This management's discussion and analysis (MD&A) should be read in conjunction
with the unaudited condensed consolidated financial statements and notes
appearing elsewhere in this Quarterly Report and our Annual Report on Form 10-K
for the year ended December 31, 2019.

Unless the context otherwise requires, references to "we," "our," "us" or "AAM"
shall mean collectively (i) American Axle & Manufacturing Holdings, Inc.
(Holdings), a Delaware corporation, (ii) American Axle & Manufacturing, Inc.
(AAM, Inc.), a Delaware corporation, and its direct and indirect subsidiaries,
and, (iii) Metaldyne Performance Group, Inc. (MPG) and its direct and indirect
subsidiaries. AAM Inc. and MPG are wholly-owned subsidiaries of Holdings.

COMPANY OVERVIEW



We are a global Tier 1 supplier to the automotive industry. We design, engineer
and manufacture driveline and metal forming products that are making the next
generation of vehicles smarter, lighter, safer and more efficient. We employ
approximately 20,000 associates, operating at nearly 80 facilities in 17
countries, to support our customers on global and regional platforms with a
focus on quality, operational excellence and technology leadership.

Major Customers



We are a primary supplier of driveline components to General Motors Company (GM)
for its full-size rear-wheel drive (RWD) light trucks, sport utility vehicles
(SUVs), and crossover vehicles manufactured in North America, supplying a
significant portion of GM's rear axle and four-wheel drive and all-wheel drive
(4WD/AWD) axle requirements for these vehicle platforms. We also supply GM with
various products from our Metal Forming segment. Sales to GM were approximately
40% of our consolidated net sales in the first six months of 2020, 39% in the
first six months of 2019, and 37% for the full year 2019.

We also supply driveline system products to FCA US LLC (FCA) for heavy-duty Ram
full-size pickup trucks and its derivatives, the AWD Jeep Cherokee, and a
passenger car driveshaft program. In addition, we sell various products to FCA
from our Metal Forming segment. Sales to FCA were approximately 16% of our
consolidated net sales in the first six months of 2020, 14% in the first six
months of 2019, and 17% for the full year 2019.

We are also a supplier to Ford Motor Company (Ford) for driveline system products on certain vehicle programs, and we sell various products to Ford from our Metal Forming segment. Sales to Ford were approximately 12% of our consolidated net sales in the first six months of 2020, 8% in the first six months of 2019, and 9% for the full year of 2019.

No other customer represented 10% or more of consolidated net sales during these periods.

Impact of Novel Coronavirus (COVID-19)

COVID-19 Operational Impact and AAM Actions



In March of 2020, COVID-19 was designated by the World Health Organization as a
pandemic illness and began to significantly disrupt global automotive
production. In an effort to mitigate the spread of COVID-19, many governmental
and public health agencies in locations in which we operate implemented
shelter-in-place orders or similar measures. The majority of our customers
temporarily ceased or significantly reduced production near the end of March,
which continued into the second half of the second quarter. As a result,
substantially all of our manufacturing facilities either temporarily suspended
production or experienced significant reductions in volumes during this period.


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At AAM, safety is our top responsibility and that includes the health and wellness of our associates globally. In response to COVID-19, we instituted several operational measures to ensure the safety of our associates, which included the following:



•Assembled a COVID-19 Task Force comprised of AAM's senior leadership working
closely with associates across several functions and regions to coordinate
decision making and communication related to actions taken by AAM to mitigate
the impact of COVID-19;
•Suspended or reduced production at manufacturing facilities and directed
associates who could do so to work remotely;
•Maintained communication with customers, including planning for business
resumption and monitoring announcements regarding new program deferrals or other
changes;
•Initiated thorough cleaning and decontamination procedures at many of our
manufacturing facilities in preparation for resuming production; and
•Designed additional safety measures to further protect associates as production
is restored and our associates resume working in our global facilities.

By the end of the first quarter of 2020, our manufacturing locations in Asia,
which were impacted by COVID-19 earlier than other global regions, were
beginning to stabilize and return to more normalized levels of production. We
restarted operations in North America and Europe in May 2020, and we have
continued to ramp up production, along with our customers and supply base, into
the third quarter of 2020. The ultimate timing of returning to more normalized
levels of production will depend on future developments, including the potential
extension of shelter-in-place orders and a ramp-up to increased levels of
production by our customers, which are outside of our control. We continue to
monitor the impact of COVID-19 on our suppliers, as well as on our customers and
their suppliers. As production resumes and volumes continue to ramp-up, we
cannot be sure that the supply chain will be adequately prepared which could
adversely impact the timing of a return to increased levels of production.

Financial Impact of COVID-19



We estimate that the impact of COVID-19 on net sales was approximately $947
million and $1,116 million for the three and six months ended June 30, 2020,
respectively. Further, we estimate that the impact to gross profit of this
reduction in net sales was approximately $299 million and $346 million for the
three and six months ended June 30, 2020, respectively. Due to the significant
uncertainty associated with the extent of the impact of COVID-19 and the timing
of resuming more normalized levels of production, we cannot estimate the impact
of COVID-19 on our 2020 results of operations and financial condition.

In order to mitigate the financial impact of COVID-19, we have continued our
emphasis on cost management, and have implemented additional measures to adjust
to our customers' revised production schedules, including:

•Continuing to flex our variable cost structure;
•Continuing to manage our controllable expenses, net of costs to ensure the
health and safety of our associates;
•Reducing the annual cash retainer for each non-employee director by 40%;
•Reducing salaries for executive officers by 30% and for certain other
associates by various percentages depending on level;
•Reducing our projected capital expenditures for the year;
•Amending our Credit Agreement to, among other things, revise our financial
maintenance covenants to provide additional financial flexibility; and
•Pursuing options to defer and reduce tax payments through the CARES Act and
similar global initiatives.

The additional measures we are taking to address the impact of COVID-19 are expected to remain in place until further clarity can be achieved regarding the recovery and stabilization of the global economy, as well as the resulting impact of COVID-19 on the global automotive industry.


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RESULTS OF OPERATIONS -- THREE MONTHS ENDED JUNE 30, 2020 AS COMPARED TO THREE MONTHS ENDED JUNE 30, 2019

Net Sales Net sales were $515.3 million in the second quarter of 2020, as
compared to $1,704.3 million in the second quarter of 2019. Our change in sales
in the second quarter of 2020, as compared to the second quarter of 2019,
primarily reflects an estimated reduction of approximately $947 million
associated with the decline in global automotive production as a result of
COVID-19, and a reduction of approximately $171 million as a result of the sale
of the U.S. operations of our Casting business that was completed in the fourth
quarter of 2019 (the Casting Sale). Net sales in the second quarter of 2020, as
compared to the second quarter of 2019, also decreased by approximately $31
million associated with the effect of metal market pass-throughs to our
customers and the impact of foreign exchange related to translation adjustments.

Cost of Goods Sold Cost of goods sold was $614.2 million in the second quarter
of 2020, as compared to $1,456.0 million in the second quarter of 2019. The
change in cost of goods sold principally reflects an estimated reduction of
approximately $648 million associated with the decline in global automotive
production as a result of COVID-19, and a reduction of $164 million as a result
of the Casting Sale. Cost of goods sold was also impacted by a decrease of
approximately $31 million related to metal market pass-through costs and the
impact of foreign exchange.

For the three months ended June 30, 2020, material costs were approximately 41%
of total cost of goods sold, as compared to approximately 57% for the three
months ended June 30, 2019. Material costs as a percentage of cost of goods sold
declined as a result of lower product shipments caused by COVID-19, which drove
lower material costs and caused fixed costs to be a greater component of cost of
goods sold.

Gross Profit (Loss)  Gross loss was $98.9 million in the second quarter of 2020,
as compared to gross profit of $248.3 million in the second quarter of
2019. Gross margin was (19.2)% in the second quarter of 2020, as compared to
14.6% in the second quarter of 2019. Gross profit (loss) and gross margin were
impacted by the factors discussed in Net Sales and Cost of Goods Sold above.
While we were able to significantly reduce our variable costs during the quarter
ended June 30, 2020, the sharp decline in sales that began during the first
quarter and extended into the second quarter, as well as the magnitude of the
decline in sales, resulted in a reduction of both gross profit and gross margin.

Selling, General and Administrative Expenses (SG&A) SG&A (including research and
development (R&D)) was $73.8 million or 14.3% of net sales in the second quarter
of 2020, as compared to $91.3 million or 5.4% of net sales in the second quarter
of 2019. R&D spending was approximately $31.7 million in the second quarter of
2020, as compared to $33.2 million in the second quarter of 2019. The decrease
in SG&A expense in the three months ended June 30, 2020, as compared to the
three months ended June 30, 2019, was primarily attributable to lower
compensation-related expense due, in part, to our restructuring initiatives.
SG&A expense also declined in the three months ended June 30, 2020 as a result
of our emphasis on cost management, including the additional measures that we
implemented in response to the impact of COVID-19.

The increase in SG&A as a percentage of sales during the three months ended June
30, 2020, as compared to the three months ended June 30, 2019, was primarily
attributable to the decline in sales as a result of COVID-19.

Amortization of Intangible Assets Amortization expense related to intangible
assets was $21.6 million for the three months ended June 30, 2020 and $24.9
million for the three months ended June 30, 2019. The reduction in amortization
expense related to intangible assets reflects the Casting Sale and the disposal
of the intangible assets associated with this business.

Restructuring and Acquisition-Related Costs Restructuring and acquisition-related costs were $11.3 million in the second quarter of 2020 and $12.2 million in the second quarter of 2019. See Note 2 - Restructuring and Acquisition-Related Costs for additional detail.



Operating Income (Loss)  Operating loss was $205.6 million in the second quarter
of 2020, as compared to operating income of $119.9 million in the second quarter
of 2019. Operating margin was (39.9)% in the second quarter of 2020, as compared
to 7.0% in the second quarter of 2019. The changes in operating income (loss)
and operating margin were primarily due to factors discussed in Net Sales, Cost
of Goods Sold, Gross Profit (Loss) and SG&A above.

Interest Expense and Interest Income  Interest expense was $54.6 million in the
second quarter of 2020, as compared to $56.2 million in the second quarter of
2019. Interest income was $3.0 million in the second quarter of 2020, as
compared to $0.5 million in the second quarter of 2019. The weighted-average
interest rate of our long-term debt outstanding was 5.5% in the second quarter
of 2020 and 5.9% in the second quarter of 2019.
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Debt Refinancing and Redemption Costs In the second quarter of 2019, we
voluntarily redeemed the remaining balance outstanding under our 7.75% Notes due
2019. This resulted in a principal payment of $100 million and $0.3 million in
accrued interest. We expensed approximately $0.1 million for the write-off of
the unamortized debt issuance costs that we had been amortizing over the
expected life of the borrowing, and approximately $2.2 million for an early
redemption premium.

Other Income (Expense), Net Other income (expense), net includes the net effect
of foreign exchange gains and losses, our proportionate share of earnings from
equity in unconsolidated subsidiaries, and all components of net periodic
pension and postretirement benefit costs other than service cost. Other income
(expense), net was income of $0.1 million in the second quarter of 2020, as
compared to expense of $3.1 million in the second quarter of 2019.

Income Tax Expense (Benefit) Income tax was a benefit of $43.9 million for the
three months ended June 30, 2020, as compared to expense of $6.0 million for the
three months ended June 30, 2019. Our effective income tax rate was 17.1% in the
second quarter of 2020, as compared to 10.2% in the second quarter of 2019.

We review the likelihood that we will realize the benefit of deferred tax assets
and estimate whether recoverability of our deferred tax assets is "more likely
than not." If, based upon available evidence, it is more likely than not the
deferred tax assets will not be realized, a valuation allowance is recorded.
During the three months ended June 30, 2020, we determined that a portion of our
deferred tax assets related to U.S. interest expense carryforwards were not more
likely than not to be realized. As such, during the three months ended June 30,
2020, we recognized a tax expense of approximately $36.0 million to establish a
partial valuation allowance in the U.S. Due to the uncertainty associated with
the extent and ultimate impact of COVID-19 on global automotive production
volumes, we may experience lower than projected earnings in certain
jurisdictions in future periods, and it is reasonably possible that additional
valuation allowances could be recognized in the next twelve months as a result.

In addition, during the three months ended June 30, 2020, we finalized an
advance pricing agreement in a foreign jurisdiction, which resulted in a tax
benefit of approximately $6.8 million. Also during the three months ended June
30, 2020, we recognized a tax benefit of approximately $7.0 million related to
our ability to carry back projected current year losses under the CARES Act to
years with the previous 35% tax rate.

Our effective income tax rate for the three months ended June 30, 2020 varies
from our effective income tax rate for the three months ended June 30, 2019 as a
result of the items described above. For the three months ended June 30, 2020
and 2019, our effective income tax rates vary from the U.S. federal statutory
rate of 21% primarily due to favorable foreign tax rates, as well as the impact
of tax credits and the effect of the items described above.

Net Income (Loss) Attributable to AAM and Earnings (Loss) Per Share (EPS) Net
income (loss) attributable to AAM was a loss of $213.2 million in the second
quarter of 2020, as compared to income of $52.5 million in the second quarter of
2019. Diluted loss per share was $1.88 in the second quarter of 2020, as
compared to diluted earnings per share of $0.45 in the second quarter of 2019.
Net income (loss) attributable to AAM and EPS for the second quarters of 2020
and 2019 were primarily impacted by the factors discussed above.

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RESULTS OF OPERATIONS -- SIX MONTHS ENDED JUNE 30, 2020 AS COMPARED TO SIX MONTHS ENDED JUNE 30, 2019

Net Sales Net sales were $1,858.8 million in the first six months of 2020 as
compared to $3,423.5 million in the first six months of 2019.  Our change in
sales in the first six months of 2020, as compared to the first six months of
2019, primarily reflects an estimated reduction of approximately $1,116 million
associated with the decline in global automotive production as a result of
COVID-19, and a reduction of $354 million as a result of the Casting Sale. Net
sales for the first six months of 2020, as compared to the first six months of
2019, also decreased by approximately $73 million associated with the effect of
metal market pass-throughs to our customers and the impact of foreign exchange
related to translation adjustments.

Cost of Goods Sold Cost of goods sold was $1,762.4 million in the first six
months of 2020 as compared to $2,953.0 million in the first six months of 2019.
The change in cost of goods sold principally reflects an estimated reduction of
approximately $770 million associated with the decline in global automotive
production as a result of COVID-19, and a reduction of $339 million as a result
of the Casting Sale. Cost of goods sold was also impacted by a decrease of
approximately $73 million related to metal market pass-through costs and the
impact of foreign exchange, as well as the impact of improved operating
performance and lower launch costs.

For the six months ended June 30, 2020, material costs were approximately 51% of
total costs of goods sold as compared to approximately 57% for the six months
ended June 30, 2019. Material costs as a percentage of cost of goods sold
declined as a result of lower product shipments caused by COVID-19, which drove
lower material costs and caused fixed costs to be a greater component of cost of
goods sold.

Gross Profit  Gross profit was $96.4 million in the first six months of 2020 as
compared to $470.5 million in the first six months of 2019. Gross margin was
5.2% in the first six months of 2020 as compared to 13.7% in the first six
months of 2019. Gross profit and gross margin were impacted by the factors
discussed in Net Sales and Cost of Goods Sold above. While we were able to
significantly reduce our variable costs during the six months ended June 30,
2020, the sharp decline in sales that began during the first quarter and
extended into the second quarter, as well as the magnitude of the decline in
sales, resulted in a reduction of both gross profit and gross margin.

SG&A SG&A (including R&D) was $164.1 million or 8.8% of net sales in the first
six months of 2020 as compared to $182.0 million or 5.3% of net sales in the
first six months of 2019. R&D spending was approximately $68.3 million in the
first six months of 2020 as compared to $67.5 million in the first six months of
2019. The change in SG&A in the first six months of 2020, as compared to the
first six months of 2019, was primarily attributable to lower
compensation-related expense due, in part, to our restructuring initiatives.
SG&A expense also declined in the six months ended June 30, 2020 as a result of
our emphasis on cost management, including the additional measures that we
implemented in response to the impact of COVID-19.

The increase in SG&A as a percentage of sales during the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, was primarily attributable to the decline in sales as a result of COVID-19.



Amortization of Intangible Assets Amortization expense related to intangible
assets for the six months ended June 30, 2020 was $43.4 million as compared to
$49.9 million for the six months ended June 30, 2019. The reduction in
amortization expense related to intangible assets reflects the Casting Sale and
the disposal of the intangible assets associated with this business.

Impairment Charge In the first six months of 2020, the reduction in global
automotive production volumes caused by the impact of COVID-19 represented an
indicator to test our goodwill for impairment. As a result of this goodwill
impairment test, we determined that the carrying values of our Driveline and
Metal Forming reporting units were greater than their respective fair values. As
such, we recorded a total goodwill impairment charge of $510.0 million in the
first six months of 2020. See Note 3 - Goodwill and Other Intangible Assets for
further detail.

Restructuring and Acquisition-Related Costs Restructuring and
acquisition-related costs were $28.9 million for the six months ended June 30,
2020, as compared to $24.3 million for the six months ended June 30, 2019. As
part of our restructuring actions, we incurred severance charges of
approximately $16.3 million and $8.2 million, as well as implementation costs of
approximately $7.7 million and $8.9 million, during the six months ended
June 30, 2020 and 2019, respectively. We expect to incur approximately $70
million to $80 million of total restructuring charges in 2020. See Note 2 -
Restructuring and Acquisition-Related Costs for additional detail regarding our
restructuring activity.

During the six months ended June 30, 2020, we incurred $4.9 million of
integration expenses primarily associated with the ongoing integration of MPG.
This compares to $7.2 million of integration expenses incurred during the six
months ended
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June 30, 2019. Integration expenses primarily reflect costs incurred for
information technology infrastructure and enterprise resource planning (ERP)
systems. We expect to incur integration charges of $10 million to $15 million in
2020 as we finalize the integration of ERP systems at legacy MPG locations.

Loss on Sale of Business In the first six months of 2020, we finalized certain
customary post-closing calculations associated with the Casting Sale, resulting
in an additional loss on sale of $1.0 million.

Operating Income (Loss)  Operating income (loss) was a loss of $651.0 million in
the first six months of 2020 as compared to income of $214.3 million in the
first six months of 2019. Operating margin was (35.0)% in the first six months
of 2020 as compared to 6.3% in the first six months of 2019. The changes in
operating income (loss) and operating margin were due primarily to the factors
discussed in Net Sales, Cost of Goods Sold, Gross Profit, SG&A, and Impairment
Charge above.

Interest Expense and Interest Income  Interest expense was $106.1 million in the
first six months of 2020 as compared to $109.6 million in the first six months
of 2019. Interest income was $5.8 million in the first six months of 2020 as
compared to $1.2 million in the first six months of 2019. The weighted-average
interest rate of our long-term debt outstanding was 5.6% for the six months
ended June 30, 2020 and 5.9% for the six months ended June 30, 2019. We expect
our interest expense for the full year 2020 to be approximately $205 million to
$215 million.

Debt Refinancing and Redemption Costs In the first quarter of 2020, we
voluntarily redeemed $100 million of our 6.625% Notes due 2022. As a result, we
expensed approximately $0.4 million for the write-off of the unamortized debt
issuance costs that we had been amortizing over the expected life of the
borrowing, and approximately $1.1 million for the payment of an early redemption
premium.

In the second quarter of 2020, we issued an irrevocable notice to the holders of
our 6.625% Notes due 2022 to voluntarily redeem the remaining portion of our
6.625% Notes due 2022 in the third quarter of 2020. This resulted in a principal
payment of $350 million and $5.7 million in accrued interest in July 2020.
Subsequent to June 30, 2020, we expensed approximately $1.3 million for the
write-off of the unamortized debt issuance costs that we had been amortizing
over the expected life of the borrowing, and approximately $3.9 million for the
payment of an early redemption premium.

In the second quarter of 2019, we voluntarily redeemed the remaining balance
outstanding under our 7.75% Notes due 2019. This resulted in a principal payment
of $100 million and $0.3 million in accrued interest. We expensed approximately
$0.1 million for the write-off of the unamortized debt issuance costs that we
had been amortizing over the expected life of the borrowing, and approximately
$2.2 million for an early redemption premium.

Other Expense, Net Other expense, net includes the net effect of foreign
exchange gains and losses, our proportionate share of earnings from equity in
unconsolidated subsidiaries, and all components of net periodic pension and
postretirement benefit costs other than service cost. Other expense, net was
$2.2 million in the first six months of 2020 as compared to $6.1 million in the
first six months of 2019.

Income Tax Expense (Benefit) Income tax was a benefit of $40.6 million for the
six months ended June 30, 2020 as compared to expense of $3.0 million for the
six months ended June 30, 2019. Our effective income tax rate was 5.4% in the
first six months of 2020 as compared to 3.1% in the first six months of 2019.

During the six months ended June 30, 2020, we recognized the impact of the items
discussed under Income Tax Expense (Benefit) in the "Results of Operations -
Three Months Ended June 30, 2020 as Compared to Three Months Ended June 30,
2019" section of this MD&A. Additionally, we recognized a net tax benefit in the
six months ended June 30, 2020 of approximately $7.5 million related to our
ability to carry back losses from prior years under the CARES Act.

Our effective income tax rate for the six months ended June 30, 2020 varies from
our effective income tax rate for the six months ended June 30, 2019, as a
result of the items described above, and also as a result of the impact of the
goodwill impairment charge recorded during the first six months of 2020, which
had no corresponding income tax benefit. In addition, in the first six months of
2019, we recognized an income tax benefit of $9.3 million related to final
regulations issued by the Department of Treasury and Internal Revenue Service in
the first quarter of 2019. The final regulations changed the manner in which we
were required to compute the one-time transition tax under the Tax Cuts and Jobs
Act that was imposed on certain foreign earnings for which U.S. income tax was
previously deferred.

For the six months ended June 30, 2020 and 2019, our effective income tax rates
vary from the U.S. federal statutory rate of 21% primarily due to favorable
foreign tax rates, as well as the impact of tax credits and the effect of the
items described above.
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Net Income (Loss) Attributable to AAM and Earnings (Loss) Per Share (EPS) Net
income (loss) attributable to AAM was a loss of $714.5 million in the first six
months of 2020 as compared to income of $94.1 million in the first six months of
2019. Diluted EPS was a loss of $6.33 per share in the first six months of 2020
as compared to earnings of $0.81 per share in the first six months of 2019. Net
income (loss) attributable to AAM and EPS for the first six months of 2020 and
2019 were primarily impacted by the factors discussed above.

SEGMENT REPORTING



Our business is organized into Driveline and Metal Forming segments, with each
representing a reportable segment under ASC 280 Segment Reporting. In the fourth
quarter of 2019, we completed the Casting Sale. The Casting Sale did not include
the entities that conduct AAM's casting operations in El Carmen, Mexico, which
are now included in our Driveline segment. The Casting Sale did not qualify for
classification as discontinued operations, as it did not represent a strategic
shift in our business that has had, or will have, a major effect on our
operations and financial results. As such, we continue to present Casting as a
segment in the tables below for the periods prior to the sale, and the reported
amounts are now comprised entirely of the U.S. casting operations that were
included in the sale. The amounts previously reported in our Casting segment for
the retained operations in El Carmen, Mexico have been reclassified to our
Driveline segment for the periods presented.

The results of each segment are regularly reviewed by the chief operating decision maker to assess the performance of the segment and make decisions regarding the allocation of resources to the segments.

Our product offerings by segment are as follows:



•Driveline products consist primarily of front and rear axles, driveshafts,
differential assemblies, clutch modules, balance shaft systems, disconnecting
driveline technology, and electric and hybrid driveline products and systems for
light trucks, SUVs, crossover vehicles, passenger cars and commercial vehicles;
and
•Metal Forming products consist primarily of axle and transmission shafts, ring
and pinion gears, differential gears and assemblies, connecting rods and
variable valve timing products for Original Equipment Manufacturers and Tier 1
automotive suppliers.

The following table represents sales by reportable segment for the three and six months ended June 30, 2020 and 2019 (in millions):


                                                                                                    Six Months Ended June
                                         Three Months Ended June 30,                                         30,
                                          2020                 2019                2020                  2019
Driveline                            $     403.7           $  1,181.5          $  1,435.4          $    2,347.8
Metal Forming                              150.3                484.2               572.6                 967.5
Casting                                        -                179.7                   -                 373.4
Eliminations                               (38.7)              (141.1)             (149.2)               (265.2)
Net Sales                            $     515.3           $  1,704.3          $  1,858.8          $    3,423.5



The change in Driveline sales for the three and six months ended June 30, 2020,
as compared to the three and six months ended June 30, 2019, primarily reflects
estimated reductions of approximately $773 million and $919 million,
respectively, associated with the impact of the decline in global automotive
production as a result of COVID-19. These estimated reductions include
approximately $724 million and $861 million, respectively, related to external
customers. The change in Driveline sales also reflects a reduction of
approximately $16 million and $36 million, respectively, associated with the
effect of metal market pass-throughs to our customers and the impact of foreign
exchange related to translation adjustments.

The change in net sales in our Metal Forming segment in the three and six months
ended June 30, 2020, as compared to the three and six months ended June 30,
2019, primarily reflects estimated reductions of approximately $318 million and
$365 million, respectively, associated with the impact of the decline in global
automotive production as a result of COVID-19. These estimated reductions
include approximately $223 million and $255 million, respectively, related to
external customers. Also for the three and six months ended June 30, 2020, as
compared to the three and six months ended June 30, 2019, Metal Forming sales
were impacted by a reduction of approximately $15 million and $37 million,
respectively, associated with the effect of metal market pass-throughs to our
customers and the impact of foreign exchange related to translation adjustments.

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The change in net sales in our Casting segment in the three and six months ended
June 30, 2020, as compared to the three and six months ended June 30, 2019, is
the result of the Casting Sale that was completed in the fourth quarter of 2019
as AAM no longer operates in this business.

We use Segment Adjusted EBITDA as the measure of earnings to assess the
performance of each segment and determine the resources to be allocated to the
segments. We define EBITDA to be earnings before interest expense, income taxes,
depreciation and amortization. Segment Adjusted EBITDA is defined as EBITDA for
our reportable segments excluding the impact of restructuring and
acquisition-related costs, debt refinancing and redemption costs, gain (loss) on
the sale of a business, impairment charges, pension settlements, and
non-recurring items.

The amounts for Segment Adjusted EBITDA for the three and six months ended June 30, 2020 and 2019 are as follows (in millions):


                                           Three Months Ended June 30,                                Six Months Ended June 30,
                                            2020                  2019                2020                   2019
Driveline                             $       (31.2)          $    162.1          $    108.1          $       304.9
Metal Forming                                 (20.9)                86.5                53.1                  170.9
Casting                                           -                 17.4                   -                   35.2

Total segment adjusted EBITDA $ (52.1) $ 266.0

$ 161.2 $ 511.0





For the three and six months ended June 30, 2020, as compared to the three and
six months ended June 30, 2019, the change in Segment Adjusted EBITDA for the
Driveline segment was primarily attributable to lower net global automotive
production volumes as a result of the impact of COVID-19, which was partially
offset by our continued emphasis on cost management, as well as the additional
measures that we implemented in response to the impact of COVID-19.

The change in Metal Forming Segment Adjusted EBITDA for the three and six months
ended June 30, 2020, as compared to the three and six months ended June 30,
2019, was primarily attributable to the impact of the decline in global
automotive production as a result of the impact of COVID-19, which was partially
offset by our continued emphasis on cost management, as well as the additional
measures that we implemented in response to the impact of COVID-19.

The change in Segment Adjusted EBITDA for our Casting segment in the three and
six months ended June 30, 2020, as compared to the three and six months ended
June 30, 2019, was the result of the Casting Sale that was completed in the
fourth quarter of 2019 as AAM no longer operates in this business.


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Reconciliation of Non-GAAP and GAAP Information



In addition to results reported in accordance with accounting principles
generally accepted in the United States of America (GAAP) in this MD&A, we have
provided certain non-GAAP financial measures such as EBITDA and Total Segment
Adjusted EBITDA. Such information is reconciled to its closest GAAP measure in
accordance with Securities and Exchange Commission rules below.

We define EBITDA to be earnings before interest expense, income taxes,
depreciation and amortization. Total Segment Adjusted EBITDA is defined as
EBITDA for our reportable segments excluding the impact of restructuring and
acquisition-related costs, debt refinancing and redemption costs, gain (loss) on
the sale of a business, impairment charges, pension settlements, and
non-recurring items. We believe that EBITDA and Total Segment Adjusted EBITDA
are meaningful measures of performance as they are commonly utilized by
management and investors to analyze operating performance and entity valuation.
Our management, the investment community and the banking institutions routinely
use EBITDA and Total Segment Adjusted EBITDA, together with other measures, to
measure our operating performance relative to other Tier 1 automotive suppliers
and to assess the relative mix of Adjusted EBITDA by segment. We also believe
that Total Segment Adjusted EBITDA is a meaningful measure as it is used for
operational planning and decision-making purposes. These non-GAAP financial
measures are not and should not be considered a substitute for any GAAP measure.
Additionally, non-GAAP financial measures as presented by AAM may not be
comparable to similarly titled measures reported by other companies.

                                                  Three Months Ended June 30,                                 Six Months Ended June 30,
                                                    2020                  2019                2020                   2019
Net income (loss)                            $       (213.2)          $     52.7          $   (714.4)         $        94.4
Interest expense                                       54.6                 56.2               106.1                  109.6
Income tax expense (benefit)                          (43.9)                 6.0               (40.6)                   3.0
Depreciation and amortization                         139.1                136.5               268.7                  277.3
EBITDA                                       $        (63.4)          $    251.4          $   (380.2)         $       484.3
Restructuring and acquisition-related costs            11.3                 12.2                28.9                   24.3
Debt refinancing and redemption costs                     -                  2.4                 1.5                    2.4
Impairment charge                                         -                    -               510.0                      -
Loss on sale of business                                  -                    -                 1.0                      -

Total segment adjusted EBITDA                $        (52.1)          $    266.0          $    161.2          $       511.0

LIQUIDITY AND CAPITAL RESOURCES



Our primary liquidity needs are to fund debt service obligations, capital
expenditures and working capital requirements, in addition to advancing our
strategic initiatives. We believe that operating cash flow, available cash and
cash equivalent balances and available borrowing capacity under our Senior
Secured Credit Facilities and foreign credit facilities will be sufficient to
meet these needs.

COVID-19 Considerations Related to Liquidity and Capital Resources

In order to mitigate the financial impact of COVID-19, we have implemented measures to conserve cash and protect our liquidity position, including:



•Continuing to flex our variable cost structure;
•Continuing to manage our controllable expenses, net of costs to ensure the
health and safety of our associates;
•Reducing the annual cash retainer for each non-employee director by 40%;
•Reducing salaries for executive officers by 30% and for certain other
associates by various percentages depending on level;
•Reducing our projected capital expenditures for the year;
•Amending our Credit Agreement to, among other things, revise our financial
maintenance covenants to provide additional financial flexibility; and
•Pursuing options to defer and reduce tax payments through the CARES Act and
similar global initiatives.

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At June 30, 2020, we had over $1.6 billion of liquidity consisting of
approximately $893 million of cash and cash equivalents, approximately $691
million of available borrowings under our Revolving Credit Facility and
approximately $79 million of available borrowings under foreign credit
facilities. In the second quarter of 2020, we issued an irrevocable notice to
the holders of our 6.625% Notes due 2022 to voluntarily redeem the remaining
portion outstanding in the third quarter of 2020. This resulted in a principal
payment of $350 million and $5.7 million in accrued interest in July 2020. With
the exception of the voluntary redemption of the 6.625% Notes in July 2020, we
have no significant debt maturities before 2024. Based on our cash and cash
equivalents, together with available borrowings under credit facilities, and the
measures we are taking to conserve cash, we believe that our current liquidity
position and projected operating cash flows will be sufficient to meet our
primary cash needs for the next 12 months.

Operating Activities In the first six months of 2020, net cash used in operating
activities was $3.1 million as compared to net cash provided by operating
activities of $136.9 million in the first six months of 2019. The following
factors impacted cash from operating activities in the first six months of 2020,
as compared to the first six months of 2019:

Impact of COVID-19 We experienced lower earnings and cash flows from operating
activities as a result of the significant reduction in production volumes during
the six months ended June 30, 2020 due to the impact of COVID-19.

Accounts receivable For the six months ended June 30, 2020, we experienced an
increase in cash flow from operating activities of approximately $427 million
related to the change in our accounts receivable balance from December 31, 2019
to June 30, 2020, as compared to the change in our accounts receivable balance
from December 31, 2018 to June 30, 2019. This change was primarily attributable
to a reduction in sales in the second quarter of 2020 due to the impact of
COVID-19.

Accounts payable and accrued expenses For the six months ended June 30, 2020, we
experienced a decrease in cash flow from operating activities of approximately
$323 million related to the change in our accounts payable and accrued expenses
balance from December 31, 2019 to June 30, 2020, as compared to the change from
December 31, 2018 to June 30, 2019. This change was primarily attributable to
reduced sales and purchasing activity in the second quarter of 2020 due to the
impact of COVID-19.

Restructuring and acquisition-related costs For the full year 2020, we expect
restructuring and acquisition-related payments in cash flows from operating
activities to be between $55 million and $70 million, and we expect the timing
of cash payments to approximate the timing of charges incurred.

Pension and other postretirement benefits Due to the availability of our
pre-funded pension balances (previous contributions in excess of prior required
pension contributions) related to certain of our U.S. pension plans, we expect
our regulatory pension funding requirements in 2020 to be approximately $1.5
million. We expect our cash payments for other postretirement benefit
obligations in 2020, net of GM cost sharing, to be approximately $17 million.

Income taxes During the second quarter of 2020, we finalized an advance pricing
agreement in a foreign jurisdiction, which resulted in a cash payment to the tax
authorities of $18.5 million, and a reduction of our liability for unrecognized
tax benefits and related interest and penalties of $25.3 million. As of June 30,
2020 and December 31, 2019, we have recorded a liability for unrecognized income
tax benefits and related interest and penalties of $23.1 million and $52.6
million, respectively.

In the first six months of 2020, we recognized a refundable income tax asset of
approximately $35 million related to income tax for which we expect to receive a
refund based on the utilization of net operating losses under the provisions of
the CARES Act. This amount is presented in Prepaid expenses and other in our
Condensed Consolidated Balance Sheet as of June 30, 2020. See Note 1 -
Organization and Basis of Presentation for additional detail regarding the CARES
Act.

Investing Activities In the first six months of 2020, net cash used in investing
activities was $108.8 million as compared to $238.0 million for the six months
ended June 30, 2019. Capital expenditures were $105.6 million in the first six
months of 2020 as compared to $237.5 million in the first six months of 2019. We
expect our capital spending in 2020 to be approximately $250 million.

Financing Activities In the first six months of 2020, net cash provided by financing activities was $480.2 million, as compared to net cash used in financing activities of $127.7 million in the first six months of 2019. The following factors impacted cash from financing activities in the first six months of 2020 as compared to the first six months of 2019:



Senior Secured Credit Facilities In 2019, Holdings, AAM, Inc., and certain
subsidiaries of Holdings entered into the First Amendment (First Amendment) to
the Credit Agreement. The First Amendment, among other things, established $340
million in incremental term loan A commitments with a maturity date of July 29,
2024 (Term Loan A Facility due 2024), reduced the
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availability under the Revolving Credit Facility from $932 million to $925
million and extended the maturity date of the Revolving Credit Facility from
April 6, 2022 to July 29, 2024, and modified the applicable margin with respect
to interest rates under the Term Loan A Facility due 2024 and interest rates and
commitment fees under the Revolving Credit Facility. The applicable margin and
the maturity date for the Term Loan B Facility remained unchanged. The proceeds
of $340 million were used to repay all of the outstanding loans under the
existing Term Loan A Facility and a portion of the outstanding Term Loan B
Facility, resulting in no additional indebtedness. This also satisfies all
payment requirements under the Term Loan B Facility until maturity in 2024.

In April 2020, Holdings, AAM, Inc., and certain subsidiaries of Holdings entered
into the Second Amendment (Second Amendment) to the Credit Agreement. For the
period from April 1, 2020 through March 31, 2022 (the Amendment Period), the
Second Amendment, among other things, replaced the total net leverage ratio
covenant with a new senior secured net leverage ratio covenant, reduced the
minimum levels of the cash interest expense coverage ratio covenant, and
modified certain covenants restricting the ability of Holdings, AAM and certain
subsidiaries of Holdings to create, incur, assume or permit to exist certain
additional indebtedness and liens and to make certain restricted payments,
voluntary payments and distributions. The Second Amendment also increased the
maximum levels of the total net leverage ratio covenant after the Amendment
Period, modified the applicable margin with respect to interest rates under the
Term Loan A Facility due 2024 and interest rates and commitment fees under the
Revolving Credit Facility, and increased the minimum adjusted London Interbank
Offered Rate for Eurodollar-based loans under the Term Loan A Facility due 2024
and Revolving Credit Facility. The applicable margin for the Term Loan B
Facility remains unchanged. We paid debt issuance costs of $4.6 million in the
six months ended June 30, 2020 related to the Second Amendment.

The Senior Secured Credit Facilities provide back-up liquidity for our foreign
credit facilities. We intend to use the availability of long-term financing
under the Senior Secured Credit Facilities to refinance any current maturities
related to such debt agreements that are not otherwise refinanced on a long-term
basis in their local markets, except where otherwise reclassified to Current
portion of long-term debt on our Condensed Consolidated Balance Sheet.

At June 30, 2020, we had $691.4 million available under the Revolving Credit
Facility. This availability reflects $200.0 million outstanding on the Revolving
Credit Facility and $33.6 million for standby letters of credit issued against
the facility. The borrowings under the Revolving Credit Facility are used for
general corporate purposes.

6.875% Notes due 2028 In June 2020, we issued $400 million in aggregate
principal amount of 6.875% senior notes due 2028 (the 6.875% Notes). Proceeds
from the 6.875% Notes will be used primarily to fund the redemption of the
remaining $350 million of 6.625% senior notes due 2022 described below and for
general corporate purposes. We paid debt issuance costs of $6.0 million in the
six months ended June 30, 2020 related to the 6.875% Notes.

Redemption of 6.625% Notes due 2022 In the first quarter of 2020, we voluntarily
redeemed a portion of our 6.625% Notes due 2022. This resulted in a principal
payment of $100.0 million and $2.0 million in accrued interest. We expensed
approximately $0.4 million for the write-off of the unamortized debt issuance
costs that we had been amortizing over the expected life of the borrowing, and
approximately $1.1 million for the payment of an early redemption premium.

In the second quarter of 2020, we issued an irrevocable notice to the holders of
our 6.625% Notes due 2022 to voluntarily redeem the remaining portion of our
6.625% Notes due 2022 in the third quarter of 2020. This resulted in a principal
payment of $350 million and $5.7 million in accrued interest in July 2020.
Subsequent to June 30, 2020, we expensed approximately $1.3 million for the
write-off of the unamortized debt issuance costs that we had been amortizing
over the expected life of the borrowing, and approximately $3.9 million for the
payment of an early redemption premium.

Redemption of 7.75% Notes due 2019 In May 2019, we voluntarily redeemed the
remaining balance outstanding under our 7.75% Notes due 2019. This resulted in a
principal payment of $100 million and $0.3 million in accrued interest. We
expensed approximately $0.1 million for the write-off of the unamortized debt
issuance costs that we had been amortizing over the expected life of the
borrowing, and approximately $2.2 million for an early redemption premium.

Foreign credit facilities We utilize local currency credit facilities to finance
the operations of certain foreign subsidiaries. At June 30, 2020, $109.6 million
was outstanding under our foreign credit facilities, as compared to $106.0
million at December 31, 2019. At June 30, 2020, an additional $78.9 million was
available under our foreign credit facilities.

Treasury stock Treasury stock increased by $2.7 million in the first six months
of 2020 to $212.0 million as compared to $209.3 million at year-end 2019, due to
the withholding and repurchase of shares of AAM stock to satisfy employee tax
withholding obligations due upon the vesting of performance shares and
restricted stock units.

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Subsidiary Guarantees of Registered Debt Securities Our 6.875% Notes, 6.625%
Notes, 6.50% Notes, 6.25% Notes (due 2026), and 6.25% Notes (due 2025)
(collectively, the Notes) are senior unsecured obligations of AAM, Inc.
(Issuer); all of which are fully and unconditionally guaranteed, on a joint and
several basis, by Holdings and substantially all domestic subsidiaries of AAM,
Inc. and MPG Inc (Subsidiary Guarantors). Holdings has no significant assets
other than its 100% ownership in AAM, Inc. and MPG Inc., and no direct
subsidiaries other than AAM, Inc. and MPG Inc.

Each guarantee by Holdings and/or any of the Subsidiary Guarantors is:



•a senior obligation of the relevant Subsidiary Guarantors;
•the unsecured and unsubordinated obligation of the relevant Subsidiary
Guarantors; and
•of equal rank with all other existing and future unsubordinated and unsecured
indebtedness of the relevant Subsidiary Guarantors.

Each guarantee by a Subsidiary Guarantor provides by its terms that it will be automatically, fully and unconditionally released and discharged upon:



•Any sale, exchange or transfer (by merger or otherwise) of the Capital Stock of
such Subsidiary Guarantor, or the sale or disposition of all the assets of such
Subsidiary Guarantor, which sale, exchange, transfer or disposition is made in
compliance with the applicable provisions of the indentures;
•the exercise by the Issuer of its legal defeasance option or covenant
defeasance option or the discharge of the Issuer's obligations under the
indentures in accordance with the terms of the indentures;
•the election of the Issuer to affect such a release following the date that
such guaranteed Notes have an investment grade rating from both Standard &
Poor's Ratings Group, Inc, and Moody's Investors Service, Inc.

The following represents summarized financial information of AAM Holdings, AAM
Inc. and the Subsidiary Guarantors (collectively, the Combined Entities). The
information has been prepared on a combined basis and excludes any investments
of AAM Holdings, AAM Inc., or the Subsidiary Guarantors in non-guarantor
subsidiaries. Intercompany transactions and amounts between Combined Entities
have been eliminated.

Statement of Operations Information

(in millions)


                                                       Six Months Ended June         Year Ended December
                                                              30, 2020                     31, 2019
Net sales                                              $         1,396.9            $         3,043.3
Gross profit                                                        26.7                        192.0
Loss from operations                                              (524.2)                      (793.3)
Net loss                                                          (545.4)                      (718.0)

Balance Sheet Information                                                 (in millions)
                                                           June 30, 2020              December 31, 2019
Current assets                                         $         1,325.6            $           699.5
Noncurrent assets                                                2,839.7                      3,120.4

Current liabilities                                              1,323.4                        551.9
Noncurrent liabilities                                           4,274.9                      4,281.3

Redeemable preferred stock                                             -                            -
Noncontrolling interest                                                -                            -

At June 30, 2020 and December 31, 2019, amounts owed by the Combined Entities to non-guarantor entities totaled approximately $445 million and $125 million, respectively, and amounts owed to the Combined Entities from non-guarantor entities totaled approximately $690 million and $630 million, respectively.


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CRITICAL ACCOUNTING ESTIMATES



Subsequent to the goodwill impairment charge that was recorded for our Driveline
reporting unit in the first six months of 2020, the fair value of this reporting
unit approximated its carrying value. Fair value of the reporting unit is
estimated based on a combination of discounted cash flows and the use of pricing
multiples derived from an analysis of comparable public companies multiplied
against historical and/or anticipated financial metrics of the reporting unit.
These calculations contain uncertainties as they require management to make
assumptions including, but not limited to, market comparables, future cash flows
of the reporting unit, and appropriate discount and long-term growth rates.

A decline in the actual cash flows of the Driveline reporting unit in future
periods, as compared to the projected cash flows used in the valuation, could
result in the carrying value of this reporting unit exceeding its fair value.
Further, a change in market comparables, discount rate or long-term growth rate,
as a result of a change in economic conditions or otherwise, including those
resulting from the impact of COVID-19, could result in the carrying value of
this reporting unit exceeding its fair value, which would result in an
additional impairment charge.

AAM's critical accounting estimates are included in our Annual Report on Form
10-K for the year ended December 31, 2019 and did not materially change during
the six months ended June 30, 2020.

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. Typically, our business is also
moderately seasonal as our major OEM customers historically have an extended
shutdown of operations (normally 1-2 weeks) in conjunction with their model year
changeover and an approximate one-week shutdown in December. Our major OEM
customers also occasionally have longer shutdowns of operations (up to six
weeks) for program changeovers. Accordingly, our quarterly results may reflect
these trends.

LITIGATION AND ENVIRONMENTAL MATTERS

We are involved in, or potentially subject to, various legal proceedings or claims incidental to our business. These include, but are not limited to, matters arising out of product warranties, tax or contractual matters, and environmental obligations. Although the outcome of these matters cannot be predicted with certainty, at this time 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. We
have made, and anticipate continuing to make, capital and other expenditures
(including recurring administrative costs) to comply with environmental
requirements at our current and former facilities. Such expenditures were not
significant in the second quarter of 2020.

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