Good morning. My name is Suzanne, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the AAM's Fourth Quarter and Full Year 2015 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. As a reminder, today's call is being recorded. I would now like to turn the call over to Mr. Jason Parsons, Director of Investor Relations. Please go ahead, Mr. Parsons.

Thank you, and good morning, everyone. Thank you for joining us today and for your interest in AAM. Earlier this morning we released our fourth quarter and full year 2015 earnings announcement. If you have not had an opportunity to review the earnings announcement, you can access it on our website, aam.com, or through the PR Newswire services. A replay of this call will also be available beginning at 1:00 PM today through 11:59 PM Eastern Time, February 19th by calling 855-859-2056, reservation number 34605757. Before we begin, I would like to remind everyone that the matters discussed in this call may contain comments and forward-looking statements subject to risks and uncertainties, which cannot be predicted or quantified and which may cause future activities and results of operations to differ materially from those discussed. For additional information, we ask that you refer to our filings with the Securities and Exchange Commission. Also during this call, we may refer to certain non-GAAP financial measures. Information regarding these non-GAAP measures, as well as a reconciliation of these non-GAAP measures to GAAP financial information is available on our website. Over the next several months we will participate in the following conferences; the JPMorgan Global High Yield & Leveraged Finance Conference in Miami, Florida on March 1st, and the Bank of America-Merrill Lynch, New York Automotive Summit on March 23rd. In addition, we are always happy to host investors at any of our facilities. Please feel free to contact either myself or Vitalie Stelea to schedule a visit. With that, let me turn things over to AAM's Chairman and CEO, David Dauch.

Thank you, Jason, and good morning to everyone. Thank you for joining us today to discuss AAM's financial results for the fourth quarter and for the full year of 2015. Joining me on the call today are Mike Simonte, AAM's President; and Chris May, our Vice President and Chief Financial Officer. To begin my comments today, I'll review the highlights of our fourth quarter and full year 2015 finance performance. Next, I'll comment on AAM's 2016 outlook and then I'll discuss our new and incremental business backlog and current business opportunities before turning things over to Chris. As always, after Chris covers the details of our financial results, we'll open up the call to any questions that you all may have. Let me begin by stating that AAM had an outstanding year in 2015. On the strength of North American light vehicle production volumes and our solid operational performance, AAM achieved record sales and record gross profit for the year. We also made measurable progress in diversifying our business and improving our capital structure. A quick summary of our 2015 financial performance is as follows, starting with sales. AAM's fourth quarter 2015 sales were $958.4 million. For the full year 2015, AAM's sales increased 5.6% on a year-over-year basis to $3.9 billion, a new annual record for AAM. This sales growth was despite over $125 million of year-over-year sales headwinds related specifically to lower metal market pass-throughs and foreign currency translation. For the full year 2015, non-GM sales grew by almost 10% to $1.3 billion, also a record for AAM. AAM's net income in the fourth quarter of 2015 was $62.9 million, or $0.81 per share. For the full year 2015, AAM's net income totaled $235.6 million, or $3.02 per share. AAM's adjusted EBITDA in the fourth quarter of 2015…

Thank you, David, and good morning, everyone. I will cover the financial details of our fourth quarter and full year 2015 results with you today, starting with sales. As David mentioned, AAM's sales in the fourth quarter of 2015 were $958.4 million, up 2% compared to the fourth quarter of 2014. Sales in the fourth quarter of 2015 reflect the impact of lower metal market pass-throughs to our customers, as well as FX translation, mainly related to the weakening of the Brazilian reais against the U.S. dollar. Metal market and FX accounted for over $40 million reduction in sales in the fourth quarter of 2015 as compared to the fourth quarter of 2014. AAM's non-GM sales for the quarter were $323.5 million, as compared to $317.2 million on a year-over-year basis, also a 2% increase. For the full year 2015, AAM's sales increased 5.6% to $3.9 billion as compared to $3.7 billion for the full year of 2015. Non-GM sales increased to $1.3 billion in 2015, up nearly 10% on a year-over-year basis, both of these were records for AAM. AAM's content per vehicle is measured as a dollar value of our product sale supporting our customer's North American light truck and SUV programs. In the fourth quarter of 2015, AAM's content per vehicle was $1,645, as compared to $1,697 in the fourth quarter of 2014. The reduction is largely due to the impact of lower metal market pass-throughs to our customers that I mentioned earlier. On a sequential basis AAM's content per vehicle in the fourth quarter of 2015 was up slightly $23 as compared to the third quarter of 2015. The primary driver of the sequential increase in content per vehicle was a favorable mix in seasonally higher four-wheel drive penetration. In the fourth quarter of 2015, four-wheel…

Thank you, Chris and David. We have reserved some time to take questions. I would ask that you please limit your questions to no more than two. So at this time please feel free to proceed with any questions you may have.

Your first question comes from the line of John Murphy of Bank of America Merrill Lynch. Your line is open.

Good morning, guys.

Hey, John.

Good morning, John.

Just to add first (26:27) question here. I mean, there's a lot of noise in the market about the strength in trucks which seems to be coming through. Just curious, as you think about the GM truck schedule in 2016, I just wonder if you could tell us what you are seeing and what potential upside you think they could add to the schedule if the market is really hot for trucks and what you could handle to the upside.

Yeah, John, this is David. Last year GM finished around 1.235 million units, maybe a little bit higher than that. We're expecting that volume to be similar to that this year, 1.235 million units to 1.24 million units, let's say. As we've explained to you all in the past before, their straight time capacity is around the 1.2 million units. So they got to flex capacity to go up as high as maybe 1.4 million units. We have a similar capacity in place to support that in the event the schedules go there. Right now we're seeing very strong schedules from our customer, in this case General Motors, but also from our other customers on the truck side of the business. Clearly we're in a sweet spot with respect to trucks and SUVs and crossover vehicles right now, and it's showing in our schedules and will show in our sales going forward.

Okay. That's very helpful. And just a second question, I mean, you were alluding to non-organic options in your statements, but you have been alluding to that more recently. I mean, as you think about those opportunities, do they include acquisitions, M&A? I mean, what are you thinking on sort of the spectrum of what you could potentially do in these non-organic options?

Well, it's really wide open for us, but I'll just keep everybody in balance here. What we said from a capital use is that we're going to continue to focus on organic growth, which we've demonstrated a discipline to do that. We're going to focus on debt management, which we continue to demonstrate a discipline to do that, again paying off the term loan here in the fourth quarter, based on the excess cash we had available to us. To your point on strategic initiatives, we've identified the fact that, because of where our balance sheet is now, we're now in a position that we can take that more seriously, so we're evaluating different opportunities that are there, whether it be in our core space or technology advancements or joint ventures or strategic or technological relationships. It's really wide open for us to evaluate right now. And that's the benefit, and the good news for us is that we have plenty of options to consider. And then obviously, the last thing is just looking at friendly shareholder activity, whether it's some sort of stock buyback or some sort of dividend type thing. But those are the four things that we've been very disciplined in regards to managing. Clearly the market indicators, or the market adjustments, are going to make us maybe reprioritize or reevaluate some of the opportunities that we have as it relates to capital allocation. But we clearly are looking for the appropriate strategic opportunities, if they're available.

Okay. And if I could just sneak one housekeeping issue question in. On the Mexico tax settlement, it sounds like this is a question of transfer pricing. So it sounds like you were charging too much to your Mexican operations, deflating the profits there. So that means that, as you reverse that and come to agreement on what that should be in Mexico, that would mean sort of conversely, in another region, presumably the U.S., your profits would go down, right, because if it's a pure transfer pricing issue, that means sort of the seesaw somewhere between sort of regions. If you could just kind of explain what's going on there, and it sounds like the profits in the U.S. would be lowered and maybe you would have a tax benefit on the other side on a cash basis. I'm just trying to understand what's going on?

Yeah, certainly the mechanics of what you just described, John, would be true. And as you know, we're not a tax payer today in the U.S., primarily on a federal tax basis. We will over time. But the mechanics as you described are true. The settlement relates to transfer pricing issues with our Mexican entities and the ownership structure through our chain of different entities. So correct, you have it correct.

So the tax yield in the U.S. is improving as a result of this, it's just not cash right now?

Yeah, correct.

Okay. That's very helpful. Thank you.

Hey, thanks, John.

And your next question comes from the line of Ryan Brinkman of JPMorgan. Your line is open.

Hi. This is Samik here on behalf of Ryan. So firstly, I just want to touch upon the U.S. SAAR predictions that you have. I see that you've maintained them for the 17.5 million units to 18 million units range for 2016. But investors that we talked to are certainly at a different place and they expect a decline. So maybe if you can share your thoughts about what drives that confidence in reiterating that SAAR number, and what probably investors are missing?

Yeah. We feel very strongly in the SAAR at 17.5 million units. I mean, clearly based on where the market performed last year and how it started up this year with respect to our schedules and all, we don't see anything lightening (31:28) up in that area. Again, the most important thing is that we've got the ability to adjust our business up or down, based on the market conditions that are there. So right now, we see a strong market in front of us, at 17.5-plus million units. We're prepared to support that, and if there's adjustments in the future up or down, we're prepared to support that as well.

Great. My last question here, can you just help us with the size of your backlog in China for 2016, and if you're expecting any upside to that from the recent rebound we've seen in that market?

Our Asia or China backlog represents around 30%. Yes, there are other opportunities that we're working on from a new business or incremental opportunities, and China plays, or Asia plays, a significant role in that.

Great. Thanks for taking our questions. Thank you.

Thank you.

And your next question comes from the line of Rod Lache of Deutsche Bank. Your line is open.

Good morning everybody.

Hi, Rod.

Good morning, Rod.

Couple things I wanted to know if you can comment on. Clearly, a lot of companies are doubling down on trucks right now. Ford announced four new SUVs earlier this week, and I think there's a presumption that this should be good for American Axle. So, I was hoping you might be able to just pass along, is there any measurement that you can share with us on what the size of the bidding opportunity looks like now, versus where it had been running in the past, whether that's kind of an accurate conclusion that looks like there's a growing opportunity as a result of some of these trends.

Yeah, Rod, as I mentioned in my comments, we were quoting on about $1 billion of activity on a consistent basis. That's been elevated now to $1.5 billion covering that 2018 to 2020 period of time. A good portion of the increase is in that light truck and also in the crossover vehicle opportunity. So, yes, we are seeing increases in our core business of trucks and SUVs and crossovers.

Okay, great. Makes sense. And another just follow-up question on M&A. Does the view from Axle's perspective on M&A change with volatility in American Axle's valuation? Or are you basically seeing the valuations of potential targets moving kind of commensurately?

It would be the latter versus the former. I mean, we're all in it together. Most of the companies are adjusting commensurate with what's happening to us as well. Again, we're in it for the long haul. We're going to make decisions that are best for the company moving forward, organically, strategically, as well as looking at the appropriate shareholder activity.

Okay. Just one last one on CapEx and margins as we look out to 2017, I know you don't typically comment on something that far ahead, but just given the moves that we're seeing right now in terms of CapEx this year, and then a big year for launches next year. Could you just give us some color on, is CapEx looking like it could decline very meaningfully as you look out to 2017 and just given the higher proportion of new business, how should we be thinking about the margin effect in a big launch year?

Well, again, we've guided the Street and we're consistent. Our guidance is in the range that we're going to operate in going forward, is a 4% to 6% of sales range. Sometimes it may be up like it's going to be this year because of the strength of the backlog that we have in 2017. Last year it was about 5%, this year it will be 6% as we mentioned. We've had years where we've been down around 4%, so. And at the same time, as we've talked is, there's some business or some capital equipment that will be coming available to us in the latter half of 2018 and, therefore, we're hoping as we go forward here we can moderate, but still stay within the range of CapEx that we've guided.

Right. But does it moderate next year, just given that you're going to be looking at a lower launch here potentially in the subsequent years or does it stay elevated?

I think it may moderate off the 6% a little bit, but not that much. We'll see more of the adjustment I think in the outer years.

Okay. And what about the margins, is a launch year a big factor for how the EBITDA margins kind of trend?

As we've guided the Street this year, our margins, EBITDA of 14.50% to 14.75%, so we see another strong year in front of us. Quite honestly we see other strong years the next several years. But as we've said and guided all along, as we bring on new non-GM business and specifically, non-full size truck type platform, we're going to see a natural degradation in some of our overall margins, just because of the contribution margin and the FX (36:23), mainly after the 2017 period of time.

And Rod, this is Chris. I would point out we've had significant launch activity the last few years and we've maintained strong margins and we expect that to continue.

Right, right. Okay. Thank you.

Yeah. Thanks, Rod.

And your next question comes from the line of Brett Hoselton of KeyBanc. Your line is open.

Thank you. This is actually Irina Hodakovsky on for Brett Hoselton. Good morning.

Hi, Irina.

Hi, Irina.

I wanted to ask you guys a little bit about your backlog. This is further out 2018, what you introduced right now is a little bit short of what you've been launching in the last couple of years, and then with the GM business dropping off there's a big gap. If you can talk a little bit in terms of opportunities with a little more detail, what kind of products are you looking at? What kind of markets? How confident are you in closing that gap of $500 million?

Let me start first by saying we're highly confident that we can do it. At the same time as I covered with you, we're still quoting on activity that will support the backlog in 2018. Historically, we've run around $300 million a year on our backlog. So 2016, 2017 are covered that way. 2018 is a little bit light. But like I said, there is $500 million of opportunity that we're quoting on that could favorably impact the 2018 period of time. We got another $1 billion of opportunity impacting us in the 2019, 2020 period of time. That business is right in our wheelhouse as we just talked with Rod about trucks and crossover vehicles. It's got geographic diversification associated with it and obviously a significant customer diversification. So again, we feel highly confident that we can offset it and again, that's just from an organic standpoint. At the same time, we're producing things from a strategic standpoint and we're even more confident.

Thank you.

Thank you.

Your next question comes from the line of Matt Stover at SIG. Your line is open.

Thank you. Thank you very much. Two questions, one mechanical. On the metal market pass-throughs and the FX, was that mostly applied against the GM sales or how should we think about that distribution for GM, non-GM?

Yeah, no, Matt, that would pretty much go across our entire product portfolio. From an FX standpoint, the impact was primarily out of our products we ship in Brazil, which is GM and Volkswagen, as it relates to metal that impacts pretty much all customers.

Okay. And then I just want to clarify something on the backlog. If I look at your first two years of the 2016 and 2017, that's net new backlog. That $125 million as we look at 2018 is backlog that you've won, it doesn't...

No, Matt, those are gross backlog numbers.

Gross backlog. So, if we look at that out year for 2018, you indicated that you're bidding right now on $500 million of opportunities that exist?

Yep, correct.

How would that sort of compare to kind of a normalized level? Is that an increased level relative to where we would be out two years or how does that compare?

I'd say it's about the same. As I said, we're starting to see some increase in our customer opportunities or our business opportunities but that's more in the 2019 and 2020 commensurate with where we're seeing greater penetration or greater needs for trucks and SUVs and crossovers in the future.

Okay. Great, thanks, guys.

Thanks, Matt.

Yeah, thanks, Matt. Have a good day.

Thank you, Matt. We thank all of you who participated on this call and appreciate your interest in AAM. We certainly look forward to talking with you in the future.

And this concludes today's conference call. You may now disconnect.