American Axle & Manufacturing Holdings Inc (AXL) 2002 Q1 法說會逐字稿

Good afternoon,

welcome to the American Axle &

Manufacturing Holdings, Inc.

Q1 2002 Earnings

teleconference.

This call is being recorded.

Time permitting we will be

asking questions, taking

questions.

You may place yourself in the

queue by pressing 1 followed by

the 4 on your phone.

If your question has been

answered you can remove

yourself by pressing the 1

followed by the 3.

I would like to turn the call

over to the Vice President at

American Axle & Manufacturing

Holdings, Inc..

Please go ahead Mr. Krause.

Thanks for joining us

today.

All of you should have had a

chance to review the Q1 2002

Earnings announcement that was

released earlier this morning.

If you have not you can access

it on our website or through

the news wire services.

A replay of this call will be

available beginning at noon

today through midnight ET on

May 7 by calling 800-633-8284,

before I turn the call over to

our Co-Founder and Chairman,

Richard Dauch I will read a

statement.

The matters discussed here may

contain forward-looking

statements based on current

plans, expectations, events

and financial and industry

trends affecting the company's

future operating results and

financial position.

Such statements involve risks

and uncertainties which cannot

be predicted or quantified and

may cause future activity and

results of operations to

differ materially from those

discussed.

The historical results

achieved are not necessarily

indicative of future prospects

of the company.

For additional information we

ask you refer to the company's

filings with the Securities

and Exchange Commission.

It is intended to be in

compliance with the

regulations, it is open to

analysts, news media and other

interested parties.

We are audio web casting this

call through our website and

this call will be archived

there for later listening.

I would like to mention we

look forward to seeing many of

you at conferences we will

attend in the Q2, including

the McDonald's Securities

conference on June 14th in

Boston and the Wachovia

Securities conference on June

25th in Nantucket.

Let's get to the purpose of

today's call.

I will turn things over to

Richard Dauch, Chairman, CEO.

Thank you.

Good morning, Ladies and

Gentlemen.

And thanks for joining us to

discuss our financial results

for the Q1 of year 02.

We are pleased to report Q1

earnings per share increased

47% to 75 cents per share,

versus the 51 cents earned in

the Q1 of 01.

On March 8, we were the first

auto supplier to raise

earnings guidance for the

quarter.

At this time we indicated that

earnings would increase 40%

from the 51 cents earned in

the Q1 of 2001.

Our company delivered earnings

that were slightly ahead of

that guidance.

The 75 cents we reported were

2 cents ahead of the first

call consensus estimate of 73

cents per share.

This is our company's 13th

straight quarter since

becoming a public company that

we have delivered strong

earnings performance.

I am joined this morning by

our President and CFO Robin

Adams, along with your Chief

Officer and Patrick Lancaster.

After I discuss today's

release I will turn things

over to Robin for further

details in the financial

performance of the company.

When Robin finishes we will

open the call for questions

that you may have.

I trust you have had the

opportunity to review the

earnings press release we made

available over news and wire

services earlier this morning.

The Q1 North American Light

Vehicle production was up

approximately 4% including

Light Truck production up

almost 8% in the Q1 as the

OEM's continue to use incentives

to sell vehicles and cars were

basically flat in the quarter

and inventories were being

restored.

Am sales in the Q1 of 02 were

a record level and were up 13%

from last year's quarter to

$859 million.

Light Truck production to GM

increased approximately 17% in

the quarter and sales to GM

comprise about 89% of the

company's total revenues in

the Q1 of 02.

AM sales were impacted by a

shift in product mix and

declines in products sold to

non-GM customers.

Our company enjoyed a 1.5%

increase in content for Light

Truck in the Q1.

That content grew to $1,135

per truck in the Q1.

Operating income grew 36% to

$72.5 million in the Q1 of

2002, versus 53.5 million in

the same period a year ago.

The increase is a result of

the volume and content

increases coupled with

significant productivity

improvements and our continued

focus on tight cost controls

throughout the company.

We continue the investments in

research and development with

a major focus on our company's

exciting new I Ride chassis

modules features Power Light,

independent drive axles with

front and rear steering.

We also are concentrating on

our company's Power Transfer

unit, PTUS, a key component in

the cross-over vehicle line

strategy.

We expect to introduce our new

modules during this summer and

these modules will offer

significant advantages over

anyone else's and from the

beam strategy presently

applied.

Research and development

spending rose about 7% for

this Q1 of 2002.

As a result of this research

and development, our company

increased the percentage of

new technology products

introduced since mid-1998 to

72.5%.

Remember, that was only 3% in

1994.

As compared to 69.6% for the

period of 2001.

I am pleased we had a

significant improvement in

cash flow.

Net cash used after capital

expenditures improved $156

million in the Q1 of 2002,

versus the same quarter of

year 2001.

We project to be cash-flow

positive from operations for

the entire 2002 calendar year.

Am has continued to improve

its quality performance.

Our quality measurements have

improved well in excess of 99%

since 1994, and we further

improved to only 16 parts per

million for the six-months

that just finished.

This is data as measured by

our customers.

For March alone, we were down

to less than 10 parts per

million, specifically 8.

This is absolutely the best in

the world, nobody can compete

with this.

Additionally over 90% of our

companies shippable parts have

been at zero parts per million

for in excess of six months.

From a growth perspective, we

are busy creating a new and

exciting Driveline products

and modules, tied to our 2001

award for the Driveline system

and module supplier for a

major future GM product

program.

We will be the tier 1 systems

integrator and systems

supplier with responsibility

for the entire Driveline

system, module and component

design.

This award also gives our

company sourcing control.

This is the largest one

Driveline system program

awarded to any OEM in the

world auto business.

During the Q1, AM won several

contracts totaling in excess

of $165 million.

The majority of these

contracts are for model years

200432006.

Approximately 75% of those

wins are new business and

about 25% are replacement

business.

Additionally, in April, last

month, 2002, our AM joint

venture was awarded a contract

to produce precision

components for the new Ford

Amazon.

We are pleased to work with

Ford South America and it

supports our continuing

customer diversification

strategy.

We have other opportunities

and are working hard to secure

additional business from

existing and perspective

customers.

We are encouraged about these

opportunities.

Currently we are quoting new

business of approximately $900

million.

More than 800 million is new

potential business and

approximately 80 million is in

replacement business.

We feel confident we will win

our share of this potential

business due to the advantages

we provide to our customers.

Some of those advantages

include the following --

advanced and superior

technology.

World class quality.

Delivery, warranty performance

and excellent packaging.

I would like to thank our

Investors for making the

secondary stock offering that

we completed on March 21 of

2002 a success.

We welcome all the new

Investors and also our

previous Investors who

supported us.

We remember very glad you made

the commit to American Axle.

This offering is significantly

helped the daily trading

volume in Axle stock.

The average daily trading

volume of our stock has

increased from less than

20,000 shares per day, prior

to August 2001, to in excess

of 150,000 shares per day

following that offer.

We have now seen our daily

trading volume nearly double

to 300,000 shares per day, in

the month of April, following

our latest offering in March.

We are also pleased to

announce that the Fortune

Magazine included AM in the

Fortune 500 listing.

During the year 2002, we will

be launching many major new

products and programs for our

customers.

14 of these launches will be

in the major category and

those launches are including

in the following production.

Item 1, the GM 370, the

Driveline products for the

extended long wheel-base

midsize Sport Utility Vehicle

that was launched successfully

in February of 2002 and is

flat and running hard.

Item two, Ford, the net shape

differential gears for

automatic transmissions in

selected front-wheel drive

vehicles, that could be

passenger cars or minivans,

program launched successfully

in our Cheektowaga operation

from February through April

2002.

The launch is behind us and

was successful.

Three, the start of operations

of our brand-new Ford facility

in Mexico, which supports our

Driveline operations that is

contiguous to it.

Several launches occurred from

01 and they will continue

through July 2002.

It is going very well.

Fourth is Hummer, the Hummer 2

or known as the Baby Hummer by

GM, the Driveline products

including front and rear axles

and front and rear

driveshafts.

That launch began in March and

is continuing right now in May

and going well.

Some of the other launches

that our company is readying

for production later is the

huge one, Dodge Ram, series 25

and 3500, front and rear

driveshafts, launches occur in

July of 2002, we are in

excellent shape.

Item two, on that, that -- we

are producing the 11.5 inch

axle now in our Three Rivers

facility for the first time.

That will supplement our 11.5

that we do in Mexico, as well

as what we do in Scotland.

Our World Axle is working well

for our company.

Third point is the

electronically controlled 8.6

axle which features advanced

vehicle stability systems to

be used on the GM full-size

utilities, that launch will

begin July of 2002.

And finally, the GM 610, the

full-size rear-wheel drive van

better known as the Express

and Savannah will utilize our

front and rear axles and 7 1/4

front axles.

That will occur in July of

2002.

Ladies and Gentlemen, we are in

excellent shape to meet all

our customers' launch dates

which I have discussed with

you.

We are up to the challenges in

2002 and will demonstrate our

leadership position.

We are committed to further

increasing the value of Axle

stock by following on the

following seven items.

First, continued research and

development with major

concentration on new product

development, which includes

our state-of-the-art rear or

front steerable modules.

Secondly, -- introduction of

more new products by the end

of the year, we will be close

to 80% of new products, up

from 72.5% that I am reporting

today.

Third, our world class quality

and warranty performance

continues to get stronger.

Fourth our 100% consistent

ontime delivery, our

continuing customer

diversification, our

consistent financial earnings

performance such as the 13th

straight quarter and finally

delivering free positive cash

flow.

In summary, I believe that our

company is well-positioned for

continued growth in the auto

parts supplier sector.

We expect to continue to

deliver increasing margins,

free positive cash flow as we

implement these many new

product launches while

existing new customers

utilizing our high-tech [INAUDIBLE]

-based products and new

business.

Finally I would like to say I

participated in the recent

secondary stock offering for

estate planning purposes for

my family, investment

diversification, as well as

helping my company's increase

float which has worked out

well.

I am committed to the

long-term success of the

company.

I remain a significant

minority investor with over

14% of the shares of this

company, some 7.3 million

shares of stock, I have an

employment contract which I

expect to honor through 2006,

I am passionate about the

company, our strong prospects

for value and growth.

I would like to turn it over

to Robin Adams.

As you just heard from Dick,

we achieved Q1 earnings per

share of 75 cents, an increase

of 40% versus Q1 last year.

This is 2 cents ahead of the

latest Wall Street

expectations.

It also exceeded expectations

prior to our March 8th

guidance, by 14 cents a share

or 23%.

Our margins increased by over

1% in the quarter consistent

with our view for the year.

We also generated $156 million

year-over-year improvement in

cash flow versus Q1 last year.

We continued our commitment to

meet the financial

expectations of our Investors.

Now, let me go over some of

the details to help you

understand the company's

strong Q1 financial

performance.

Sales in the Q1 are an

all-time record for the

company.

Sales increased nearly $100

million, or 13%, to $859

million in the quarter.

This compares to North

American builds up

approximately 4%.

We continue on to out perform

the auto industry growth by 9%

this quarter.

Our major customer, General

Motors had builds up in excess

of 10% in the quarter.

Now, that increased in builds

at 10% by GM was driven by a

17% increase in light truck

production.

As Dick mentioned our content

light truck increased 1.5% in

the quarter to $1135 versus

the Q1 last year.

Now, this increased light

truck penetration by our major

customer and the content for

light truck increase was

offset by product mix shifts

in GM-like trucks and

reductions in non-GM customer

sales.

GM trucks represented more

than 55% of GM's builds in the

quarter as they continue to

focus on increasing light

truck market penetration.

As we said before they talked

about taking that

concentration up to 60% of

their vehicle build.

The four-wheel drive and

all-wheel drive on vehicles we

supply was approximately 59%

in the Q1.

Versus 54% in the Q1 of last

year.

Product mix as I said was a

big factor in the quarter and

primarily why our sales growth,

even at record levels, was

slightly below that of GM

overall light truck production,

and our content per vehicle

growth was slower than it has

been in previous quarters.

The majority of our volume

growth in the quarter was on

GM midsized trucks and SUV.

Our content per vehicle on

midsized SUVs and pickups

are approximately $300 per

vehicle less than full size

trucks and SUV.

You can understand why our

growth in the mid-size and

SUV mix ratio kept our

overall growth down relative

to light trucks.

If you remember GM's new

midsized SUV, known as the

GMC Envoy, the Trailblazer

and BravadO were launched in

the Q1 of 2001 and now in 2002

are in full production.

The 370, the extended

wheelbase version of the SUV,

the Envoy XL and Trailblazer

XT was launched in the Q1 of

this year, in GM's Oklahoma

City facility, which a year

ago was not building sport

utility vehicles.

That is why the strong

production move in the Q1 for

midsized SUV and trucks for

the company.

Now, the percentage of total

revenue our sales to GM were

89% concentration level versus

86% for the Q1 of last year.

While we experienced strong

sales increases with General

Motors, we experienced

declines in the quarter and

sales with non-GM customers

impacting the topline sales

growth by 2 percentage points.

Margin was part of the story

as well for us in the quarter,

gross margin was 13.8% versus

12.6% in the Q1 last year.

That is a 1.2% improvement in

the quarter and that was as a

result of not only higher

production volumes, but

significant productivity

improvements including a focus

on purchasing efforts and

continued tight cost controls.

We generated $23 million of

gross profit in the quarter on

incremental sales of close to

$100 million or basically

[INAUDIBLE] cents on the dollar

incremental gross profit for

the bottom line.

SG&A expenses were at 5.4% of

sales and in line with the the

previous year's levels of

5.4%.

On a dollar basis, SG&A

spending increased 4.8 million

in the quarter, of which

approximately 1 million was

related to investment in

research and development.

800,000 related to our March

secondary offering, and the

remainder related to increased

profit sharing expense that we

incurred in the Q1 this year

versus last year.

Our traditional SG&A costs

remain flat year-over-year on

a dollar basis as we remained

focus on tight administrative

cost controls.

Research and development

spending was up 7% in the

quarter.

Our operating income increased

36% in the quarter to $72.5

million.

In our margin increased 140

bases points to 8.4% versus 7%

in the Q1 last year.

We earned 19 cents on the

dollar in operating income on

our incremental sales in the

quarter.

We stopped amortizing goodwill

in -- 02 in line with the new

FAS 142.

We will complete the full

[INAUDIBLE] of FAS

142 with a review of

investment in goodwill by the

end of the Q2.

EBITDA increased 24% in the

quarter to $104.5 million.

Margin at the EBITDA level was

12.2%, up over 1% from the the

11.1% in the Q1 of 01.

We stated previously and

continuously we expect to grow

EBITDA margins approximately

1% or 100 bases points this

year and the Q1 got us off to

a good start.

EBITDA was up close to 20

million in the quarter versus

the same quarter last year and

translated to an incremental

20 cents on the dollar for

incremental sales.

As you look at interest

expense, there was a decrease

of approximately $4 million in

the quarter.

We were at 11 .$6 million,

this is due to lower average

interest rates.

Our short-term borrowing rates

are approximately 3% lower

than last year at this time.

We continue to improve our

credit statistics from an

operating perspective.

Net interest coverage at the

end of the quarter was 4.7

times on a trailing 12-month

basis versus 4.1 times at the

end of the year, EBITDA

[INAUDIBLE] was up to seven

times on a trail 12-month

basis versus 6.2 times at the

end of the year.

Our tax rate in the quarter

remained unchanged at

approximately 36%.

Net income increased 62% in

the quarter to close to $39

million, or 4.5% of sales,

versus a 3.2% of sales in the

Q1 of 01 or a margin increase

at the net income line item of

1.3 percentage points.

Fully diluted shares in the

quarter increased over 5

million.

Shares primarily as a result

of our 3 million share

offering last August and the

impact of American Axle's

current higher stock price on

the overall dilution

calculation.

The net result is diluted

earnings per share of 75 cents

in the quarter, and represents

as Dick said an increase of

47% versus the Q1 last year.

We had good strong

year-over-year comparisons to

the quarter on every line item

of the income statement and

improved margins by over 100

bases points at the gross

profit operating income, net

income and EBITDA line items.

You can't ask for other better

quarter.

Let me turn to cash flow.

Cash provided by operations in

the Q1 of 2002 was a source of

$48 million versus a use of

$68 million in the Q1 of 2001.

This improvement of $160

million is a result of $15

million of higher earnings and

also improved working capital.

If you remember that working

capital improvement reflects

the final change in

contractual payment terms we

had with GM in Q1 of 01.

That negatively impacted our

cash flow last year in the Q1

by $90 million.

Those change in payment terms

are finally behind us now in

the Q1.

Capital spending was $65

million in the quarter versus

104 million in the year

earlier period in line with

our expectations of lower

capital spending.

This resulted, the capital

spending and cash flow from

operations resulted in

improvement of $156 million in

net cash after capital

spending versus the Q1 last

year.

We had a use of $16 million in

the quarter, versus a use of

172 in the Q1 last year.

As I said, the capital

spending in the quarter is

line with our guidance of

lower capital spending for the

year 2002 in the range of 250

to $275 million.

If you annualize Q1 you get

close to that number.

It reflecting our lower

capital spending in the future

that we expect, as we have

substantially completed the

rebuilding of our facilities

to support our new higher

technology products we are

bringing to market.

I want to remind you, and we

have told you this for of the

last six months, the Q1 of

each year is traditionally a

heavy outflow for cash.

We saw this in our performance

a slight use of cash, due to

the increased capital

investments in the Q1

resulting from the level of

business activity in December

which is much lower versus the

higher level of activity in

March.

Let me give you an example.

Our sales in March were

approximately $75 million

higher than they were in the

month of December, 2001.

And with current industry

payment terms of -- means that

difference of $75 million

approximately sits on the

balance sheet at the end of

the quarter as an increased

investment and working

capital.

As we previously indicated we

spent $5 million in the

quarter of our free cash flow

to buy out off-balance sheet

operating leased equipment.

Now, let's talk about our debt

and capital structure.

Total debt was $888 million up

$10 million versus year end

2001, net debt, or gross debt

less cash increased only 18

million in the quarter despite

the seasonally related 64 --

I'm sorry, $46 million

increase in working capital.

Our debt-to-capital ratio was

60% in the quarter versus 71%

quarter a year ago.

Our book equity has grown to

$582 million from only $40

billion at year end 1998.

Our net-to-capital has

improved from 95% to 60%

during that same time period.

This is a dramatic improvement

despite over $1 billion

capital spending in the period,

three acquisitions in 1998 and

1999 and an increase in debt

related to the three-year

transition with General Motors

to normal payment terms.

We will continue to grow our

equity base through earnings

performance.

We will reduce debt levels

through generation of positive

free cash flow resulting in a

projected debt-to-capital

ratio at 55% by the end of the

year and below 50% by the end

of 2003.

Our guidance on this has

remained unchanged for the

past two years and we remain

committed to the targets.

Looking at our -- further at

credit stats in the quarter

net debts trailing 12 month

EBITDA ratio was below 2.3

times, versus 2.35 times at

the end of 2001.

We are within traditional

investment grade levels with

these stats.

We feel comfortable with the

financial flexibility of our

current capital structure at

March 31st, we have total

borrowing capacity in excess

of $350 million through our

existing credit facilities and

we have no major debt

maturities coming due.

Let me focus on the rest of

2002.

We gave guidance on March 8th

of this year for Q2 earnings

growth of approximately 15%

versus the 72 cents a share we

earned in the Q2 last year,

that translates to a raping of

approximately 83 to 85 cents a

share for this year.

We want to re-confirm that

guidance today.

Our guidance for the full year

on March 8 was earnings growth

of 20% versus the 236 a share

we earned last year putting

you in $2.80 to $2.85 range.

That guidance was based a

North American life build

assumption of approximately 16

million vehicles.

We are reconfirming that

guidance as well today, the

guidance for the full year.

Some analysts have recently

become more bullish for build

assumptions on the year than

our 16 million assumption,

therefore are projecting

earnings for the year for

American Axle in excess of

guidance.

With higher build rates we

would project higher earnings.

We prefer to remain cautious

on the last half of 02 until

we get a more definitive read

on the growth prospects for

the economy and the impact of

that on the auto industry.

I want to encourage all of you

when you look at analysts

earnings estimate for American

Axle for the last half of 02

to understand the underlying

industry build assumptions

that those estimates are based

on.

Now, going from earnings to a

cash flow perspective, we

would today, however, like to

provide more definitive

guidance on cash flow for this

year.

With the Q1 behind us, in 20%

year-over-year earnings growth

guidance for the full year we

would expect to generate free

cash flow of approximately

$100 million this year.

This is double our previous

guidance of approximately $50

million.

As we previously mentioned, we

expect to use approximately

$45 million of our 2002 free

cash flow to exercise our

buyout option and equipment

currently being leased.

And as I mentioned earlier, we

used $5 million of that to buy

out leases in the Q1.

We have 40 million left to go

this year.

The remaining available free

cash flow generated will be

used to reduce outstanding

debt and further improve

capital structure.

We view our Q1's performance

as another confirmation of our

financial strength and

leadership and our focus to

continue to deliver on

commitments we have made to

shareholders.

Despite the continued strong

performance in stock price we

trade at a sizable discount to

our peer group of other

suppliers, whether on an EPS

basis or enterprise value to

EBITDA basis.

We traded at least a 20%

discount.

The skepticism regarding

commitment to reduce capital

spending levels and ability to

generate cash flow should be

behind us.

Our expectation is that over

time we will be rewarded for

continued strong consistent

strong financial performance

with valuation multiples that

are at the average of our peer

group which remains at 15

times year 2002 estimated

earnings.

Our Q1, strong financial

performance at every line item

in the income statement is

just another step in that

process.

Thank you for your attention.

I would like to turn the call

back over to Bob Krause.

Thank you.

We have reserved time to take

questions.

We have received instructions

from Leanne on how to get into

the queue.

Feel free to proceed with

questions.

Ladies and

Gentlemen, to register for a

question, please press the 1

followed by the 4 on your

telephone.

Our first question will come

from Steve Haggerty with

Merrill Lynch.

Good morning.

A couple of quick questions.

Can you talk more about the

non-GM revenue portion and

what affected the change there,

what drove the decline there?

And also on that, when should

we start to see non-GM portion

of revenue start to pick up

specifically with regard to

the Dodge Ram pickup contract?

Steve, the non-GM revenue

reduction was approximately

$15 million in the quarter and

it was related to some

programs that we anticipated

running off and the remainder

related to passenger car and

commercial vehicle programs

that were on the continue to

be weak relative to rest of

the sector, particularly

relative to GM light trucks.

As far as the change in that

dynamic, as Dick mentioned we

are launching the biggest

program we have in July of

2002 with that Dodge Ram

program.

As we said earlier that is in

excess of $300 million worth

of sales on an annualized

basis.

That will increase non-GM

business by 10%.

For this year, 02, it will

be well in excess of $100

million yet this year, on a

full annual basis in 03, it

will be $350 million.

That should pick up

in q3?

Yes.

Two follow-up

questions, you took a charge

in Q4 for UK operations, how

is that restructuring over

there proceeding?

It is right on track,

Steve.

Finally, health

care cost assumptions, we are

hearing a lot about the rising

health care costs and how it

impacts all the companies that

we follow.

Can you give us a sense of

what you assume for the

increase in health care costs

for 02?

Let me tell you what our

assumptions are and I will let

Joel tell you how we are

dealing with it.

Our assumption is from a cost

perspective we will have

double digit increases in

health care costs this year.

Let me tell you what we

have done.

We are looking to review our

providers, go to single source

providers to try to manage

costs.

We have also capped our

liability for retiree health

care costs, new hires, are not

covered in the traditional

plan, there is a new program

with respect to new hires.

Those are two activities we

have taken to reduce the high

costs of health care we

experienced this year.

Let me have Joel have answer really

how we are offer setting the

costs.

Good morning, Steve.

What we have got now is a very

mature productivity program.

We continue to add refinements

to it and we identify every

cost increment prior to our --

doing our final budget for the

next calendar year.

We put in all the market

basket of ideas we need to

offset all of those

incremental cost increases

that were subject to and we

are tracking something in the

order of 4,000 productivity

improvement suggestions that

encompass every account in

Manufacturing and go to every

level of management within the

company.

Thank you.

One thing, too.

Despite the double digit

increases in health care costs

we improved margins over a

hundred bases points in the

quarter.

We expect to improve them for

the full year.

Thanks to Joel, we are more

than able to offset those

costs through productivity

improvements.

Thank you.

Our next question

comes from Steve Girski.

I just have a

question, Robin, on the

margins.

Looking sequentially it looks

like revenues were up versus

Q4, yet margins were done, is

there something that makes the

comparison not apples to

apples?

One is product mix, the

other is -- as you know, a lot

of costs increase at the first

of the year, wages increase in

the Q1, we have fundamental

costs that go up in the Q1.

We expect to see full

year-over-year improvements in

margin every quarter this year

versus last year.

And the -- this --

just another question on this

four-wheel steer product.

There is a lot of confusion in

the market as to what is this

product versus what is on the

market now.

Of course the people in the

market now say you can't be on

this product kind of thing.

Can you just [INAUDIBLE] and clear

some of that up for us?

On the four-wheel steer we

have a superior product.

Number two, we have it in five

different vehicles ride now

that are roadable, drivable,

for our customers and their

engineers and decision makers

to decide what they want to

apply it to and when.

Point three, ours is a

boatable problem, it can be

done without any disruption to

the present customers'

assembly plant or process.

Next, ours is on a multilink

product, not a beam live axle

giving it a far superior ride

and handling.

Next we have a much better

cost control and therefore

price elasticity on it.

Are you saying you

are in the market by the

middle of the year with

something?

No, we have a superior

product, it is available, it

is being tested and we will

secure purchase orders in the

future.

We have nothing to announce on

that right now.

We want to have a superior

product to what is out there

now and we do because what is

out there is a beam axle and

very pricey.

I am with you.

Just one thing on the backlog,

you said you are bidding on

900 million of business

currently.

I think last quarter was a

billion, is just the change in

that the 165 that you want?

Steve, I will have Pat

Lancaster respond to you.

Basically that is correct.

It is the 165 we have wanted.

Of course there is always

different opportunities that

arise, and others are

resolved.

Is there a lot of

four-wheel steer business in

that 900 billion or will that

be incremental?

That is incremental.

Thank you.

Our next question

comes from Wendy Needham with

CS First Boston.

Good morning.

A quick one.

The payables number, Robin, do

you have the actual number at

the end of the quarter?

Yes, I do.

Let me dig that out for you.

Accounts payable will be

approximately $343 million, an

increase of $40 million in the

quarter.

Again related to the business

activity.

In March 1st versus December.

On the content per

vehicle, does it say -- I know

it is hard to predict

precisely, does it stay around

this level on the GM products

for the rest of the year

because you have got the 370s

coming in or does it go down

more?

We expect, as we said

before, we expect tighter

content per vehicle growth

this year.

About the 5% level, maybe

slightly below that.

We are seeing content for

vehicle growth on individual

products greater than that

1.5% in the quarter.

What is happening is that it

is the mid-size SUV and

trucks that are becoming a

bigger part of the share.

Having said that, giving the

Dodge Ram that launches in the

last part of the year, that

should offset some of this mix

shut and product greater

content for vehicle growth in

the back half of the year.

We are not looking for the

double digit growth in the

last year.

We averaged 7% a year.

When you take last year and

this year, this year we will

be closer to 5%, averaging in

excess of that 7% again.

One thing I would add is

that the Hummer is coming

in -- coming in also.

That is all four-wheel drive,

the Dodge Ram as Robin

indicated and then we still

have the strong and slightly

upgrade on four-wheel drive

application for the full-size.

There is a good penetration

for the midsize.

The 5% includes the

Dodge Ram?

Yes.

And the Hummer.

And the Hummer.

I think you said before, Dick

the Hummer is over 2,000 a

vehicle?

That's pretty pricey.

A hell of a buy.

You ought to buy one.

You can't drive it

on the roads where I live.

I will take you for a ride.

Our next question

comes from David Leiker with

Robert W. Baird & Company.

Please go ahead.

First, a little

cleanup question here, the tax

rate going forward, shall we

use 36% or -- that seems to

move around by quarter.

We expect to be 36% for the

year, David.

That is a good number to use

for this year.

And then going

through, in your comments,

Dick, I missed this, the 165

million in new business for 04

through 06, is that --

What is your question?

Is that what you

were awarded recently or is

that the revenue flow in that

time period?

Pat, do you want to respond

on that $155 million for

David?

That is for programs with

model years in 04 through 06.

That is a

cumulative number over the

three-year period?

Yes.

And then in the 800

million of new business that

you are talking about that you

are working on, is there one

or two large programs in there

or 2, $300 million, or are

they a bunch of programs under

100 million?

There is at least one very

substantial one and there is a

number of others in the 100

million-plus category.

Caller: That is substantial,

is that on a sale of the Ram?

Let me answer it a bit

differently.

We have 35 specific different

actions going on and they

range anywhere from a dribble,

$2 million, up to $225 million

on an annual basis.

So we are fishing in a lot of

ponds, a lot of different OEMs,

GM, Ford, Daimler-Chrysler,

world programs, forging

programs, Asian programs,

et cetera, and we will earn

our fair share of it.

Thank you.

David, Bob Krause has

another comment.

I wanted to clarify the 165

million in new business is an

annual rate, 75% of that is

new, 25% is replacement.

It is not cumulative over the

three years, it would be on a

run rate fully launched basis.

Thank you.

Our next question

comes from Richard Hilgert

with Fahnestock & Company,

please go ahead.

Good morning.

Okay, I wanted more

clarification on the non-gm

business, the 15 million that

we were down versus year-ago.

It was program run-off, and

passenger car weakness, can

you quantify between the two

where the 15 million is?

Richard, it is all over the

place.

I mean, it is such a small

number relative to $800

million of sales in the

quarter, that it is just all

over the place.

It is a little bit of

everything.

Caller: Was some of this

the Ford business?

It is a dribble of this and

other things.

It is a compilation.

Okay.

On the margin, should we

expect the same kind of

magnitude of improvement in

the Q2 year-over-year that we

saw in the Q1 year-over-year?

Richard, as we said, we

expect our margins to improve

over 1% this year.

We did it in the Q1, I think

you can expect consistent

performance throughout the

rest of the year in order to

achieve that 1%.

Some quarters might be

stronger, some weaker.

Generally it will be in that

direction quarter by quarter.

Okay.

When you had given us backlog

information before, you had

pre-qualified the 150 million

for 02 with a down year in

production.

Can you update us on where you

are on that 150 million for

backlog for the full year on

02?

I am not sure of your

specific question.

Would you repeat it please?

When we had gone

over your backlog before you

had broken down the years and

given us a backlog number at

the beginning of the year for

02 of a total of $150 million.

That was predicated on a down

year in build rates, so I am

wondering, you know, with the

higher-than-anticipated demand

we have seen so far this year

where you stand on that number

for the full year in 02 now?

We are confident in that

number.

We think it is a good number.

You don't want to

update it and make it higher

now that we have seen higher

build rates in the Q1?

We have responded.

Okay.

And last, on the crossover

driveline product you

mentioned in the press release,

the way that is worded -- I am

not too familiar with the I

Ride chassis module, is that

part of the crossover?

We should make sure you get

a chance to ride them.

They are fabulous.

Is that part of the

cross-over driveline you are

talking about?

It is not.

It is a different application.

What we are trying to do here

is respond to the market and

the customers' needs of having

more friendly ride, more

car-type qualities, and also

to be able to differentiate

brands.

Let's use our strategic

partner and big customer GM

has a lot of different brands

to differentiate, GMC,

Cadillac and others.

If up want to go to the

extreme, Hummer.

We want to be sure we have

different kinds of suspension

and ride, adapt into existing

platforms and be adaptable to

the existing process of

production at the assembly

plants.

It is marvelous and it is

patentable to us.

Okay, great, thanks,

everybody.

Thank you, richard.

Our next question

comes from Darren Kimball with

Lehman Brothers.

Go ahead.

Can you hear me?

Yes, good morning.

Good morning.

Can you clarify a couple of

things for me?

Robin, on your commentary

about the full-year earnings

guidance versus a build

expectation of 16 million, can

you clarify what you mean by

build?

I mean are you referring to

U.S. Sales?

I don't think a 16 million

build is conservative relative

to consensus estimates.

I am talking about North

American vehicle builds.

As we put out guidance in

March we expect North American

vehicle builds to inch up to

the 15.8 to 16 million vehicle

build level.

Some analysts and I can't

speak for you personally, some

analysts have increased

earnings estimates for the

company based on stronger

expectations of vehicle builds

in the market.

I want people to understand

that.

And what I want to encourage

people to do is to talk to the

analysts or at least

understand what is driving

their earnings guidance rather

than just assuming we are all

working off the same vehicle

assumption build.

Can I just further

clarify, I mean, is yours a

light vehicle comment or are

you wrapping in medium and

heavy-duty production?

Ours is a light vehicle

comment.

Okay.

And secondly, maybe I missed

this in the call, but can you

update us on our full year

Cap-x expectations?

Joel Robinson will give you

an update.

We are looking at 250 to

$275 million range for this

calendar year.

Part of the

underspend in the Q1 may

persist and wind up being an

underspend forth -- for the

year?

If you take the first

quarter and annualize it, it

is fairly in line with what we

would expect for a run rate

for this year.

If you look back at what we

spent in the last six months of

01 it is consistent with those

spending levels as well [INAUDIBLE]

Darren, we said the reduced

capital spending is in line

with previous guidance, it is

right where it should be, and

remember, you have to recall

over the last five years, we

spent a billion and a half in

capital to rebuild

manufacturing facilities, we

rebuilt the product portfolio,

our systems, and we said this

would drop dramatically and it

did this past quarter, and we

are on that run rate for the

rest of the year.

Okay, and another

clarification, when you talked

about introducing the steer

system this summer I heard

your answer to Steve, so the

-- the way to interpret is you

are introducing it to

customers, not to the market?

That is correct.

Okay.

And my last question is just

on the leases, could you speak

to the rationale for buying

out the equipment leases

versus other uses for the

proceeds?

Darren, this equipment is

critical and integral to our

Manufacturing processes.

We have the option to extend

the lease.

It was just a financing

decision as we looked at what

the alternative costs would be

to extend the lease we

determine the that our best

alternative from a capital

perspective would be to

repurchase the assets under

the lease.

Basically it is a

cost-to-financing decision,

whether you want to borrow or

continue to pay the financing

costs under the lease.

It is cheaper for us to borrow

the money and repay than

lease and buy it out.

Okay, that is

helpful.

Great quarter.

Thank you.

Our next question

comes from UBS Warburg, go

ahead.

I wanted to clarify

that I Ride would that be

putting an independent rear on

the Escalade versus the Tahoe?

It would fit well on that

platform.

Are there any I

guess those products would be

included in the $900 million

you guys are bidding right

now?

That would have nothing to

do with that.

This is business that we want

to differentiate present

products, and it would be a

replacement for existing

business, and obviously it

would have an enhanced content

and it would help them

differentiate their product

and meet the consumers' needs

and market competition.

Okay.

On that 900 still that you are

quoting, can you give any kind

of breakout, if you would, GM

versus non-GM or car versus

truck?

Yeah, I will have Pat

Lancaster respond to you.

In terms of the $900

million we are quoting on,

about 25% of that is GM and

75% non-GM.

Hopefully that will be

helpful.

Sure.

I don't have it broken out

any further.

Okay.

And then on the content per

vehicle, I understand the mix

issues with the midsize issue,

can you comment on how much

higher your content on the 360

is versus the old Blazer?

I am not going to give you

a dollar amount.

I can tell you there is an

increase in content.

Okay.

Is it a similar increase on

the new small pickup coming

out, I 190 versus the S-10?

In that range, yes.

Thank you.

I understand that was our

last question, so no other

questions are in the queue.

We would like to thank all of

you for participating on the

call today.

And look forward to talking to

you in the future and seeing

you at investor conferences.

Thank you for your interest in

American Axle.

Ladies and

Gentlemen, that does conclude

your conference for today.

We thank you for your

participation.