American Axle & Manufacturing : AAM December 2020 Investor Presentation

Investor Presentation

December 2020

1

Forward Looking Statements

This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward- looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. These risks and uncertainties include uncertainty around the duration and effects of the COVID-19 pandemic, and include factors detailed in the reports we file with the SEC, including those described under "Risk Factors" in our most recent Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. These forward-looking statements speak only as of the date of this communication. We expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

It should also be noted that this presentation contains certain financial measures, including Adjusted EBITDA, Adjusted Earnings per Share, Adjusted Free Cash Flow, Net Leverage Ratio and Liquidity that are not required by, or presented in accordance with, accounting principles generally accepted in the United States, or GAAP. These measures are presented here to provide additional useful measurements to review our operations, provide transparency to investors and enable period-to-period comparability of financial performance. A description of non-GAAP financial measures that we use to evaluate our operations and financial performance, and reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP, can be found in the appendix under "Reconciliation of Non-GAAP Measures".

2

Agenda

• AAM Overview
• Growth Opportunities in Electrification
• Financial Highlights
• ESG Update

3

AAM Overview

About AAM

2019 SALES

$6.5B

Approximately

20,000

ASSOCIATES

As a leading, global tier 1 automotive supplier, AAM designs, engineers and manufactures driveline and metal forming technologies that are making the next generation of vehicles smarter, lighter, safer and more efficient

AAM delivers POWER that moves the world

through world-class quality, technology leadership

and operational excellence

Nearly

17 80

COUNTRIESLOCATIONS

Over

60

MANUFACTURING

FACILITIES

16

ENGINEERING CENTERS

5

Business Units and Market Leadership

DRIVELINE

• 2019 Sales - $4.6B
• A Global Leader in
• • Full-sizepickup truck and SUV driveline systems
  • AWD systems for crossover vehicles
  • Damped gears, viscous dampers and rubber isolation pulleys
• Pioneer of disconnecting AWD Systems
• One of the leaders in hybrid and electric driveline solutions

METAL FORMING

• 2019 Sales - $1.8B
• Largest automotive forger in the world
• A Global Leader in
• • Powdered metal connecting rods
  • Differential gears
  • Axle shafts
  • Hypoid pinions
  • Ring gears
  • Transmission gears
  • CVT pulleys
  • Aluminum valve bodies

*Note: Market leadership based on company estimates as compared to other independent supplier., business unit sales before eliminations of intercompany sales of approximately $0.5 billion.	6

2020 AAM Highlights

Implemented

Significant Cost

Savings Actions to

Adjust to New

Market Demand

Received Silver

Quality Award at

Ford's World

Excellence Awards

Recognized as GM

Supplier of the Year

for Fourth Year

in a Row

Won Both PACE

Partnership and

Innovation Awards

for Electric Drive

Technology

BITDA*

Launched First

China eDrive

Program at our Liuzhou AAM JV

Published

Comprehensive

Sustainability

Report

Continued Strong

Free Cash Flow

Generation and

Debt Reduction

Secured Additional

China eDrive

Business Win with

New Customer

Amended Credit

Agreement and

Refinanced Senior

Notes to Enhance

Financial Flexibility

7

Growth Opportunities in Electrification

Electrification Opportunities

Electrification Is A Growing Portion Of Our Quoting and Emerging New Business Opportunities

We Are Well Positioned To Meet Our Customers' Needs

OEM E-Drive Outsourcing

OEM E-DriveIn-Sourcing

Vehicle Integration

Electric Drive Units

ePowertrain Components

Gear Boxes

AAM CPV: Up to $2,500+		AAM CPV: Up to $500

9

Electrification Opportunities

			Passenger Car*			Light Truck*
Vehicle		Small	Mid-Size	Luxury		Crossover	Large SUV/Truck
Current Booked		Baojun (E300 Plus)	Multiple Chinese	Premium European		Jaguar (I-PACE)	North American
Business			OEMs	OEM			OEM
Platform		P4 (E-Drive)	P4 (E-Drive)	P3 Hybrid (E-Drive)		P4 (E-Drive)	P4 (Sub-Assembly)

AAM Serves All Key Electrification Markets

* AAM supplies EDUs, gearboxes, sub-assemblies, and gear components for electric vehicles. Chart shows current wins and targeted segments.	10

AAM eDrive Next Gen Product Summary

• AAM is designing highly integrated advanced technology high speed eDrive units to deliver substantial improvements over currently available units
• Targeted Benefits:
• • >20% improvement in volume*
  • >20% improvement in mass*
  • World class efficiency and NVH

*For comparable power levels.	11

Current Customer Collaboration

Gearbox,

Next Gen

Subassemblies and eDrive Units

Components

OEM 1

OEM 2

OEM 3

OEM 4

OEM 5

OEM 6

OEM 7

OEM 8

OEM 9

Power Electronics Supplier

EV-Focused Tech Company 1

EV-Focused Tech Company 2 Various Others

Launched Programs

Booked Business - Future Launches

eDrive Units

Quoting and Emerging New Business Opportunities

Formal Partnership / Technology Collaborations

12

3Q 2020 Highlights and Updated 2020 Targets

3Q 2020 AAM Financial Highlights

>$1.4B	$297M	$217M
	21% of sales
Quarterly	Record Quarterly	Record Quarterly
Sales	Adj. EBITDA Margin	Adjusted Free Cash Flow

AAM's strong third quarter operating financial results and free cash flow generation reflect the

benefits of recovering global production volumes and our cost saving actions

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* For definitions and reconciliations of non-GAAP financial measures, please see the attached appendix.

Revised 2020 Financial Outlook as disclosed on October 30, 2020

Revised 2020 Financial Targets

Full Year Sales	≈ $4.6 billion
Adjusted EBITDA	$665 - $680 million
Adjusted Free Cash Flow	$220 - $235 million

• AAM's updated 2020 full year financial targets are based on current customer schedules and assume that there are no significant impacts to our expected production or costs related to COVID-19 or the recent fire at our Malvern Manufacturing Facility through the remainder of 2020
• AAM expects restructuring and acquisition-related cash payments to be between $55 and $70 million

* For definitions of Adjusted EBITDA and Adjusted Free Cash Flow and Non-GAAP reconciliations, please see the attached appendix

15

Adjusted Free Cash Flow and Credit Profile

Cash Flow and Debt Metrics	3Q 2020
Adjusted Free Cash Flow	$217.2 million
Net Debt	$3.0 billion
Net Leverage Ratio	4.7x
Liquidity	$1.48 billion

In 3Q 2020, AAM prepaid $350 million of Senior Notes due 2022

* For definitions and reconciliations of non-GAAP financial measures, please see the attached appendix.	16

Downside Protection Playbook

	Sales Decline	0%
Potential Actions	Duration Expected	AND / OR
Short

Reduce Variable Costs

• Direct Material (≈60% of COGS)
• Hourly Headcount
• Variable Overhead

Reduce Semi-fixed Costs

• Salaried headcount, merit and incentive compensation adjustments/deferrals

• Formal spending reduction programs (ex. travel)

• Align future R&D, project and capital expenses to lower sales levels

Select Recapacitating of Facilities

• Align capacity with customers

• Plant loading adjustments to optimize capacity

Structural Capacity and Overhead Reduction

• Global footprint consolidations
• Significant Salaried Reduction in Force programs

Note: This list includes examples for illustrative purposes and does not include all potential actions

25%+
	Restructuring Costs
Longer	Required?
		No

Limited

Moderate

Higher

AAM is analyzing its full playbook and in process with many actions across its global operations

17

Debt Maturity Profile

Average life of Senior Debt

nearly 5 years

Next maturity in 2024

Options for cost-efficient

prepayments

18

ESG Update

Sustainability Update

In 2020, AAM published a comprehensive sustainability report (available on www.aam.com/sustainability)

In a survey conducted

by Institutional

Investor, our

Financially Material

ESG Disclosures were ranked 1st out of 80+ nominated Small-cap Consumer companies

20

Sustainability Leadership and Oversight

AAM's sustainability program is managed within a well-defined governance structure, through clearly-

established ownership and responsibilities at multiple levels in the organization.

21

Sustainability: Key Areas of Focus

Our cross-functional team of subject matter experts considered Global Reporting Initiative (GRI) standards, industry-specific standards of the Sustainability Accounting Standards Board (SASB) and the United Nations Sustainable Development Goals to prioritize sustainability topics and develop performance indicators

22

Why AAM?

• Experienced and proven management team
• Strong core business focused on high demand products, complimented by global profitable growth opportunities
• Flexible and variable cost structure with a proven track record of effectively adjusting our business to current market demand
• Superior profit margin and strong free cash flow yield driven by AAM's operating system and the benefit of vertical integration
• Highly innovative and scalable electrification propulsion technologies designed to accelerate growth and serve multiple regions, customers and vehicle segments

23

Supplemental Data

Reconciliation of Non-GAAP Measures

In addition to the results reported in accordance with accounting principles generally accepted in the United States of America (GAAP) included within this presentation, we have provided certain information, which includes non-GAAP financial measures. Such information is reconciled to its closest GAAP measure in accordance with Securities and Exchange Commission rules and is included in the following slides.

Certain of the forward-looking financial measures included in this earnings release are provided on a non-GAAP basis. A reconciliation of non-GAAPforward-looking financial measures to the most directly comparable forward-looking financial measures calculated and presented in accordance with GAAP has been provided. The amounts in these reconciliations are based on our current estimates and actual results may differ materially from these forward-looking estimates for many reasons, including potential event driven transactional and other non-core operating items and their related effects in any future period, the magnitude of which may be significant.

26

3Q 2020 Year-Over-Year Sales Walk

(in millions)

$1,677

					$57
					$1,522													$17				$1,414
		($155)
										($87)
												($15)
															($55)						($10)
																				($15)

3Q 2019 Sales	Sale of U.S.	3Q 2019 Sales	3Q 2019 GM	COVID-19	GM Thailand Exit Transition to	Other Volume &	Pricing	Metal Market & 3Q 2020 Sales
	Casting	Pro forma for	Work Stoppage	Related	IRDA's for GM's	Mix		Fx
		U.S. Casting Sale			New Full-Size
					SUV

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3Q 2020 Year-over-Year Adjusted EBITDA Walk

(in millions)

			$24	$4	$297
$266	$18
$260		$22
($6)	($16)	$8	($3)
		($10)
		($10)

3Q 2019	3Q 2019 U.S.	3Q 2019 Adj.	3Q 2019 GM Work	Lower Sales	Other Volume &	Pricing	Metal Market & Fx Customer ED&D COVID-19 costs	Cost Reduction	Performance	3Q 2020
Adjusted EBITDA Casting EBITDA	EBITDA Pro	Stoppage	Related to	Mix		Reimbursement	Actions	and Other	Adjusted EBITDA
		forma for U.S.		COVID-19			and Commercial
		Casting Sale					Settlement
							Timing

* For definitions and reconciliations of non-GAAP financial measures, please see the attached appendix.	28

Supplemental Data

EBITDA and Adjusted EBITDA Reconciliation

($ in millions)

		Three Months Ended			Nine Months Ended
		September 30,				September 30,
		2020			2019			2020			2019
Net income (loss)	$	117.2	$	(124.1)	$	(597.2)	$	(29.7)
Interest expense		53.9			54.3			160.0			163.9
Income tax expense (benefit)		(22.5)			(40.4)			(63.1)			(37.4)
Depreciation and amortization		125.0			134.2			393.7			411.5
EBITDA		273.6			24.0			(106.6)			508.3
Restructuring and acquisition-related costs		9.7			11.7			38.6			36.0
Debt refinancing and redemption costs		5.2			5.1			6.7			7.5
Impairment charges		-			225.0			510.0			225.0
Loss on sale of business		-			-			1.0			-
Non-recurring items:
Malvern fire charges, net of recoveries		8.6			-			8.6			-
Adjusted EBITDA
$	297.1	$	265.8	$	458.3	$	776.8
as % of net sales
	21.0%			15.8%			14.0%			15.2%

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Supplemental Data

EBITDA and Adjusted EBITDA for the Trailing Twelve Months Ended September 30, 2020

($ in millions)

				Trailing
				Twelve
	Quarter Ended		Months Ended
December 31,	March 31,	June 30,	September 30,	September 30,
2019	2020	2020	2020	2020

Net income (loss)	$	(454.4)	$
Interest expense		53.4
Income tax expense (benefit)		(11.5)
Depreciation and amortization		125.4
EBITDA		(287.1)
Restructuring and acquisition-related costs		21.8
Debt refinancing and redemption costs		0.9
Impairment charges		440.0
Pension settlement		9.8
Loss on sale of business		21.3
Non-recurring items:
Gain on bargain purchase of business		(10.8)
Malvern fire charges, net of recoveries		-
Other		(2.4)
Adjusted EBITDA	$	193.5	$
as % of net sales		13.5%

(501.2)	$	(213.2)	$
51.5		54.6
3.3		(43.9)
129.6		139.1
(316.8)		(63.4)
17.6		11.3
1.5		-
510.0		-
-		-
1.0		-
-		-
-		-
-		-
213.3	$	(52.1)	$
15.9%		-10.1%

117.2	$	(1,051.6)
53.9		213.4
(22.5)		(74.6)
125.0		519.1
273.6		(393.7)
9.7		60.4
5.2		7.6
-		950.0
-		9.8
-		22.3
-		(10.8)
8.6		8.6
-		(2.4)
297.1	$	651.8
21.0%		13.9%

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Supplemental Data

Adjusted Earnings (Loss) Per Share Reconciliation

	Three Months Ended				Nine Months Ended
		September 30,				September 30,
	2020			2019				2020			2019
Diluted earnings (loss) per share	$	0.99	$	(1.10)	$	(5.28)	$	(0.27)
Restructuring and acquisition-related costs		0.08			0.10			0.34			0.32
Debt refinancing and redemption costs		0.05			0.05			0.06			0.07
Impairment charges		-			2.00			4.51			2.00
Loss on sale of business		-			-			0.01			-
Non-recurring items:
Malvern fire, net of recoveries		0.07			-			0.08			-
Adjustment to liability for unrecognized tax benefits		-			-			(0.06)			-
Tax adjustments related to the CARES Act and Tax Cuts and Jobs Act		-			-			(0.07)			(0.08)
Other		-			-			0.14			-
Tax effect of adjustments		(0.04)			(0.45)			(0.12)			(0.50)
Adjustment for anti-dilutive effect		-			(0.02)			-			(0.05)
Adjusted earnings (loss) per share	$	1.15	$	0.58	$	(0.39)	$	1.49

Adjusted earnings (loss) per share are based on weighted average diluted shares outstanding of 118.4 million and 115.8 million for the three months ended on September 30, 2020 and 2019, respectively, and 113.0 million and 115.6 million for the nine months ended on September 30, 2020 and 2019, respectively.

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Supplemental Data

Free Cash Flow and Adjusted Free Cash Flow Reconciliation

($ in millions)

		Three Months Ended			Nine Months Ended
		September 30,				September 30,
		2020			2019			2020			2019
Net cash provided by operating activities	$	249.5	$	241.7	$	246.4	$	378.6
Less: Capital expenditures net of proceeds from sale of property,
plant and equipment		(40.5)			(97.5)			(144.7)			(333.3)
Free cash flow		209.0			144.2			101.7			45.3
Cash payments for restructuring and acquisition-related costs		8.2			16.3			37.0			46.0
Adjusted Free Cash Flow	$	217.2	$	160.5	$	138.7	$	91.3

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Supplemental Data

Net Debt and Net Leverage Ratio

($ in millions)

	September 30,
		2020
Current portion of long-term debt	$	26.5
Long-term debt, net		3,555.4
Total debt, net		3,581.9
Less: Cash and cash equivalents		537.3
Net debt at end of period		3,044.6
Adjusted LTM EBITDA	$	651.8
Net Leverage Ratio		4.7

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Supplemental Data

Full Year 2020 Outlook
($ in millions)
		Adjusted EBITDA
	Low End	High End
Net loss		(617)		(602)
Income tax benefit		(70)		(70)
Interest expense		215		215
Depreciation and amortization		525		525
Full year 2020 targeted EBITDA		53		68
Impairment charges		510		510
Restructuring and acquisition-related costs		85		85
Debt refinancing and redemption costs		7		7
Non-recurring charges and other		10		10
Full year 2020 targeted Adjusted EBITDA	$	665	$	680

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Supplemental Data

Full Year 2020 Outlook

($ in millions)

Net cash provided by operating activities

Capital expenditures net of proceeds from the sale of property, plant and equipment

Full year 2020 targeted Free Cash Flow

Cash payments for restructuring and acquisition- related costs

Full year 2020 targeted Adjusted Free Cash Flow

Adjusted Free Cash Flow

Low End		High End
	405			420
	(250)			(250)
	155			170
	65			65
$	220	$	235

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Definition of Non-GAAP Measures

EBITDA and Adjusted EBITDA

We define EBITDA to be earnings before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding the impact of restructuring and acquisition- related costs, debt refinancing and redemption costs, loss on sale of a business, impairment charges, pension settlements and non-recurring items. We believe that EBITDA and 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 Adjusted EBITDA, together with other measures, to measure our operating performance relative to other Tier 1 automotive suppliers. We also 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. EBITDA and Adjusted EBITDA should not be construed as income from operations, net income or cash flow from operating activities as determined under GAAP. Other companies may calculate EBITDA and Adjusted EBITDA differently.

Adjusted Earnings (Loss) Per Share

We define Adjusted earnings (loss) per share to be diluted earnings per share excluding the impact of restructuring and acquisition related costs, debt refinancing and redemption costs, loss on sale of a business, impairment charges, and non-recurring items, including the tax effect thereon. We believe Adjusted earnings (loss) per share is a meaningful measure as it is commonly utilized by management and investors in assessing ongoing financial performance that provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of core operating performance and which may obscure underlying business results and trends. Other companies may calculate Adjusted earnings (loss) per share differently.

Free Cash Flow and Adjusted Free Cash Flow

We define free cash flow to be net cash provided by (used in) operating activities less capital expenditures net of proceeds from the sale of property, plant and equipment. Adjusted free cash flow is defined as free cash flow excluding the impact of cash payments for restructuring and acquisition-related costs. We believe free cash flow and Adjusted 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. Free cash flow and Adjusted free cash flow are also key metrics used in our calculation of incentive compensation. Other companies may calculate free cash flow and Adjusted free cash flow differently.

Net Debt and Net Leverage Ratio

We define net debt to be total debt, net less cash and cash equivalents. We define Net Leverage Ratio to be net debt divided by the trailing 12 months of Adjusted EBITDA. We believe that Net Leverage Ratio is a meaningful measure of financial condition as it is commonly used by management, investors and creditors to assess capital structure risk. Other companies may calculate Net Leverage Ratio differently.

Liquidity

We define Liquidity as cash on hand plus amounts available on our revolving credit facility and foreign credit facilities.

US SAAR

We define US SAAR as the seasonally adjusted annual rate of light vehicle sales in the United States.

Other

Other includes the accelerated depreciation for certain assets that will be idled as a result of our largest customer exiting their operations in Thailand, which they announced in 2020.

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