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5. American Axle & Manufacturing Holdings, Inc. Business Report FY ended Dec. 2018

American Axle & Manufacturing Holdings, Inc. Business Report FY ended Dec. 2018

Factors
1) Net Sales
-The Company’s net sales in the fiscal year ended December 31, 2018 increased by 16.0% over the previous year to USD 7,270.4 million. The increase in sales is primarily due to the effect of including a full year of sales from the acquisition of MPG, as opposed to nine months of sales through MPG in the previous year, as the MPG acquisition was completed on April 2017. Other contributing factors include higher production volumes related to crossover vehicles and increased production volumes from program launches.  These gains were partially offset by lower full-size truck sales and reduced production volumes for specific light truck programs in which the Company prepared for program changeovers in 2018.

2) Operating Income
-The Company’s operating income decreased by 80.4% in the fiscal year ended December 31, 2018 to USD 106.4 million. The decrease in operating income was primarily due to a goodwill impairment charge of USD 485.5 million. Increased material costs also contributed to the decreased income despite an overall increase in net sales.

3) Driveline
-The Driveline segment had sales of USD 4,254.0 million in the fiscal year ended December 31, 2018, an increase of 5.3% over the previous year. The increase in sales was driven by increased production volumes related to crossover vehicles and increased production volumes from program launches. The gains were partially offset by lower full-size truck sales and reduced production volumes for North American trucks as the Company prepared for program changeovers during the year.

4) Metal Forming
-The Company’s Metal Forming segment’s sales in the fiscal year ended December 31, 2018 increased by 32.2% to USD 1,097.4 million. The main contributing factor to the increase in the segment’s sales was the effect of a full year of sales from MPG compared to nine months of sales in the previous fiscal year. Other contributing factors included an increase in metal market pass-throughs to the Company’s customers as will as positive foreign currency translation effects.

5) Powertrain
-In the fiscal year ended December 31, 2018, the Company’s sales in the Powertrain segment totaled USD 1,114.7 million, an increase of 38.2% over the previous year. As with the Metal Forming segment, the primary factor to the increase in the Powertrain segment’s sales was the effect of a full year of sales derived from MPG compared to nine months of MPG sales in 2017. Sales also increased due to higher production volumes from new program launches.

6) Casting
-The Company’s sales in the Casting segment totaled USD 804.3 million in the fiscal year ended December 31, 2018, an increase of 36.4% over the previous year. The segment’s growth was primarily due to the effect of a full year of sales from MPG as opposed to nine months of MPG sales in 2017. Metal market pass-throughs also increased sales by approximately USD 13 million.

Business Partnerships

-The Company and Drexler Automotive have entered into an agreement to expand their relationship and bring high-performance differentials and differential technologies from the premium market to the general passenger vehicle market. The expanded relationship between the Company and Drexler immediately integrates Electro-Mechanical limited slip differentials (eLSDs) into the Company’s TracRite family of differential products. TracRite Electro-Mechanical eLSD will go into production later this year. With more than 40 years of motorsports experience and two decades as a tier one supplier to premium European-based automakers, Drexler develops and manufactures high-performance limited slip differentials, racing transmissions, drive shafts and wheel hub systems. (From a press release on January 25, 2018)

Contracts

-The Company will supply AWD driveline technology for the Cadillac XT4, which goes on sale later in 2018. The Cadillac XT4’s twin clutch AWD system features a Company power transfer unit (PTU) that allows the driver to decouple the driveshaft and rear axle to reduce drivetrain losses when not in AWD mode. Attached to the vehicle’s transmission, the PTU sends power through the driveshaft to the rear drive module (RDM) when torque is needed. When AWD mode is turned off, the PTU stops rotating the driveshaft and stops sending power to the RDM, thereby improving fuel economy and reducing emissions. The Cadillac XT4 PTU is part of the Company’s line of EcoTrac disconnecting AWD solutions, which include disconnecting PTUs, multi-piece driveshafts, rear drive modules with electronic control units and torque transfer devices. (From a press release on June 7, 2018)

-The Company will supply power transfer units (PTU) for Ford Motor Company crossover vehicles with all-wheel drive (AWD) starting with the 2019 Ford Edge and Lincoln Nautilus. The Company will manufacture EcoTrac components in several facilities including Three Rivers, Michigan, U.S.; Guanajuato, Mexico; Changshu, China and Swidnica, Poland. By the end of 2020, EcoTrac componentry will represent approximately USD 800 million of the Company’s annual revenue. (From a press release on June 11, 2018)

Awards

-In 2018, the Company won the 2017 GM Supplier of the Year Award, marking the second consecutive year in which the Company had won the award.

-In 2018, a number of the Company’s individual facilities won awards from automakers, including:

• The GM Supplier Quality Excellence Award was awarded to five facilities in the U.S., one facility in China, and one facility in South Korea. This marks the fourth consecutive year in which the Company’s Changshu Manufacturing Facility in China has won this award.
• The Company’s facilities in Fraser, Michigan and Royal Oak Michigan both received the FCA Outstanding Quality Award for their 2017 performance.
• The Suzhou Manufacturing Facility in China received Ford’s Q1 Award as well as Chery International’s 2017 Excellent Quality Performance Supplier Award.

-The Company has been awarded a Jaguar Land Rover Supplier Excellence award for its contribution to the automaker’s business, cost transformation and operational delivery during the last year. The Company was recognized for supplying axles for the Jaguar F-PACE, XE and XF and the Range Rover Velar and was one of just 15 suppliers to receive the Supplier Excellence award. (From a press release on June 20, 2018)

Outlook

-The Company expects that its net sales in the fiscal year ending December 31, 2019 to be between USD 7.3 billion and USD 7.4 billion.
 

R&D Facilities

-As of December 31, 2018, the Company has 16 engineering centers.

Product Development

Technologies showcased at IZB International Suppliers Fair
-The Company will showcase its latest fuel efficient and lightweight driveline, powertrain and metal forming technologies at the upcoming IZB International Suppliers Fair held from October 16-18 in Wolfsburg, Germany. The Company will display products that will help automakers manufacture vehicles that are fuel efficient and help reduce emissions without sacrificing performance. Products shown will include: e-AAM hybrid and electric driveline technology, QUANTUM axle technology and EcoTrac disconnecting AWD. (From a press release on October 10, 2018)

-The Company expects that its capital expenditures in the fiscal year ending December 31, 2019 will be approximately 7% of its net sales.

Investments outside U.S.

<Spain>
-The Company will expand operations in the industrial area of Viladecans, Spain, to support growth with new and existing European customers. Set to open in January 2019, a new 15,000-square-meter facility located 20 kilometers southwest of Barcelona will produce powertrain components for Europe's leading automakers including Renault, BMW, Daimler, Porsche, Audi and Ford. The new facility consolidates two smaller facilities in nearby Gava and will employ 170 associates at full capacity. AAM Barcelona will produce a complete range of damper products including compression dampers, PV bonded dampers, isolation pulleys, in-mold bonded dampers and damped gears. (From a press release on June 28, 2018)