Financial overview

Remarks
1) Sales in 2006 reflect flat customers' reduced production volumes for the major full-size truck and SUV programs by GM and DaimlerChrysler and a decrease of over 30% in products of GM's mid-size light truck and SUV programs.
The decreases in net sales resulting from lower GM light truck production volumes in 2006, 2005 and 2004 were partially offset by metal market price adjustments. Its 2005 and 2004 sales were also positively impacted by higher production of the Dodge Ram program.
Its 4WD/AWD penetration rate was 61.9% in 2006 as compared to 63.7% in 2005 and 62.6 in 2004. The Company defines 4WD/AWD penetration as the total number of front axles the Company produces divided by the total number of rear axles the Company produces for the vehicle programs on which the Company sells product.

Contracts
2007 launches are Driveline System for GMT900 Pickup Truck (GM, Rear Drive Modules for Chairman (Ssangyong Motors), Rear Drive Modules for 300CC (Beijing Benz DaimlerChrysler), and TracRite Differentials for Quattro Series (Audi).

New Business Backlog 2007-2012
Its new and incremental business backlog was approximately 1.1 billion dollars at December 31, 2006.
-Approx. 600 million dollars for AWD-RWD passenger cars and SUVs
-Approx. 140 million dollars for Asian OEMs and affiliated suppliers
-Approx. 300 million outside of North America

-Includes new and advanced technology products :PTUs, RDMs and IFDAs for passenger cars and SUVs; First transfer case award; Transmission differentials; Six speed transmission shafts

-Strategic wins with new customers: Nissan, Audi, Hino (Toyota), Jatco, Koyo and Ssangyong

Expanding Global Presence
The Company constructed new regional manufacturing facilities in Changshu, China and Olawa, Poland has further expanded its Mexican and Brazilian operations.

Restructuring
In 2006, the Company made significant adjustments to its business to meet the unprecedented structural change occurring in the domestic automotive industry including the continuing market share erosion of its major customers. As part of these adjustments, the Company took actions to realign and resize its production capacity and cost structure to meet current and projected operational and market requirements. These restructuring actions included the reduction of its workforce, redeployment of machinery and equipment to support new programs and the rationalization of U.S. production capacity.

Business Outlook for 2007
AAM's 2007 earnings outlook is based on the assumption that its customers' production volumes for the major North American light truck programs it currently supports will be approximately 2% lower as compared to 2006. AAM expects 2007 sales to increase to approximately $3.3 billion. AAM expects content per vehicle to increase approximately 5% in 2007, off a base of $1,225 in 2006.

Major Initiatives for 2007
-Rationalize U.S. production capacity
-Transition workforce to a lower cost structure
-Expand global footprint
-Broaden product portfolio
-Diversify customer base

R&D Expenditure (in million dollars)

Product development includes power transfer units, transfer cases, driveline and transmission differentials, multi-piece driveshafts, independent rear drive axles and independent front drive axles. The Company continues to focus on electronic integration in its existing products. The Company also continues to support the development of hybrid vehicle systems.