Financial overview

Remarks
1) Sales in 2007 reflect substantially similar customer production volumes for the major full-size truck and SUV programs the Company currently supports for GM and Chrysler and a decrease of approximately 11% in products supporting GM’s mid-size light truck and SUV programs.
The decreases in net sales resulting from lower GM light truck production volumes in 2007 and 2006 were partially offset by metal market price adjustments.
The 4WD/AWD penetration rate was 63.6% in 2007 as compared to 61.9% in 2006 and 63.7% in 2005. The Company defines 4WD/AWD penetration as the total number of front axles divided by the total number of rear axles produced for the vehicle programs on which the Company sells product.

Contracts
Its new and incremental business backlog was approximately 1.3 billion dollars as of January 17, 2008.
-Approx. 75% for facilities outside the U.S.
-Approx. 50% of AWD/RWD passenger cars and SUVs :10 AWD/RWD programs for 4 customers; programs in North America, South America, Asia, Europe and Australia
-Approx. $800 million launching in 2008-2010
-Strategic wins with new customers: Volkswagen (rear axles for new global vehicle program); Tata Motors (light vehicle axles); Chery Automobile Co., Ltd. (RDM for a 2009 model year SUV); Mahindra International (MIL)

Joint Ventures
In October 2007, the Company formed a joint venture with Sona Koyo Steering Systems Limited (Sona Koyo) of India. The new company, AAM Sona Axle Private Limited (AAM Sona Axle), will manufacture and sell light truck, passenger car and SUV axle assemblies for the India market. The Corporate headquarters of AAM Sona Axle will be located in Pune, India, and a new manufacturing facility will be constructed in north India. The facility is expected to launch in 2008 with the production of light vehicle axles for Tata Motors.

Expanding Global Presence
In addition to its recent construction of production facilities in China and Poland, the Company continues to expand its existing facilities in Mexico and Brazil.

Restructuring
In 2007, the Company continued ongoing restructuring efforts to address the structural change occurring in the domestic automotive market. The Company reduced its workforce and redeployed assets to support capacity utilization initiatives. In December 2007, the Company idled production at its Buffalo Gear, Axle & Linkage (Buffalo) facility in New York.

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 and to support the development of hybrid vehicle systems.