax benefit		1.1					21.4
Dividends paid										(23.0	)
Purchase of treasury stock		(5.0	)										(171.0	)
Balance at December 31, 2004		49.7			0.5		357.6			817.9			(171.7	)		—			(48.8	)
Net income										56.0											$	56.0
Unrecognized loss on derivatives, net																			(0.1	)		(0.1	)
Foreign currency translation, net																			6.1			6.1
Minimum pension liability adjustment, net																			(5.5	)		(5.5	)
Comprehensive income																					$	56.5
Exercise of stock options,including tax benefit		0.6					28.0
Dividends paid										(30.4	)
Stock-based compensation																5.6
Restricted stock awards																(20.4	)
Balance at December 31, 2005		50.3			0.5		385.6			843.5			(171.7	)		(14.8	)		(48.3	)
Net loss										(222.5	)										$	(222.5	)
Unrecognized loss on derivatives, net																			(1.9	)		(1.9	)
Foreign currency translation, net																			11.6			11.6
Minimum pension liability adjustment																			37.0			37.0
FAS 158 transition adjustments
Minimum pension liability																			15.6			—
Net prior service credit																			10.8			—
Net actuarial loss																			(11.6	)		—
Comprehensive loss																					$	(175.8	)
Reclassification of unearned compensation							(14.8	)								14.8
Exercise of stock options,
including tax benefit		0.2			0.1		2.2
Dividends paid										(31.0	)
Stock-based compensation							8.7
Purchase of treasury stock													(0.1	)
Balance at December 31, 2006		50.5		$	0.6	$	381.7		$	590.0		$	(171.8	)	$	—		$	13.2

See accompanying notes to consolidatedfinancial statements.

28

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION American Axle & Manufacturing Holdings, Inc. (Holdings) and its subsidiaries (collectively, we, our, us or AAM) is a premier Tier I supplier to the automotive industry and a worldwide leader in the manufacture, engineering, design and validation of driveline and drivetrain systems and related components and chassis modules for light trucks, sport utility vehicles (SUVs), passenger cars and crossover vehicles. Driveline and drivetrain systems include components that transfer power from the transmission and deliver it to the drive wheels. Our driveline, drivetrain and related products include axles, chassis modules, driveshafts, power transfer units, transfer cases, chassis and steering components, driving heads, crankshafts, transmission parts and metal-formed products. In addition to locations in the United States (U.S.) (Michigan, New York and Ohio), we also have offices or facilities in Brazil, China, England, Germany, India, Japan, Luxembourg, Mexico, Poland, Scotland and South Korea.

PRINCIPLES OF CONSOLIDATION We include the accounts of Holdings and its subsidiaries in our consolidated financial statements. We eliminate the effects of all intercompany transactions, balances and profits in our consolidation.

REVENUE RECOGNITION We recognize revenue when products are shipped to our customers and title transfers under standard commercial terms or when realizable in accordance with our commercial agreements. If we are uncertain as to whether we will be successful collecting a balance in accordance with our understanding of a commercial agreement, we do not recognize the revenue or cost recovery until such time as the uncertainly is removed.

RESEARCH AND DEVELOPMENT (R&D) COSTS We expense R&D as incurred. R&D spending was $83.2 million, $73.6 million and $68.6 million in 2006, 2005 and 2004, respectively.

CASH AND CASH EQUIVALENTS Cash and cash equivalents include all of our cash balances and highly liquid investments with a maturity of 90 days or less at the time of purchase.

ACCOUNTS RECEIVABLE The majority of our accounts receivable are due from original equipment manufacturers in the automotive industry. Credit is extended based on the evaluation of our customers’ financial condition and is reviewed on an ongoing basis. Trade accounts receivable are generally due on average within 50 days from the date of shipment and are past due when payment is not received within the stated terms. Amounts due from customers are stated net of allowances for doubtful accounts. We determine our allowances by considering factors such as the length of time accounts are past due, our previous loss history, the customer’s ability to pay its obligation to us and the condition of the general economy and the industry as a whole. We write-off accounts receivable when they become uncollectible.

CUSTOMER TOOLING Reimbursable costs incurred for customer tooling are classified as accounts receivable. If we determine that our estimate of the cost of such customer tooling is not collectable, a loss is recognized at that time.

29

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

INVENTORIES We state our inventories at the lower of cost or market. The cost of our U.S. inventories is determined principally using the last-in, first-out method (LIFO). The cost of our foreign and indirect inventories is determined principally using the first-in, first-out method (FIFO). We classify indirect inventories, which include perishable tooling, machine repair parts and other materials consumed in the manufacturing process but not incorporated into our finished products, as raw materials. When we determine that our gross inventories exceed usage requirements, or if inventories become obsolete or otherwise not saleable, we record a provision for such loss as a component of our inventory accounts. Inventories consist of the following:

		2006			2005
	(Dollars in millions)
Raw materials and work-in-progress	$	220.6		$	212.2
Finished goods		26.3			29.9
Gross inventories		246.9			242.1
LIFO reserve		(13.8	)		(14.6	)
Other inventory valuation reserves		(34.7	)		(20.3	)
Inventories, net	$	198.4		$	207.2

PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following:

	Estimated
	Useful Lives		2006			2005
		(Years)	(Dollars in millions)
Land		—	$	28.8		$	24.6
Land improvements		10-15		18.8			19.6
Buildings and buildingimprovements		15-40		373.5			391.8
Machinery and equipment		3-15		2,314.2			2,319.5
Construction in progress		—		124.6			96.8
				2,859.9			2,852.3
Accumulated depreciationand amortization				(1,128.2	)		(1,016.3	)
Property, plant andequipment, net			$	1,731.7		$	1,836.0

We state property, plant and equipment, including amortizable tooling, at cost. Construction in progress includes costs incurred for the construction of buildings and building improvements, and machinery and equipment in process. Repair and maintenance costs that do not extend the useful life or otherwise improve the utility of the asset beyond its useful state are expensed in the period incurred.

We record depreciation and tooling amortization on the straight-line method over the estimated useful lives of the depreciable assets. Depreciation and tooling amortization amounted to $195.6 million, $158.3 million and $156.6 million in 2006, 2005 and 2004, respectively.

IMPAIRMENT OF LONG-LIVED ASSETS We evaluate the carrying value of long-lived assets and long-lived assets to be disposed for potential impairment on an ongoing basis in accordance with FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” We consider projected future undiscounted cash flows, trends and other circumstances in making such estimates and evaluations. If an impairment is deemed to exist, the carrying amount of the asset is adjusted based on its fair value. See Note 2 “Restructuring Actions” for detail on our 2006 asset impairments.

30

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

GOODWILL We record goodwill when the purchase price of acquired businesses exceeds the value of their identifiable net tangible and intangible assets acquired. We periodically evaluate goodwill for impairment. To meet our ongoing annual obligation, we completed impairment tests as of December 31, 2006 and 2005 and concluded that there was no impairment of our goodwill. Goodwill is our only significant intangible asset.

TRADE PAYABLE PROGRAM LIABILITY We offer our suppliers access to an accelerated supplier payment program through which they can elect for a designated finance company to advance payment on their invoices due from us. We gain no advantage on the timing of such payments or the amounts due to be paid. The only difference between these obligations and other trade payables is that we are obligated to pay the finance company on the due date for such payment established in the terms and conditions of the purchase order. Our agreement with the finance company calls for us to share in the discount fees charged to the suppliers by the finance company for any advance payments made through this program. The fees collected in association with this program were negligible for 2006, 2005 and 2004.

STOCK-BASED COMPENSATION Prior to January 1, 2006, as permitted by FASB Statement No. 123, “Accounting for Stock-Based Compensation,” we accounted for our employee stock options in accordance with APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Although it is our practice to grant options with no intrinsic value, we measured compensation cost as the excess, if any, of the market price of our common stock at the date of grant over the amount our associates must pay to acquire the stock.

Effective January 1, 2006, we adopted FASB Statement No. 123(R), (SFAS 123R), “Share-Based Payment.” We adopted the fair value recognition provisions of SFAS 123R using the modified prospective transition method and, therefore, did not restate the prior periods’ results. Under this transition method, stock-based compensation expense for the first quarter of 2006 included compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of, January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of FASB Statement No. 123, (SFAS 123) “Accounting for Stock-Based Compensation.” Stock-based compensation expense for all share-based payment awards granted after January 1, 2006 is based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. We recognize these compensation costs net of a forfeiture rate and recognize the compensation costs for only those shares expected to vest on a straight-line basis over the requisite service period of the award, which is generally the vesting term. We estimate the forfeiture rate based on our historical experience.

As part of the prospective adoption of SFAS 123R, we classified our tax benefit from stock option exercises as a financing activity on the statement of cash flows for the year ended December 31, 2006. Tax benefits from the exercise of stock options in 2005 and 2004 were $3.6 million and $8.3 million, respectively. In addition, we elected the alternative transition method for calculating the beginning balance of the APIC pool as described by FASB Staff Position 123R-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards.”

The following table illustrates the effect on net income after tax and net income per common share as if we had applied the fair value recognition provisions of SFAS 123 to stock-based compensation during years ended December 2005 and 2004:

	2005			2004
	(Dollars in millions)
Net income, as reported	$	56.0		$	159.5
Deduct: Total employee stock optionexpense determined under thefair value method, net of tax		(22.3	)		(16.4	)
Pro forma net income	$	33.7		$	143.1
Basic EPS, as reported	$	1.12		$	3.09
Basic EPS, pro forma	$	0.67		$	2.77
Diluted EPS, as reported	$	1.10		$	2.98
Diluted EPS, pro forma	$	0.67		$	2.69

DERIVATIVES We account for derivatives under FASB Statement No. 133, (SFAS 133) “Accounting for Derivative Instruments and Hedging Activities,” as amended and interpreted. SFAS 133 requires us to recognize all derivatives on the balance sheet at fair value. If a derivative qualifies under SFAS 133 as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative are either offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value, and changes in the fair value of derivatives that do not qualify as hedges, are immediately recognized in earnings.

CURRENCY TRANSLATION We translate the assets and liabilities of our foreign subsidiaries to U.S. dollars at end-of-period exchange rates. We translate the income statement elements of our foreign subsidiaries to U.S. dollars at average-period exchange rates. We report the effect of translation for our foreign subsidiaries that use the local currency as their functional currency as a separate component of stockholders’ equity. Gains and losses resulting from the remeasurement of assets and liabilities of our foreign subsidiaries that use the U.S. dollar as their functional currency are reported in current period income. We also report any gains and losses arising from transactions denominated in a currency other than our functional currency in current period income.

USE OF ESTIMATES In order to prepare consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP), we are required to make estimates and assumptions that affect the reported amounts and disclosures in our consolidated financial statements. Actual results could differ from those estimates.

EFFECT OF NEW ACCOUNTING STANDARDS In July 2006, the FASB issued FASB Interpretation No. 48, (FIN 48) “Accounting for Uncertainly in Income Taxes.” FIN 48 clarifies the criteria for recognition of income tax benefits in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” The effective date for this interpretation is January 1, 2007. We do not expect the impact of this interpretation to be significant in 2007.

In September 2006, the FASB issued Statement No. 157, (SFAS 157) “Fair Value Measurements.” This statement clarifies the definition of fair value and establishes a fair value hierarchy. This statement is effective for us on January 1, 2008.

31

 AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

2.RESTRUCTURING ACTIONS

In 2006, we took certain restructuring actions to realign and resize our production capacity and cost structure to current and projected operational and market requirements. In connection with these restructuring actions, we incurred a one-time termination benefit and asset impairment charge of approximately $338.2 million. A summary of these charges is shown below (in millions):

		Charges		Cash Utilization		Non-Cash Utilization		Accrual as of December 31, 2006
	(Dollars in millions)
One-time termination benefits	$	141.7	$	105.3	$	—	$	36.4
Asset impairment charges		196.5		—		196.5		—
Total	$	338.2	$	105.3	$	196.5	$	36.4

ONE-TIME TERMINATION BENEFITS In the fourth quarter of 2006, we offered a special attrition program (SAP) to approximately 6,000 UAW represented associates at AAM’s master agreement facilities. This program was designed to reduce our workforce. In 2006, approximately 1,500 associates participated in this attrition program. We recorded expense in 2006 of $131.4 million for this program and we paid $101.2 million of these costs as of December 31, 2006.

In 2006, we also offered a salaried retirement incentive program (SRIP) to eligible salaried associates in the U.S. to voluntarily retire. As a result of 67 associates participating in this program, we recorded expense of $3.7 million in 2006 and we have paid $2.1 million as of December 31, 2006.

In 2006, we approved a plan to reduce the salaried workforce in 2007. These associates will be provided postemployment benefits within the terms of our Layoff Severance Program (LSP), which determines an employee’s benefit based on current salary and prior service levels. Based on the approval of this action and the terms of the LSP, this liability is probable and estimable as of December 31, 2006. We have recorded expense of $3.2 million for this involuntary separation. In the fourth quarter, we also approved and communicated a plan to provide transition payments to certain associates who will remain active through December 31, 2007. We recorded $0.6 million in 2006 for the proportional amount of expense for service related to these future payments as of December 31, 2006. The remaining amount of the $2.6 million estimated expense for this program will be recorded in 2007 as earned.

We also recorded a charge to cost of sales of $2.8 million related to postemployment benefits payable to associates in our European operations. We paid $2.0 million related to these benefits as of December 31, 2006.

ASSET IMPAIRMENTS In the fourth quarter of 2006, we recorded asset impairment charges of $196.5 million associated with plans to idle a portion of our production capacity in the U.S. dedicated to its mid-size light truck product range and other capacity reduction initiatives.  These plans resulted in the identification of assets to be disposed that became permanently idled. We recorded expense of $39.4 million related to the disposal or idling of these assets. In addition, we performed an impairment assessment in 2006 of certain “held for use” assets located at our Buffalo Gear, Axle & Linkage facility due to impairment indicators such as permanent declines in production volumes of mid-size SUVs and changes in the extent these long-lived assets will be used. Recoverability of these assets has been determined by comparing the forecasted undiscounted cash flows of the operations to which the assets relate to their carrying amount. When the carrying value of an asset group exceeded its fair value and was therefore nonrecoverable, those assets have been written down to fair value. Fair value has been determined based on a cash flow analysis performed using management estimates. Based on this analysis, we recorded an additional expense of $142.0 million and reduced the remaining useful lives of certain of these assets. This represents the reduction in net book value required to state these assets at their estimated fair value. Certain other long-lived assets classified as “held for sale” were written down to their estimated net realizable value based on quoted market prices. We recorded expense of $5.7 million for these assets. The remaining net book value of the held for sale assets of $5.6 million is classified as other assets and deferred charges on our consolidated balance sheet as of December 31, 2006.

As a result of the asset impairments relating to our machinery and equipment, certain machine repair parts classified as indirect inventory were impaired. We recorded a charge of $9.4 million related to the write down of their net book value to the estimated net realizable value at year-end 2006.

In 2004, we initiated a voluntary separation program whereby hourly associates could receive lump-sum payments to voluntarily terminate their employment with AAM. We recognized a pre-tax charge of approximately $17.3 million and $23.8 million related to this program in 2005 and 2004, respectively.

32

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

3.LONG-TERM DEBT AND LEASE OBLIGATIONS

Long-term debt consists of the following:

		2006		2005
	(Dollars in millions)
Revolving credit facility	$	100.0	$	—
5.25% Notes, net of discount		249.8		249.7
2.00% Convertible Notes		2.7		150.0
Term loan		250.0		—
Uncommitted lines of credit		33.5		71.5
Foreign credit facilities and other		33.7		15.6
Capital lease obligations		2.5		2.4
Long-term debt	$	672.2	$	489.2

DEBT REFINANCING AND REDEMPTION In 2006, the 2.00% Senior Convertible Notes due 2024 (2.00% Convertible Notes) became convertible into cash under terms of the indenture. A total of $147.3 million of the notes were converted into cash in 2006 and $2.7 million of the notes remain outstanding as of December 31, 2006. The cash conversion rights remain in effect as of the date of this filing. We had been amortizing fees and expenses associated with the 2.00% Convertible Notes over the expected life of the notes. As a result of these conversions, we expensed the proportional amount of unamortized debt issuance costs in 2006, which totaled $2.7 million.

In 2004, we entered into a senior unsecured revolving credit facility which, as amended, provides up to $600.0 million of revolving bank financing commitments through April 2010, (Revolving Credit Facility). The Revolving Credit Facility is used for general corporate purposes, which included the refinancing of the previously existing senior secured bank credit facilities (1997 Bank Credit Facilities). In 2004, $3.2 million of unamortized fees and expenses associated with the 1997 Bank Credit Facilities were expensed when we terminated these commitments.

In February 2004, we issued $250.0 million of 5.25% Senior Notes due February 2014 (5.25% Notes) and $150.0 million of 2.00% Senior Convertible Notes due 2024 (2.00% Convertible Notes). We received net proceeds from these offerings of approximately $394.0 million, after deducting discounts and commissions of the initial purchasers and other expenses. We used a portion of the net proceeds to repurchase $63.0 million, or 1.59 million shares, of our common stock in privately negotiated transactions. The remainder of the net proceeds was used to redeem all $300.0 million of the outstanding 9.75% Senior Subordinated Notes due March 2009 (9.75% Notes) at a cost of $314.6 million on March 1, 2004, and for other general corporate purposes. In the first quarter of 2004, the $14.6 million call premium and an additional $5.7 million of unamortized discounts and debt issuance costs were expensed as a result of this redemption.

Debt refinancing and redemption costs expensed in the first quarter of 2004 are summarized as follows (dollars in millions):

Call premium on 9.75% Notes	$	14.6
Write-off of unamortized discount and debt issuance costs:  9.75% Notes		5.7
1997 Bank Credit Facilities		3.2
Debt refinancing and redemption costs	$	23.5

33

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

REVOLVING CREDIT FACILITY Our Revolving Credit Facility bears interest at rates based on LIBOR or an alternate base rate, plus an applicable margin. At December 31, 2006, $475.8 million was available under the Revolving Credit Facility, which reflected a reduction of $24.2 million for standby letters of credit issued against the facility.

The Revolving Credit Facility provides back-up liquidity for our foreign credit facilities and uncommitted lines of credit. We intend to use the availability of long-term financing under the Revolving Credit Facility to refinance any current maturities related to such debt agreements that are not otherwise refinanced on a long-term basis in their respective markets. Accordingly, we have classified such amounts as long-term debt.

5.25% NOTES The 5.25% Notes are senior unsecured obligations of American Axle & Manufacturing, Inc. (AAM, Inc.) and are fully and unconditionally guaranteed by Holdings. Holdings has no significant assets other than its 100% ownership of AAM, Inc. and no subsidiaries other than AAM, Inc.

2.00% CONVERTIBLE NOTES The 2.00% Convertible Notes are senior unsecured obligations of Holdings and are fully and unconditionally guaranteed by AAM, Inc. At the option of the holder, these notes are convertible through 2024.

TERM LOAN In 2006, we entered into a $250.0 million senior unsecured term loan (the “Term Loan”) that matures in April 2010. The obligations of AAM, Inc. under the Term Loan are guaranteed by Holdings. Proceeds from this financing were used for general corporate purposes and to finance payments related to the cash conversion of the 2.00% Convertible Notes. Borrowings under the Term Loan bear interest payable at rates based on LIBOR or an alternate base rate, plus an applicable margin.

LEASES We lease certain facilities, machinery and equipment under capital leases expiring at various dates. Approximately $9.4 million of such gross asset cost is included in property, plant and equipment at December 31, 2006 and 2005. The weighted-average interest rate on these capital lease obligations at December 31, 2006 was 7.1%.

We also lease certain facilities, machinery and equipment under operating leases expiring at various dates. Pursuant to these operating leases, we have the option to purchase the underlying machinery and equipment on specified dates. In 2006, we renewed and amended equipment leases totaling $33.6 million, elected to exercise our purchase option for $71.8 million of assets and entered into sale-leaseback transactions amounting to $34.8 million. These transactions did not result in a significant loss or deferred gain. Existing lease renewal or repurchase options are approximately $42.7 million through 2011. Future minimum payments under noncancelable operating leases are as follows: $18.3 million in 2007; $16.7 million in 2008, $15.7 million in 2009, $15.4 million in 2010, $12.5 million in 2011 and $9.9 million thereafter. Our total expense relating to operating leases was $28.0 million, $32.2 million and $30.6 million in 2006, 2005 and 2004, respectively.

UNCOMMITTED LINES OF CREDIT In 2006, we had access to $60.0 million of uncommitted bank lines of credit. At December 31, 2006, $33.5 million was outstanding under such uncommitted bank credit lines and an additional $26.5 million was available.

FOREIGN CREDIT FACILITIES We utilize local currency credit facilities to finance the operations of certain foreign subsidiaries. These credit facilities, guaranteed by Holdings or AAM, Inc., expire at various dates through December 2011. At December 31, 2006, $33.7 million was outstanding under these facilities and an additional $92.3 million was available.

DEBT COVENANTS The Revolving Credit Facility contains operating covenants which, among other things, require us to comply with a leverage ratio and maintain a minimum level of net worth. The Term Loan restricts our ability to make certain payments and enter into certain types of transactions with affiliates.  Our ability to incur certain types of liens and amounts of indebtedness, merge into another company or sell all or substantially all of our assets is also limited by these credit facilities.

DEBT MATURITIES Aggregate maturities of long-term debt are as follows (dollars in millions):

2007	$	61.8
2008		5.5
2009		0.4
2010		350.5
2011		3.8
Thereafter		250.2
Total	$	672.2

NET INTEREST EXPENSE The following table summarizes supplemental information regarding the components of net interest expense as reported in our consolidated statements of income:

		2006			2005			2004
	(Dollars in millions)
Gross interest expense	$	46.2		$	33.6		$	31.6
Capitalized interest		(7.2	)		(5.7	)		(5.8	)
Interest income		(0.2	)		(0.7	)		(0.3	)
Net interest expense	$	38.8		$	27.2		$	25.5

The weighted-average interest rate of our long-term debt outstanding at December 31, 2006 was 8.0% as compared to 4.7% and 5.3% at December 31, 2005 and 2004, respectively.

34

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

4.DERIVATIVES AND RISK MANAGEMENT

DERIVATIVE FINANCIAL INSTRUMENTS In the normal course of business, we are exposed to market risk associated with changes in foreign currency exchange rates and interest rates. To manage a portion of these inherent risks, we purchase certain types of derivative financial instruments, from time to time, based on management’s judgment of the trade-off between risk, opportunity and cost. We do not hold or issue derivative financial instruments for trading or speculative purposes.

CURRENCY FORWARD CONTRACTS Because a majority of our business is denominated in U.S. dollars, we do not currently have significant exposures relating to currency exchange risk. From time to time, we use foreign currency forward contracts to reduce the effects of fluctuations in exchange rates, primarily relating to the Euro, Mexican Peso, Pound Sterling, Brazilian Real and Canadian Dollar. We had currency forward contracts with a notional amount of $33.5 million and $35.7 million outstanding at December 31, 2006 and 2005, respectively.

INTEREST RATE SWAPS We are exposed to variable interest rates on certain credit facilities. From time to time, we use interest rate hedging to reduce the effects of fluctuations in market interest rates. In 2006, we have hedged a portion of the interest rate risk related to our Term Loan by entering into an interest rate swap with a notional amount of $200.0 million. This notional amount reduces to $100.0 million in December 2008 and expires in April 2010. This interest rate swap converts variable rate financing based on 3-month LIBOR into fixed U.S. dollar rates. The fair value of our interest rate swap at December 31, 2006 was a liability of $3.3 million.

Generally, we designate interest rate swaps as effective cash flow hedges of the related debt and reflect the net cost of such agreements as an adjustment to interest expense over the lives of the debt agreements. The ineffective portion of any such hedges is included in current earnings. The impact of hedge ineffectiveness was not significant in any of the periods presented.

FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying value of our cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates their fair values due to the short-term maturities of these assets and liabilities. The carrying value of our borrowings under the Revolving Credit Facility, the uncommitted lines of credit and foreign credit facilities approximates their fair value due to the frequent resetting of the interest rates. We can prepay the Term Loan at a 2% premium to par through June 2007, at a 1% premium to par from June 2007 to June 2008, and at par thereafter. We have estimated the fair value of the 5.25% Notes using available market information, to be $210.3 million at December 31, 2006.

CONCENTRATIONS OF CREDIT RISK In the normal course of business, we provide credit to customers in the automotive industry. We periodically evaluate the creditworthiness of our customers and we maintain reserves for potential credit losses, which, when realized, have been within the range of our allowances for doubtful accounts. When appropriate, we also diversify the concentration of invested cash among different financial institutions and we monitor the selection of counter parties to other financial instruments to avoid unnecessary concentrations of credit risk.

Sales to General Motors Corporation (GM) were approximately 76%, 78% and 80% of our total net sales in 2006, 2005 and 2004, respectively. Accounts receivable due from GM were $200.6 million at year-end 2006 and $213.0 million at year-end 2005. Sales to DaimlerChrysler Corporation (DaimlerChrysler) were approximately 14% of our total net sales in 2006, 13% in 2005 and 11% in 2004. Accounts receivable due from DaimlerChrysler were $82.6 million at year-end 2006 and $66.0 million at year-end 2005. No other single customer accounted for more than 10% of our consolidated net sales in any year presented.

5.STOCKHOLDER RIGHTS PLAN

In September 2003, our Board of Directors adopted a Stockholder Rights Plan (the Rights Plan) and declared a dividend of one preferred share purchase right for each outstanding share of common stock for stockholders of record on September 25, 2003. The Rights Plan provides a reasonable means of safeguarding the interests of all stockholders against unsolicited takeover attempts at a price not reflective of the Company’s fair value. The Rights Plan is designed to give the Board of Directors sufficient time to evaluate and respond to an unsolicited takeover attempt and to encourage anyone or group considering such action to negotiate first with the Board of Directors. In July 2006, the Nominating/Corporate Governance Committee of the Board of Directors conducted an independent evaluation of the Rights Plan and concluded that it would be in the best interest of AAM and its shareholders to maintain the Rights Plan as originally adopted in September 2003, without modification.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

6. EMPLOYEE BENEFIT PLANS

PENSION AND OTHER POSTRETIREMENT BENEFITS We sponsor various qualified and non-qualified defined benefit pension plans for our eligible associates. We maintain hourly and salaried benefit plans that provide postretirement medical, dental, vision and life benefits (OPEB) to our eligible retirees and their dependents in the U.S. We also provide benefits under collective bargaining agreements to a majority of our hourly associates.

In September 2006, the FASB issued Statement No. 158, (SFAS 158) “Employers Accounting for Defined Benefit Pension and Other Postretirement Plans.” This statement amends FASB Statement Nos. 87, 88, 106 and 132R. This statement requires companies to recognize in its statement of financial position an asset for a plan’s overfunded status or a liability for a plan’s underfunded status, measure a plan’s assets and obligations that determine its funded status as of the end of the fiscal year and recognize changes in the funded status of a defined benefit postretirement plan in other comprehensive income in the year in which the changes occur.

The effective date for balance sheet recognition of the funded status of pension and OPEB plans and disclosure provisions is December 31, 2006. The incremental effect of applying SFAS 158 on the balance sheet is summarized in the following table:

	Before Application of SFAS 158			Adjustments			After Application of SFAS 158
	(Dollars in millions)
Deferred income taxes	$	44.3		$	(8.6	)	$	35.7
Other assets anddeferred charges		72.6			(29.7	)		42.9
Total assets		2,635.8			(38.3	)		2,597.5
Postretirement benefits andother long-term liabilities		613.2			(49.7	)		563.5
Accumulated othercomprehensive income (loss)		(1.6	)		14.8			13.2
Retained earnings		593.4			(3.4	)		590.0
Total stockholders’ equity		802.3			11.4			813.7

The effective date for plan assets and benefit obligations to be measured as of the date of the fiscal year-end statement of financial position is January 1, 2008. We have elected to early adopt the measurement date provisions of SFAS 158 as of January 1, 2007. In the first quarter of 2007, we will record a transition adjustment of approximately $12 million to the opening retained earnings balance related to the net periodic benefit cost for the period between September 30, 2006 and January 1, 2007.

Actuarial valuations of our benefit plans were made as of September 30, 2006 and 2005. The principal weighted-average assumptions used in the valuation of our U.S. and foreign plans appear in the following table. The U.S. discount rates were based on an actuarial review of a hypothetical portfolio of long-term, high quality corporate bonds matched against the expected payment stream for each of our plans. The foreign discount rate was based on a review of long-term bonds, including published indices in the applicable market. The assumptions for expected return on plan assets were based on a review of long-term historical returns for the asset classes represented within our portfolios. The rates of increase in compensation and health care costs were based on current market conditions, inflationary expectations and historical information.

	Pension Benefits																		Other Postretirement Benefits
	2006						2005						2004						2006			2005			2004
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
Discount rate		6.05	%		5.00	%		5.80	%		5.00	%		6.20	%		5.75	%		6.10	%		5.90	%		6.35	%
Expected return on plan assets		8.50	%		7.50	%		8.00	%		8.00	%		9.00	%		8.00	%		N/A			N/A			N/A
Rate of compensation increase		3.75	%		3.25	%		4.25	%		3.25	%		4.25	%		3.50	%		3.75	%		4.25	%		4.25	%

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

The weighted-average asset allocations of our pension plan assets at September 30, 2006 and 2005 appear in the following table. The asset allocation for our plans was developed in consideration of the demographics of the plan participants and expected payment stream of the benefit obligation.

	U.S.									Foreign
	2006			2005			Target Allocation			2006			2005			Target Allocation
Equity securities		70.8	%		69.7	%		65.0% -70.0	%		72.0	%		71.0	%		65.0% -70.0	%
Fixed income securities		29.1	%		29.2	%		30.0% -35.0	%		27.0	%		28.0	%		30.0% - 35.0	%
Cash		0.1	%		1.1	%		0.0% -5.0	%		1.0	%		1.0	%		0.0% -5.0	%
Total		100.0	%		100.0	%					100.0	%		100.0	%

 The accumulated benefit obligation for all defined benefit pension plans was $549.4 million and $535.9 million at September 30, 2006 and 2005, respectively.  The following table summarizes the changes in benefit obligations and plan assets and reconciles the funded status of the benefit plans to the net benefit plan asset (liability):

	Pension Benefits						Other Postretirement Benefits
	2006			2005			2006			2005
	(Dollars in millions)						(Dollars in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	561.6		$	486.3		$	505.1		$	418.6
Service cost		33.0			32.7			40.2			38.1
Interest cost		33.7			31.3			31.7			28.9
Plan amendments		(1.3	)		—			(26.2	)		(9.7	)
Actuarial (gain) loss		(48.8	)		34.0			(71.7	)		32.5
Participant contributions		1.7			1.7			—			—
Special termination benefits		5.4			—			0.9			—
Curtailments		(28.7	)		(1.4	)		(64.0	)		—
Benefit payments		(13.5	)		(13.8	)		(4.3	)		(3.3	)
Currency fluctuations		12.2			(9.2	)		—			—
Net change		(6.3	)		75.3			(93.4	)		86.5
Benefit obligation at end of year		555.3			561.6			411.7			505.1
Change in plan assets
Fair value of plan assets at beginning of year		412.7			350.6			—			—
Actual return on plan assets		39.0			47.0			—			—
Employer contributions		11.6			33.2			4.3			3.3
Participant contributions		1.7			1.7			—
Benefit payments		(13.5	)		(13.7	)		(4.3	)		(3.3	)
Currency fluctuations		8.7			(6.1	)		—			—
Net change		47.5			62.1			—			—
Fair value of plan assets at end of year		460.2			412.7			—			—
Funded status — U.S. plans at September 30		(67.4	)		(120.7	)		(411.7	)		(505.1	)
Funded status — foreign plan at September 30		(27.7	)		(28.3	)		—			—
Unrecognized loss		—			117.3			—			129.7
Unrecognized prior service cost		—			31.1			—			(19.8	)
Fourth quarter contribution		3.0			5.5			1.2			0.8
Net asset (liability) at December 31	$	(92.1	)	$	4.9		$	(410.5	)	$	(394.4	)

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

Amounts recognized in our balance sheets are as follows:

	Pension Benefits						Other Postretirement Benefits
	2006			2005			2006			2005
	(Dollars in millions)						(Dollars inmillions)
Noncurrent assets	$	8.7		$	48.4		$	—		$	—
Current liabilities		(25.0	)		(40.0	)		(6.5	)		(5.0	)
Noncurrent liabilities		(75.8	)		(88.1	)		(404.0	)		(389.4	)
Minimum pension liability adjustment		—			84.6			—			—
Net asset (liability) at December 31	$	(92.1	)	$	4.9		$	(410.5	)	$	(394.4	)

Amounts recognized in accumulated other comprehensive (income) loss in 2006 consist of:

	Pension Benefits			Other Postretirement Benefits
	(Dollars in millions)
Minimum pension liability adjustment, including FAS 158 transition	$	(84.6	)	$	—
Net actuarial (gain) loss		33.4			(11.2	)
Net prior service (credit) cost		20.3			(37.1	)
Total amount recognized in 2006	$	(30.9	)	$	(48.3	)

The components of net periodic benefit cost are as follows:

	Pension Benefits									Other Postretirement Benefits
	2006			2005			2004			2006			2005			2004
	(Dollars in millions)									(Dollars in millions)
Net Periodic Benefit Cost
Service cost	$	33.0		$	32.7		$	32.6		$	40.2		$	38.1		$	39.0
Interest cost		33.7			31.3			27.9			31.7			28.9			25.6
Expected asset return		(32.0	)		(30.3	)		(26.6	)		N/A			N/A			N/A
Amortized loss		5.0			4.5			4.1			5.2			3.9			5.4
Amortized prior service cost (credit)		3.0			3.1			2.5			(1.7	)		(0.8	)		(0.5	)
Special termination benefits		5.4			—			—			0.9			—			—
Curtailments		4.0			—			—			(7.1	)		—			—
Other		—			—			(1.4	)		—			—			—
Net periodic benefit cost	$	52.1		$	41.3		$	39.1		$	69.2		$	70.1		$	69.5

The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2007 are $1.3 million and $2.4 million, respectively. The estimated prior service credit for the other defined benefit postretirement plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2007 is $3.0 million.

For measurement purposes, an 8.5% annual increase in the per-capita cost of covered health care benefits was assumed for 2007. The rate was assumed to decrease gradually to 5.0% by 2014 and to remain at that level thereafter. Health care cost trend rates have a significant effect on the amounts reported for the health care plans. A 1.0% increase in the assumed health care cost trend rate would have increased total service and interest cost in 2006 and the postretirement obligation at December 31, 2006 by $17.0 million and $86.1 million, respectively. A 1.0% decrease in the assumed health care cost trend rate would have decreased total service and interest cost in 2006 and the postretirement obligation at December 31, 2006 by $12.7 million and $66.0 million, respectively.

The expected future pension and postretirement benefits to be paid for each of the next five years and in the aggregate for the succeeding five years thereafter are as follows: $22.6 million in 2007; $27.1 million in 2008; $31.1 million in 2009; $34.0 million in 2010; $37.8 million in 2011 and $246.1 million thereafter. These amounts were estimated using the same assumptions to measure our 2006 year-end pension and postretirement benefit obligations and include an estimate of future employee service.

CONTRIBUTIONS Our regulatory pension funding requirements in 2007 are less than $5 million. We expect our cash outlay for other postretirement benefit obligations to be between $5 million and $10 million in 2007.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

AMENDMENTS TO SALARIED PENSION AND OPEB PLANS In 2006, we amended our U.S. salaried defined benefit pension and OPEB plans. Depending on the plan, these amendments become effective on December 31, 2006 or January 1, 2007. Under the amended defined benefit pension plans, benefits for active participants as of December 31, 2006 who will be eligible for early or normal retirement on or before December 1, 2011 will be frozen on December 31, 2011. Pension benefits for all other active salaried participants in the U.S. defined benefit pension plans were frozen on December 31, 2006. Under the amended salaried OPEB plan, future benefits for associates hired prior to January 1, 2002 who retire after December 1, 2007 will be reduced or eliminated.

 These amendments resulted in a curtailment of certain benefits under our salaried defined benefit pension and OPEB plans. As a result of the curtailment, the funded status of our U.S. salaried defined benefit pension and OPEB plans was remeasured as of August 1, 2006. We recognized a net curtailment gain of $6.5 million as a result of the amendments.

SPECIAL ATTRITION PROGRAM As a result of the SAP, the funded status of certain U.S. hourly defined benefit pension and OPEB plans was remeasured as of December 7, 2006. We recorded net expense of $9.7 million for the curtailment of certain pension and other postretirement benefits and related special termination benefits. See Note 2 “Restructuring Actions” for more detail on the SAP.

SEVERANCE OBLIGATIONS AND OTHER POSTEMPLOYMENT BENEFITS In 2006, we recorded a $91.2 million charge to cost of sales relating to supplemental unemployment benefits (SUB) estimated to be payable to UAW represented associates who are expected to be permanently idled through the end of the current collective bargaining agreement that expires in February 2008. The collective bargaining agreement between AAM and the UAW contains a SUB provision, pursuant to which we are required to pay eligible idled workers certain benefits. In prior periods, the cost of SUB and related benefits paid to associates on layoff was expensed as incurred. In the third quarter of 2006, several factors contributed to a condition in which future SUB costs became both probable and reasonably estimable. These factors included the conclusion of mid-contract negotiations with the UAW regarding SUB, the approval of a supplemental new hire agreement with the UAW, our agreement with the UAW to offer a special attrition program, plant loading decisions affecting current and future production programs and revised production schedules by both GM and DCX on major AAM platforms. The participation in the SAP of approximately 1,500 associates reduced the number of associates expected to be permanently idled. Therefore, we revised our estimate of SUB to be paid pursuant to the current agreement and reduced this liability to $13.2 million as of December 31, 2006.

VOLUNTARY SAVINGS PLANS Most of our U.S. associates are eligible to participate in voluntary savings plans. Our maximum match under these plans in 2006 was 50% of salaried associates’ contributions up to 6% of their eligible salary. Matching contributions amounted to $3.1 million in 2006, $2.6 million in 2005 and $3.6 million in 2004. Our common stock is an investment option for our participants under these plans.

The salaried savings plan has been amended, effective January 1, 2007. Under the amended plan, our maximum match increased to 50% of salaried associates’ contributions up to 10% of their eligible salary. Also effective January 1, 2007, participants in the salaried retirement programs whose benefits were frozen on December 31, 2006 will receive an additional annual retirement contribution between 3% to 5% of eligible salary, depending on years of service.

DEFERRED COMPENSATION PLAN Certain U.S. associates are eligible to participate in a non-qualified deferred compensation plan. Payments of $1.0 million and $0.8 million have been made in 2006 and 2005, respectively, to eligible associates that have elected distributions. At December 31, 2006 and 2005, our deferred compensation liability was $14.5 million and $13.8 million, respectively. We recognized $1.3 million, $0.9 million and $1.0 million of expense related to this deferred compensation plan in 2006, 2005 and 2004, respectively.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

7. SHARE-BASED COMPENSATION

At December 31, 2006, we have stock-based compensation outstanding under two stock compensation plans approved by our stockholders. Under two of these plans, a total of 19.1 million shares have been authorized for issuance to our directors, officers and certain other associates in the form of options, nonvested stock or other awards that are based on the value of our common stock. Shares available for future grants at December 31, 2006 under these plans were 3.7 million.

STOCK OPTIONS Under the terms of the Plan, stock options are granted at the market price of the stock on the grant date. The contractual term of stock options ranges from 10 to 12 years. We issue new shares to satisfy stock-based awards.

Effective December 31, 2005, we accelerated the vesting of approximately 1.8 million “out of the money” stock options, all of which became immediately exercisable in full. The acceleration was intended to eliminate future compensation expense with respect to the “out of the money” stock options that we would otherwise have recognized upon our adoption of SFAS 123R on January 1, 2006. Stock options granted subsequent to December 31, 2005 become exercisable one-third after one year from the date of grant, an additional one-third after two years and in full after three years.

The following table summarizes activity relating to our stock options:

				Weighted-Average
	Number of			Exercise Price
	Shares			Per Share
	(In millions, except per share data)
Outstanding at January 1, 2004		7.0		$	16.43
Options granted		1.7			38.35
Options exercised		(1.1	)		12.17
Options lapsed or canceled		(0.3	)		28.07
Outstanding at December 31, 2004		7.3		$	21.82
Options granted		0.3			26.24
Options exercised		(0.6	)		7.70
Options lapsed or canceled		(0.2	)		29.22
Outstanding at December 31, 2005		6.8		$	23.00
Options granted		0.3			15.58
Options exercised		(0.2	)		5.42
Options lapsed or canceled		(0.1	)		28.39
Outstanding at December 31, 2006		6.8		$	23.10

			Weighted-Average
	Number of		Exercise Price
	Shares		Per Share
	(In millions,except per share data)
Exercisable at December 31, 2004		4.0	$	14.30
Exercisable at December 31, 2005		6.8	$	22.99
Exercisable at December 31, 2006		6.4	$	23.51

As of December 31, 2006, unrecognized compensation cost related to unvested stock options totaled $1.4 million. The weighted average period over which this cost is expected to be recognized is approximately two years. The total intrinsic value of options outstanding and exercisable as of December 31, 2006 was $17.2 million and $16.0 million, respectively. The total intrinsic value of stock options exercised in 2006 and 2005 was $3.0 million and $9.6 million, respectively.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

The following is a summary of the range of exercise prices for stock options that are outstanding and exercisable at December 31, 2006:

			Weighted-Average		Weighted-		Number of		Weighted-Average
	Outstanding		Exercise Price		Average		Stock Options		Exercise Price
	Stock Options		Per Share		Contractual Life		Exercisable		Per Share
	(In millions, except per share data)				(In years)		(In millions, except per share data)
Range of exercise prices
$4.26		0.4	$	4.26		2.8		0.4	$	4.26
$8.85		0.6		8.85		4.3		0.6		8.85
$9.15-$13.13		0.1		12.17		3.2		0.1		12.17
$15.00 -$15. 58		1.1		15.42		5.4		0.7		15.34
$18.40 -$23. 73		1.5		23.66		6.1		1.5		23.70
$24.13 -$28.45		1.6		24.67		5.7		1.6		24.67
$32.13 -$40.83		1.5		38.49		7.1		1.5		38.49
		6.8	$	23.10		5.7		6.4	$	23.51

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

	2006			2005			2004
Expected volatility		41.31	%		41.64	%		44.04	%
Risk-free interest rate		4.78	%		4.36	%		3.70	%
Dividend yield		3.70	%		2.25	%		None
Expected life of options		7 years			7 years			7 years
Weighted-averagegrant date fair value	$	5.33		$	10.50		$	19.83

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

OTHER SHARE-BASED COMPENSATION We also award performance accelerated restricted stock and restricted stock units (PARS and RSUs, respectively) under our 1999 Stock Incentive Plan. Prior to the adoption of SFAS 123R, the total amount of compensation expense associated with the PARS was recorded as unearned compensation and was presented as a separate component of stockholders’ equity. In 2006, as required by SFAS 123R, the remaining unearned compensation was eliminated against paid-in-capital. The total amount of compensation expense associated with the RSUs is recorded as an accrued liability when incurred. The PARS and RSUs vest over three to five years contingent upon the satisfaction of future financial performance targets specified by the plan. The unearned compensation is expensed over the expected vesting period.

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

				Weighted-Average Grant
	Number of			Date Fair Value per
	Shares/Units			Share/Unit
	(In millions, except per share data)
Outstanding at December 31, 2004
Granted		1.0		$	25.14
Vested		—			—
Canceled		*		$	26.68
Outstanding at December 31, 2005		1.0		$	25.11
Granted		0.9			15.80
Vested		*			26.68
Canceled		(0.1	)		21.42
Outstanding at December 31, 2006		1.8		$	20.46

____________

* Activity for the period was less than 100,000shares

As of December 31, 2006, unrecognized compensation cost related to nonvested PARS and RSUs totaled $19.2 million. The weighted average period over which this cost is expected to be recognized is approximately two years. The total fair market value of PARS and RSUs vested in 2006 was $0.6 million.

In 2006, we recognized approximately $10.2 million of expense related to stock-based compensation awards as compared to $5.6 million in 2005.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

8. INCOME TAXES

 Income before income taxes for U.S. and non-U.S. operations was as follows:

	2006			2005		2004
	(Dollars in millions)
U.S. income (loss)	$	(474.7	)	$	20.2	$	155.3
U.S. foreignsource income		52.0			33.0		31.7
Non-U.S. income		67.2			26.8		48.8
Total income (loss) beforeincome taxes	$	(355.5	)	$	80.0	$	235.8

The following is a summary of the components of our provisions for income taxes:

 

2006 2005 2004

	(Dollars in millions)
Current
Federal	$	21.1		$	5.9		$	18.3
Other state and local		(2.5	)		4.5			4.0
Foreign		20.7			14.7			7.7
Total current		39.3			25.1			30.0
Deferred
Federal		(162.2	)		(1.3	)		36.8
Other state and local		(6.0	)		(1.6	)		0.5
Foreign		(4.1	)		1.8			9.0
Total deferred		(172.3	)		(1.1	)		46.3
Total income tax expense (benefit)	$	(133.0	)	$	24.0		$	76.3

 The following is a reconciliation of our provision for income taxes to the expected amounts using statutory rates:

	2006			2005			2004
Federal statutory		35.0	%		35.0	%		35.0	%
Foreign income taxes		1.6			(1.9	)		(0.5	)
State and local		2.1			1.8			1.2
Federal tax credits		3.8			(5.3	)		(1.7	)
Global restructuring		(4.5	)		—			—
Other		(0.6	)		0.4			(1.6	)
Effective income tax rate		37.4	%		30.0	%		32.4	%

42

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

The following is a summary of the significant components of our deferred tax assets and liabilities:

	2006			2005
	(Dollars inmillions)
Current deferred tax assets
Employee benefits	$	29.6		$	11.4
Inventory		5.2			—
Prepaid taxes and other		5.1			9.9
Valuation allowance		(2.3	)		—
Total current deferred tax assets		37.6			21.3
Current deferred tax liabilities
Inventory and other		(6.9	)		(4.3	)
Current deferred tax asset, net	$	30.7		$	17.0

	2006			2005
	(Dollars inmillions)
Noncurrent deferred tax assets
Employee benefits	$	203.6		$	159.8
NOL carryforwards		23.8			20.8
Tax credit carryforwards		25.1			2.4
Capital allowance carryforwards		12.6			13.7
Fixed assets		6.5			—
Prepaid taxes		—			2.8
Other		9.0			1.3
Valuation allowances		(36.7	)		(31.2	)
Noncurrent deferred tax assets, net		243.9			169.6
Noncurrent deferred tax liabilities
Fixed assets and other		(215.0	)		(282.7	)
Noncurrent deferred tax asset (liability),net	$	28.9		$	(113.1	)

Noncurrent deferred tax assets and liabilities recognized in our balance sheets are as follows:

	2006		2005
	(Dollars inmillions)
U.S. federal deferred tax asset (liability), net	$	23.5	$	(116.1	)
Other foreign deferred tax asset, net		5.4		3.0
Noncurrent deferred tax asset (liability),net	$	28.9	$	(113.1	)

The deferred income tax assets and liabilities summarized above reflect the impact of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the basis of such assets and liabilities as measured by tax laws. At year-end 2006 and 2005, our net noncurrent foreign deferred tax asset was primarily attributable to timing differences related to the pension liability for our foreign operations. At year-end 2006, our net noncurrent U.S. federal deferred tax asset was principally comprised of the timing difference of employee benefits not yet deductible for tax purposes and other tax credit carryforwards offset by the impact of accelerated tax depreciation. At December 31, 2005, the accelerated tax depreciation was greater thanthe temporary difference for employee benefits and tax credit carryforwards, resulting in a net noncurrent U.S. federal deferred tax liability.

Our deferred tax asset valuation allowances at December 31, 2006 and 2005 are principally related to foreign net operating losses and capital allowance carryforwards. Although these carryforwards do not expire, we considered prior operating results and future plans, as well as the utilization period of other temporary differences, in determining the amount of our valuation allowances. In 2006 and 2005, we utilized a portion of such foreign tax benefits.

Payments for federal, state, local and foreign income taxes were $49.4 million, $36.0 million and $33.3 million in 2006, 2005 and 2004, respectively.

43

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

9.EARNINGS (LOSS) PER SHARE (EPS)

The following table sets forth the computation of our basic and diluted EPS:

	2006			2005		2004
	(In millions, except per share: data)
Numerator
Net income (loss)	$	(222.5	)	$	56.0	$	159.5
Denominators
Basic shares outstanding - Weighted-averageshares outstanding		50.4			50.1		51.6
Effect of dilutive securities
Dilutive stock-basedcompensation		—			1.0		1.9
Diluted shares outstanding - Adjusted weighted-average shares after assumed conversions		50.4			51.1		53.5
Basic EPS	$	(4.42	)	$	1.12	$	3.09
Diluted EPS	$	(4.42	)	$	1.10	$	2.98

Basic and diluted loss per share in 2006 are the same because the effect of 1.0 million potentially dilutive shares would have been antidilutive.

Certain exercisable stock options were excluded in the computations of diluted EPS because the exercise price of these options was greater than the average annual market prices. The number of stock options outstanding, which were not included in the calculation of diluted EPS, was 4.7 million at year-end 2006, 4.7 million at year-end 2005 and less than 1.6 million at year-end 2004. The ranges of exercise prices related to the excluded exercisable stock options were $19.54 - $40.83 at year-end 2006, $23.73 - $40.83 at year-end 2005 and $34.88 - $40.83 at year-end 2004.

10.LABOR RELATIONS

In February 2004, our national collective bargaining agreement with the UAW expired. As a result of not reaching an agreement before the expiration of the contract, we experienced a temporary work stoppage of less than two days at six of our North American manufacturing facilities. In 2004, our operating results include costs and expenses of approximately $5.2 million related to overtime and other costs to recover lost production as a result of the work stoppage.

Lump-sum ratification payments totaling $37.5 million (including applicable payroll taxes) were made in the first half of 2004 in accordance with new collective bargaining agreements with unions that represent our hourly associates at six of our locations in the U.S. These lump-sum payments relate to the future service of our hourly workforce. Through 2006, we expensed $28.7 million of these payments, which represented amounts earned in relation to the agreements in addition to $8.0 million, $7.1 million and $7.5 million paid in lieu of base wage increases in 2006, 2005 and 2004, respectively. The remaining $8.8 million relates to amounts which would be earned during the terms of the agreements and will be amortized over the remaining lives of the agreements.

44

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

11.COMMITMENTS AND CONTINGENCIES

Obligated purchase commitments for capital expenditures were approximately $97.1 million at December 31, 2006 and $163.1 million at December 31, 2005.

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

 We are subject to various federal, state, local and foreign environmental and occupational safety and health laws, regulations and ordinances, including those regulating air emissions, water discharge, waste management and environmental cleanup. We will continue to closely monitor our environmental conditions to ensure that we are in compliance with all laws, regulations and ordinances. GM has agreed to indemnify and hold us harmless against certain environmental conditions existing prior to our purchase of the assets from GM on March 1, 1994. GM’s indemnification obligations terminated on March 1, 2004 with respect to any new claims that we may have against GM. We have made, and will continue to make, capital and other expenditures (including recurring administrative costs) to comply with environmental requirements. Such expenditures were not significant during 2006.

Due to the nature of our operations, we have legal obligations to perform asset retirement activities related to federal, state, and local environmental requirements. The process of estimating environmental liabilities is complex and significant uncertainty exists related to the timing and method of the settlement of these obligations. Therefore, these liabilities are not reasonably estimable until a triggering event occurs that allows us to estimate a range of potential settlement dates, the potential methods of settlement and the probabilities associated with the potential settlement dates and potential methods of settlement.

 In 2006, based on the significant redeployment of assets and determination of certain assets as permanently idled, the methods and timing of environmental liabilities related to our Buffalo Gear, Axle & Linkage facility were reasonably estimable. Based on management’s best estimate of the costs, methods and timing of the settlement of these obligations, we recorded a charge of $2.5 million. In the future, we will update our estimated costs and potential settlement dates and methods and their associated probabilities based on available information. Any update may change our estimate and could result in a material adjustment to this liability.

12.SEGMENT AND GEOGRAPHIC INFORMATION

We operate in one reportable segment: the manufacture, engineering, design and validation of driveline systems and related components and chassis modules for light trucks, SUVs, passenger cars and crossover vehicles. Financial information relating to our operations by geographic area is presented in the following table. Net sales are attributed to countries based upon location of customer. Long-lived assets exclude deferred income taxes.

 

2006 2005 2004

	(Dollars in millions)
Net sales
United States	$	2,199.3	$	2,323.6	$	2,472.5
Canada		259.2		316.8		328.1
Mexico and South America		597.9		614.6		667.6
Europe and other		135.3		132.3		131.4
Total net sales	$	3,191.7	$	3,387.3	$	3,599.6
Long-lived assets
United States	$	1,429.3	$	1,603.0	$	1,499.3
Other		528.8		459.2		440.1
Total long-lived assets	$	1,958.1	$	2,062.2	$	1,939.4

13. UNAUDITED QUARTERLY FINANCIAL DATA

	March 31		June 30		September 30			December 31			Full Year
	(Dollars in millions, except per share data)
2006
Net sales	$	834.8	$	874.6	$	701.2		$	781.1		$	3,191.7
Gross profit (loss)		63.5		89.9		(62.0	)		(220.0	)		(128.6	)
Net income (loss) (1)		8.6		20.4		(62.9	)		(188.6	)		(222.5	)
Basic EPS (2)	$	0.17	$	0.41	$	(1.25	)	$	(3.74	)	$	(4.42	)
Diluted EPS(2)	$	0.17	$	0.40	$	(1.25	)	$	(3.74	)	$	(4.42	)
2005
Net sales	$	818.9	$	867.7	$	848.1		$	852.6		$	3,387.3
Gross profit		72.3		85.4		83.3			63.7			304.7
Net income		13.3		18.9		19.3			4.5			56.0
Basic EPS (2)	$	0.27	$	0.38	$	0.38		$	0.09		$	1.12
Diluted EPS(2)	$	0.26	$	0.37	$	0.38		$	0.09		$	1.10

⁽¹⁾ Net loss in the fourth quarter of 2006 includes the charges discussed in Note 2 "Restructuring Actions"

⁽²⁾Full year basic and diluted EPS will not necessarily agree to the sum of the four quarters because each quarter is a separate calculation.

45

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

14. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

Holdings has no significant asset other than it 100% ownership in AAM, Inc. and no direct subsidiaries other than AAM, Inc. Holdings fully and unconditionally guarantees the 5.25% Notes, which are senior unsecured obligations of AAM, Inc. The 2.00% Convertible Notes are senior unsecured obligations of Holdings and are fully and unconditionally guaranteed by AAM, Inc.

The following Condensed Consolidating Financial Statements are included in lieu of providing separate financial statements for Holdings and AAM, Inc. These Condensed Consolidating Financial Statements are prepared under the equity method of accounting whereby the investments in subsidiaries are recorded at cost and adjusted for the parent’s share of the subsidiaries’ cumulative results of operations, capital contributions and distributions, and other equity changes.

Condensed Consolidating Statements of Operations

(In millions)

	Holdings			AAM Inc.			All Others			Elims			Consolidated
2006
Net sales
External	$	—		$	2,173.4		$	1,018.3		$	—		$	3,191.7
Intercompany		—			36.0			81.8			(117.8	)		—
Total net sales		—			2,209.4			1,100.1			(117.8	)		3,191.7
Cost of goods sold		—			2,441.5			990.9			(112.1	)		3,320.3
Gross profit (loss)		—			(232.1	)		109.2			(5.7	)		(128.6	)
Selling, general and administrative expenses		—			190.6			12.5			(5.7	)		197.4
Operating income (loss)		—			(422.7	)		96.7			—			(326.0	)
Net interest expense		—			(23.2	)		(15.6	)		—			(38.8	)
Other income		—			6.4			2.9			—			9.3
Income (loss) before income taxes		—			(439.5	)		84.0			—			(355.5	)
Income tax benefit		—			(128.3	)		(4.7	)		—			(133.0	)
Earnings (loss) from equity in subsidiaries		(222.5	)		48.5			—			174.0			—
Net income (loss) before royalties and dividends		(222.5	)		(262.7	)		88.7			174.0			(222.5	)
Royalties and dividends		—			40.2			(40.2	)		—			—
Net income (loss) after royalties and dividends	$	(222.5	)	$	(222.5	)	$	48.5		$	174.0		$	(222.5	)
2005
Net sales
External	$	—		$	2,516.6		$	870.7		$	—		$	3,387.3
Intercompany		—			37.2			83.0			(120.2	)		—
Total net sales		—			2,553.8			953.7			(120.2	)		3,387.3
Cost of goods sold		—			2,340.5			862.4			(120.3	)		3,082.6
Gross profit		—			213.3			91.3			0.1			304.7
Selling, general and administrative expenses		—			182.2			17.3			0.1			199.6
Operating income		—			31.1			74.0			—			105.1
Net interest expense		—			(4.7	)		(22.5	)		—			(27.2	)
Other income (expense)		—			2.8			(0.7	)		—			2.1
Income before income taxes		—			29.2			50.8			—			80.0
Income tax expense		—			13.5			10.5			—			24.0
Earnings from equity in subsidiaries		56.0			7.3			—			(63.3	)		—
Net income before royalties and dividends		56.0			23.0			40.3			(63.3	)		56.0
Royalties and dividends		—			33.0			(33.0	)		—			—
Net income (loss) after royalties and dividends	$	56.0		$	56.0		$	7.3		$	(63.3	)	$	56.0
2004
Net sales
External	$	—		$	2,778.8		$	820.8		$	—		$	3,599.6
Intercompany		—			37.8			86.6			(124.4	)		—
Total net sales		—			2,816.6			907.4			(124.4	)		3,599.6
Cost of goods sold		—			2,456.1			767.3			(98.3	)		3,125.1
Gross profit (loss)		—			360.5			140.1			(26.1	)		474.5
Selling, general and administrative expenses		—			175.5			14.1			0.1			189.7
Operating income (loss)		—			185.0			126.0			(26.2	)		284.8
Net interest expense		—			4.5			(30.0	)		—			(25.5	)
Other income (expense)		—			(49.3	)		(0.4	)		26.2			(23.5	)
Income (loss) before income taxes		—			140.2			95.6			—			235.8
Income tax expense		—			53.7			22.6			—			76.3
Earnings from equity in subsidiaries		159.5			41.3			—			(200.8	)		—
Net income before royalties and dividends		159.5			127.8			73.0			(200.8	)		159.5
Royalties and dividends		—			31.7			(31.7	)		—			—
Net income after royalties and dividends	$	159.5		$	159.5		$	41.3		$	(200.8	)	$	159.5

46

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

Condensed Consolidating Balance Sheets

(In millions)

	Holdings		AAM Inc.			All Others		Elims			Consolidated
2006
Assets
Current assets
Cash and cash equivalents	$	—	$	0.5		$	13.0	$	—		$	13.5
Accounts receivable, net		—		181.0			146.6		—			327.6
Inventories, net		—		110.4			88.0		—			198.4
Other current assets		—		62.9			37.0		—			99.9
Total current assets		—		354.8			284.6		—			639.4
Properly, plant and equipment, net		—		1,075.2			656.5		—			1,731.7
Goodwill		—		—			147.8		—			147.8
Other assets and deferred charges		—		17.2			61.4		—			78.6
Investment in subsidiaries		1,043.4		676.1			69.9		(1,789.4	)		—
Total assets	$	1,043.4	$	2,123.3		$	1,220.2	$	(1,789.4	)	$	2,597.5
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	—	$	201.6		$	127.3	$	—		$	328.9
Other accrued expenses		—		173.6			38.8		—			212.4
Total current liabilities		—		375.2			166.1		—			541.3
Intercompany payable (receivable)		240.2		(451.0	)		210.8		—			—
Long-term debt		2.7		633.2			36.3		—			672.2
Other long-term liabilities		—		508.0			62.3		—			570.3
Total liabilities		242.9		1,065.4			475.5		—			1,783.8
Shareholders’ equity		800.5		1,057.9			744.7		(1,789.4	)		813.7
Total liabilities and shareholders’ equity	$	1,043.4	$	2,123.3		$	1,220.2	$	(1,789.4	)	$	2,597.5
2005
Assets
Current assets
Cash and cash equivalents	$	—	$	0.2		$	3.5	$	—		$	3.7
Accounts receivable, net		—		210.9			117.1		—			328.0
Inventories, net		—		124.6			82.6		—			207.2
Other current assets		—		31.0			31.5		—			62.5
Total current assets		—		366.7			234.7		—			601.4
Properly, plant and equipment, net		—		1,257.3			578.7		—			1,836.0
Goodwill		—		—			147.8		—			147.8
Other assets and deferred charges		—		72.0			9.4		—			81.4
Investment in subsidiaries		1,267.2		350.9			42.6		(1,660.7	)		—
Total assets	$	1,267.2	$	2,046.9		$	1,013.2	$	(1,660.7	)	$	2,666.6
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	—	$	268.1		$	113.0	$	—		$	381.1
Other accrued expenses		—		112.3			55.8		—			168.1
Total current liabilities		—		380.4			168.8		—			549.2
Intercompany payable (receivable)		73.9		(474.4	)		400.5		—			—
Long-term debt		150.0		321.2			18.0		—			489.2
Other long-term liabilities		—		590.1			43.3		—			633.4
Total liabilities		223.9		817.3			630.6		—			1,671.8
Shareholders’ equity		1,043.3		1,229.6			382.6		(1,660.7	)		994.8
Total liabilities and shareholders’ equity	$	1,267.2	$	2,046.9		$	1,013.2	$	(1,660.7	)	$	2,666.6

47

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

Condensed Consolidating Statements of Cash Flows

(In millions)

Holdings AAM Inc. All Others Elims Consolidated

2006
Operating activities
Net cash provided by (used in) operating activities	$	—		$	(121.2	)	$	306.9		$	—	$	185.7
Investing activities
Purchases of properly, plant and equipment, net		—			(162.8	)		(123.8	)		—		(286.6	)
Purchase buyouts of leased equipment, net of proceeds		—			(37.0	)		—			—		(37.0	)
Net cash used in investing activities		—			(199.8	)		(123.8	)		—		(323.6	)
Financing activities
Net debt activity		(147.3	)		312.1			15.7			—		180.5
Intercompany activity		178.3			11.4			(189.7	)		—		—
Debt issuance costs		—			(4.4	)		—			—		(4.4	)
Payment of dividends		(31.0	)		—			—			—		(31.0	)
Proceeds from stock option exercises,
including tax benefit		—			2.3			—			—		2.3
Purchase of treasury stock		—			(0.1	)		—			—		(0.1	)
Net cash provided by (used in) financing activities		—			321.3			(174.0	)		—		147.3
Effect of exchange rate changes on cash		—			—			0.4			—		0.4
Net increase in cash and cash equivalents		—			0.3			9.5			—		9.8
Cash and cash equivalents at beginning of period		—			0.2			3.5			—		3.7
Cash and cash equivalents at end of period	$	—		$	0.5		$	13.0		$	—	$	13.5
2005
Operating activities
Net cash provided by operating activities	$	—		$	70.4		$	210.0		$	—	$	280.4
Investing activities
Purchases of property, plant and equipment, net		—			(198.7	)		(107.0	)		—		(305.7	)
Net cash used in investing activities		—			(198.7	)		(107.0	)		—		(305.7	)
Financing activities
Net debt activity		—			70.4			(29.8	)		—		40.6
Intercompany activity		30.4			42.1			(72.5	)		—		—
Debt issuance costs		—			—			—			—		—
Payment of dividends		(30.4	)		—			—			—		(30.4	)
Proceeds from stock option exercises,
including tax benefit		—			4.6			—			—		4.6
Purchase of treasury stock		—			—			—			—		—
Net cash provided by (used in) financing activities		—			117.1			(102.3	)		—		14.8
Effect of exchange rate changes on cash		—			—			(0.2	)		—		(0.2	)
Net increase (decrease) in cash and cash equivalents		—			(11.2	)		0.5			—		(10.7	)
Cash and cash equivalents at beginning of period		—			11.4			3.0			—		14.4
Cash and cash equivalents at end of period	$	—		$	0.2		$	3.5		$	—	$	3.7
2004
Operating activities
Net cash provided by operating activities	$	—		$	345.9		$	107.3			—	$	453.2
Investing activities
Purchases of property, plant and equipment, net		—			(171.8	)		(68.4	)		—		(240.2	)
Net cash used in investing activities		—			(171.8	)		(68.4	)		—		(240.2	)
Financing activities
Net debt activity		150.0			(175.4	)		4.2			—		(21.2	)
Intercompany activity		44.0			4.1			(48.1	)		—		—
Debt issuance costs		—			(9.7	)		—			—		(9.7	)
Payment of dividends		(23.0	)		—			—			—		(23.0	)
Proceeds from stock option exercises,
including tax benefit		—			13.6			—			—		13.6
Purchase of treasury stock		(171.0	)		—			—			—		(171.0	)
Net cash provided by financing activities		—			(167.4	)		(43.9	)		—		(211.3	)
Effect of exchange rate changes on cash		—			—			0.3			—		0.3
Net increase in cash and cash equivalents		—			6.7			(4.7	)		—		2.0
Cash and cash equivalents at beginning of period		—			4.7			7.7			—		12.4
Cash and cash equivalents at end of period	$	—		$	11.4		$	3.0			—	$	14.4

48

American Axle & Manufacturing Holdings, Inc.

Five Year Financial Summary

Year Ended December 31,

(In millions, except per share data)

	2006			2005			2004			2003			2002
Statement of income data
Net sales	$	3,191.7		$	3,387.3		$	3,599.6		$	3,682.7		$	3,480.2
Gross profit (loss)		(128.6	)		304.7			474.5			540.3			491.7
Selling, general and administrative expenses		197.4			199.6			189.7			194.0			180.5
Operating income (loss)		(326.0	)		105.1			284.8			346.3			311.2
Net interest expense		(38.8	)		(27.2	)		(25.5	)		(46.8	)		(50.6	)
Net income (loss)		(222.5	) (a)		56.0			159.5	(b)		197.1			176.1	(c)
Diluted earnings (loss) per share	$	(4.42	)	$	1.10		$	2.98		$	3.70		$	3.38
Diluted shares outstanding		50.4			51.1			53.5			53.3			52.1
Balance sheet data
Cash and cash equivalents	$	13.5		$	3.7		$	14.4		$	12.4		$	9.4
Total assets		2,597.5			2,666.6			2,538.8			2,398.7			2,335.7
Total long-term debt		672.2			489.2			448.0			449.7			734.1
Stockholders’ equity		813.7			994.8			955.5			954.7			703.6
Dividends declared per share	$	0.60		$	0.60		$	0.45		$	—		$	—
Statement of cash flows data
Cash provided by operating activities	$	185.7		$	280.4		$	453.2		$	496.9		$	384.2
Cash used in investing activities		(323.6	)		(305.7	)		(240.2	)		(232.1	)		(252.9	)
Cash (used in) provided by financing activities		147.3			14.8			(211.3	)		(262.6	)		(133.2	)
Dividends paid		(31.0	)		(30.4	)		(23.0	)		—			—
Other data
EBITDA(d)	$	(110.5	)	$	293.0		$	432.7		$	513.8		$	470.6
Depreciation and amortization		206.0			185.1			171.1			163.1			145.8
Capital expenditures		286.6			305.7			240.2			229.1			207.7
Buyouts of sale-leasebacks		71.8			—			—			3.0			45.2

^(a)Includes special charges and asset impairments of 248.2, net of tax, related to restructuring actions.

^(b)Includes a one-time charge of $15.9 million, net of tax, related to debt refinancing and redemption costs in the first quarter of 2004.

^(c)Includes a $5.5 million gain, net of tax and other related costs, due to an insurance settlement related to a fire that occurred at our forge operations in Detroit, Michigan.

^(d)We believe that earnings before interest expense, income taxes, depreciation and amortization (EBITDA) is a meaningful measure of performance as it is 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, together with other measures, to measure our operating performance relative to other Tier I automotive suppliers. EBITDA should not be construed as income from operations, net income or cash flow from operating activities as determined under accounting principles generally accepted in the United States of America. Other companies may calculate EBITDA differently.

	2006			2005		2004		2003		2002
Net income (loss)	$	(222.5	)	$	56.0	$	159.5	$	197.1	$	176.1
Interest expense		39.0			27.9		25.8		47.5		51.0
Income tax expense (benefit)		(133.0	)		24.0		76.3		106.1		97.7
Depreciation and amortization		206.0			185.1		171.1		163.1		145.8
EBITDA	$	(110.5	)	$	293.0	$	432.7	$	513.8	$	470.6

EX-21

EXHIBIT 21 - SUBSIDIARIES OF OUR COMPANY

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

Subsidiary	Organized Under Laws of	% Owned by Parent (1)
American Axle & Manufacturing Holdings, Inc.	Delaware	100%
American Axle & Manufacturing, Inc.	Delaware	100%
Colfor Manufacturing Inc.	Delaware	100%
MSP Industries Corporation	Michigan	100%
MSP Team LLC	Michigan	99%(2)
AAM International Holdings, Inc	Delaware	100%
AAM Comercio e Participacoes Ltda.	Brazil	99.99%(2)
AAM do Brasil Ltda	Brazil	99.23%
AAM Mauritius Holdings Ltd	Mauritius	100%
Changshu AAM Automotive Driveline High Technology Manufacturing Co., Ltd.	China	100%
Asia Pacific Office Branch, (Tokyo, Japan)	Japan	100%
China Representative Office, (Shanghai, China)	China	100%
American Axle & Manufacturing Korea, Inc.	Korea	100%
AAM Services India Private Ltd.	India	99%(2)
AAM Poland Sp. z o. o.	Poland	100%
AAM Poland Production Sp. z o. o.	Poland	99%(2)
Albion Automotive (Holdings) Limited	Scotland	100%
Albion Automotive Limited	Scotland	100%
AAM Europe GmbH	Germany	100%
AAM International S.á r.l.	Luxembourg	100%
AAM Mexico Holdings LLC	Delaware	100%
American Axle & Manufacturing de Mexico Holdings S. de R.L. de C.V.	Mexico	99.99%(2)
Guanajuato Gear & Axle deMexico S. de R.L. de C.V.	Mexico	99.99%(2)
American Axle & Manufacturing de Mexico S. de R.L. de C.V.	Mexico	99.99%(2)
AAM Maquiladora Mexico S. de R.L. de C.V.	Mexico	99.99%(2)
AAM Luxembourg S.á r.l.	Luxembourg	100%

⁽¹⁾All subsidiaries set forth herein are reported in our financial statements through consolidations; there are no subsidiaries omitted from this list.

⁽²⁾Remaining shares owned by the Company or its subsidiaries.

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EX-23

 EXHIBIT 23 - CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 We consent to the incorporation by reference in Registration Statement Nos. 333-41976 and 333-70466 on Form S-8 and Registration Statement Nos. 333-115317 and 333-132129-01 on Form S-3 of our reports dated February 15, 2007 (which reports express an unqualified opinion and include an explanatory paragraph relating to the adoption of Statement of Financial Accounting Standards (SFAS) No.123 R - Share Based Payments on January 1, 2006 and the adoption of the balance sheet provisions of SFAS No. 158 - Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans on December 31, 2006) relating to the financial statements and financial statement schedule of American Axle & Manufacturing Holdings, Inc. and management's report on the effectiveness of internal control over financial reporting appearing in and incorporated by reference in the Annual Report on Form 10-K of American Axle & Manufacturing Holdings, Inc. for the year ended December 31, 2006.

/s/ DELOITTE & TOUCHE LLP

Detroit, Michigan

February 20, 2007

26

EX-31.1

EXHIBIT 31.1 - CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT

I, Richard E. Dauch, certify that:

1.   I have reviewed this Annual Report on Form 10-K of American Axle & Manufacturing Holdings, Inc. for the year-ended December 31, 2006;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 20, 2007

/s/ Richard E. Dauch

Richard E. Dauch
Co-Founder, Chairman of the Board & Chief Executive Officer
(Principal Executive Officer)

27

EX-31.2

EXHIBIT 31.2 - CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT

I, Michael K. Simonte, certify that:

1.   I have reviewed this Annual Report on Form 10-K of American Axle & Manufacturing Holdings, Inc. for the year-ended December 31, 2006;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 20, 2007

/s/ Michael K. Simonte

Michael K. Simonte

Vice President - Finance & Chief Financial Officer

(Principal Financial Officer)

28

EX-32

EXHIBIT 32 - CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of American Axle & Manufacturing Holdings, Inc. (Issuer) on Form 10-K for the period ending December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (Report), I, Richard E. Dauch, Co-Founder, Chairman of the Board & Chief Executive Officer of the Issuer, and I, Michael K. Simonte, Vice President - Finance & Chief Financial Officer of the Issuer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

/s/ Richard E. Dauch	/s/ Michael K. Simonte
Richard E. Dauch Co-Founder, Chairman of the Board &                        Chief Executive Officer February 20, 2007	Michael K. Simonte Vice President - Finance & Chief Financial Officer February 20, 2007

29