American Axle & Manufacturing Holdings Inc (AXL) 2009 Q4 法說會逐字稿

Good morning, my name is Stephanie, and I will be your conference facilitator today.

At this time I would like to welcome everyone to the American Axle and Manufacturing fourth quarter and full year 2009 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.

(Operator Instructions).

As a reminder, today's conference call is being recorded.

I would now like to turn the call over to Mr.

Christopher Son, Director of Investor Relations and Corporate Communications.

Please go ahead.

Thank you, Stephanie, and good morning to everyone, and thank you for joining us today and for your interest in American Axle and Manufacturing.

We released our fourth quarter and full year 2009 earnings announcement early this morning.

If you have not had an opportunity to review this announcement, you can access it on the aam.com website or through the PR Newswire services.

A replay of this call will also be available beginning at 5:00 PM today through 5:00 PM Eastern Time February 12th by calling 1-800-642-1687.

The reservation number you would need is 5158206.

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.

During the quarter, we will participate in the following conferences -- The Barclays Industrial Select Conference on February 17th, JPMorgan's High Yield and Leverage Finance Conference on March 1st, and the Banc of America-Merrill Lynch New York Automotive Summit on March 31st.

We look forward to seeing many of you there.

In addition, we are always happy to host investors at any of our facilities.

Please feel free to contact me to schedule a visit.

With that, let me turn things over to AAM's Co-Founder, Chairman, and CEO, Dick Dauch.

Good morning everyone.

Thank you for joining us today to discuss AAM's financial results for the fourth quarter and full year of 2009.

Joining me on the call today are David C.

Dauch, AAM's President and Chief Operating Officer, as well as Mike Simonte, our Executive Vice President Finance and Chief Financial Officer.

To begin my presentation today, I will provide some highlights of our fourth quarter and full year 2009 results.

I will also comment on overall business conditions and recent industry trends.

Finally, I'll make a few comments on AAM's outlook for 2010, before turning things over to Mike to discuss the details of our financial performance.

After that, we will open the call up for any questions that you may have.

Let me open my discussion today by stating that 2009 was a brutal and punishing year for the global automotive industry.

We witnessed this historic bankruptcies of two of the three major US-based OEMs, numerous automotive supplier bankruptcy filings, and countless automotive suppliers that have simply ceased operations or liquidated.

They were liquidated outside of the bankruptcy process.

As difficult as it was, the year's end, we definitely see signs of a recovery and hope for the global economy, the automotive industry, AAM, and our country.

For AAM's 2009 was a year in which we successfully navigated through one of the most difficult periods in the history of the global automotive industry.

AAM achieved transformational improvement in our cost structure, operating flexibility, and capacity utilization.

We preserved the significant value inherent in AAM's unparalleled manufacturing and engineering expertise, AAM's product, processing systems, advancing on all technologies, as well as our expansion of new business backlog.

For many key stakeholders, these were all crucial accomplishments.

We stabilized AAM's capital structure by securing new financing arrangements and ending the year with positive momentum by returning to profitability, five straight consecutive months -- good momentum.

We view these important accomplishments as powerful validation of our progress in positioning AAM for continued profitability, stable free cash flow generation, and further business diversification and growth.

Today I am pleased to report that AAM is reporting profitable results for the second consecutive quarter.

Let me briefly cover three fourth quarter highlights.

First, for the fourth quarter of 2009, AAM's sales were $464 million.

This is 13% higher than the third quarter of 2009.

Second point.

AAM's net income for the fourth quarter of 2009 was $48.6 million.

This represents diluted earnings per share or positive EPS of $0.80 per share.

In the fourth quarter of 2009, AAM recorded a tax gain of $48.8 million, about $0.80 per share, to recognize the benefit of a special US tax refund claim.

This refund claim relates to a special five-year NOL, net operating loss carry-back election, made available to AAM as a result of the new tax legislation enacted in November of 2009.

AAM's results in the fourth quarter of 2009 also include a net charge for special items of $8.5 million, equivalent to $0.14 per share.

This includes a $7.7 million non-cash write-off of unamortized debt issuance cost.

AAM also recorded pension and post retirement benefit curtailment gain of $4.3 million, and other charges of $5.1 million.

These charges primarily relate to attrition programs and related statutory benefits.

The third point.

In the fourth quarter of 2009, AAM generated positive free cash flow of approximately $16 million, as compared to a use of cash of $110.3 million in the fourth quarter of the previous year, 2008.

AAM's fourth quarter free cash flow results are improved by more than $125 million.

For the full year 2009, AAM's sales were approximately $1.5 billion.

This 28% year-over-year decline in sales compares to the following -- a 32% reduction in total light vehicle production for the industry in North America and a 44% reduction in General Motors North American light vehicle production.

AAM's sales in 2009 were also significantly and adversely impacted by the unplanned extended summer production shutdown by General Motors and our other key customer, Chrysler.

AAM estimates that shutdown resulted in a reduction in sales of approximately $304 million on a one-time basis.

The unfavorable profit impact was approximately $95 million or $1.81 per share.

That's behind them and behind us.

In 2009, AAM incurred special charges, asset impairments, and other nonrecurring operating costs of approximately $169.3 million, that being equivalent to $3.22 per share.

These charges primarily relate to the following four things.

One, plant closures and other actions to rationalize stalled capacity.

Second, implementation of new labor agreements.

Third, hourly and salaried attrition program activity.

And finally, other actions to redeploy underutilized assets and align AAM's business to current projected market requirements and demand.

As a result of these and other factors, AAM is reporting a full year 2009 loss of $253 million.

This compares to the previous year's net loss of $1.2 billion in 2008.

Ladies and gentlemen, 2009 is now in the history books.

AAM survived and is now beginning to thrive and is very powerfully positive about the newer.

When we look back at this last year, we see the second half of 2009 as a very transformational time, an important turning point for AAM, definitely, in the auto sector.

AAM's comprehensive RRR multi-year restructuring, resizing, and profit recovery business plan is now over and did the job very effectively for our Company.

We have successfully aligned AAM's cost structure and operating breakeven levels to the current projected levels of customer demand and market requirement.

In so doing, AAM has accomplished 10 critical objectives.

I will spell them out for you.

One, we have grown AAM's total global served market to approximately $34 billion.

This is with an enhanced focus on driveline applications for passenger cars, crossover vehicles, as well as now commercial vehicles.

Point two.

AAM's more than doubled global installed capacity at manufacturing facilities in the following countries -- Mexico, Brazil, Poland, India, Thailand, and China.

This was designed to accelerate AAM's participation in the world's fast growing automotive market as we are now a global Company and very prepared to compete effectively in that global circle.

Third point.

AAM's converted the formerly fixed UAW representative legacy labor cost structure in the US to a highly flexible variable labor cost structure.

People have to learn hard lessons.

Point four.

AAM has reduced its operating breakeven to a US SAAR equivalent of approximately 10 million vehicle units.

Point five.

AAM has cut its fixed operating costs by more than 50% in the past two years.

I am speaking of the years 2008 and 2009.

Point six.

AAM has achieved more than $700 million in total annual cost reductions.

Point seven.

AAM has achieved contract clarity with both the General Motors Company and the Chrysler Group.

This includes affirmation of long term sourcing on current and successor programs.

It also includes GM's commitment to honor its $230 million obligation to AAM under the OPEB cost sharing agreement.

Point eight.

AAM has grown its new and incremental business backlog for the years 2010 to 2014 to $1 billion.

This is helping to support the rapid expansion of AAM's regionally cost competitive and operationally flexible global manufacturing, engineering, and sourcing footprint.

We are very happy with what's happened.

AAM's new business backlog will also help boost AAM's earning power and provide a solid return on our investment in new products and facilities.

Point nine.

AAM's made positive progress in diversifying our business.

The main objective of this initiative is to improve the balance of AAM's revenue stream.

In 2010 and 2011, new business launches are heavily skewed to new customers.

Let's talk about that.

That includes Volkswagen, Audi, Nissan, Mack Truck, Tata Motors, Mahindra, Navistar, John Deere, and others.

By 2013, we project that more than half of AAM's daily production volume will support passenger cars, crossover vehicle, commercial vehicle, and global light truck programs -- a massive transformation for our Company and very positive in the proper market driven way.

Finally, point 10.

AAM's successfully refinanced approximately $725 million of debt obligations and we also sold 16.1 million shares of publicly traded stock, achieving net proceeds of approximately $110 million, a very successful commission.

These refinancing transactions extended debt maturities bolstered our liquidity position, helped to accelerate the process of rebuilding AAM's balance sheet strength.

Most importantly, these refinancing transactions solidify AAM's financial viability, sustainability, and continued profitability.

It positions us to successfully grow into our capital structure in the next couple years.

These important objectives successfully achieve AAM's operational restructuring, is now, as I told you earlier, substantially complete.

Now is the time for AAM stakeholders who will benefit from these vital, long-lasting structural improvements.

Before I turn it over to Mike, let me wrap up by making a few closing remarks, beginning with AAM's 2010 outlook as I participate in my 46th year globally in this auto sector.

I love it, enjoy it, and my Company is totally ready for it.

We believe global economic and market conditions are stabilizing and starting to positively improve.

Remember, the world vehicle production last year was only down 2%.

The massive hit was in North America, and we made our adjustments as a Company to the market as it spoke.

We're also encouraged by signs such as market demand for our major programs, strengthening as compared to the first half of 2009 significantly.

Based upon these and other factors, we're updating AAM's 2010 sales and profitability outlook.

For the full year 2010, we expect total US light vehicle sales to increase from approximately 10.4 million vehicle units in 2009 to a range of 11 million to 11.5 million vehicle units in 2010.

And that is still lower than most people, so we're still doing it on a conservative way, but we're expanding from where we had previously been.

Based on this industry sales assumption, and the anticipated launch timing of AAM's new business backlog, we now expect AAM's full year 2010 sales range from top line revenue to be $1.9 billion to $2.1 billion range.

This represents annual sales growth of approximately 25% to 40% as compared to the full year of 2009.

We're on the march and we can't wait to get at it.

AAM expects to be profitable in 2010.

We expect to generate positive free cash flow for the full year of 2010.

Thus, ladies and gentlemen, AAM is intensely focused on driving performance for all of our key stakeholders.

This includes our customers, our suppliers, all associates, communities as well as stockholders and creditors.

We'll commit AAM to a driving performance that means we focus on managing things we control, and we do a good job of that.

We'll be decisive and make the right decisions and we'll continue to drive daily performance, operational excellence, advanced technology, new product creativity, and these are all signature traits that we've done for 16 straight operating years.

We're differentiating our Company significantly from anybody that competes with us in our sector.

Our Company AAM is highly motivated, experienced in our management level.

We're committed to make the decisions and drive this performance with our work team and to address our long-term strategic objectives for the markets and our customers.

These objectives include profitably growing and diversifying our business while strengthening our balance sheet and growing into our capital structure as I told you in a couple of years.

We believe that AAM is well positioned to achieve these goals and the process builds significant value as we already preserve the other value, and for our stockholders and stakeholders.

I'd like to thank each and every one of you for your attention today, your vital interest in AAM, and your long-lasting knowledge and support of our Company.

Let me at this time turn this over to our Executive Vice President of Finance, Chief Financial Officer, best in the business, Mike Simonte.

Mike?

Thank you, Dick, and good morning everybody.

Let me get right into it.

We're going to start today with a review of our fourth quarter and full year 2009 financial results.

First, as Dick previously mentioned, today we did report GAAP net earnings of $48.6 million, and that's $0.80 per share in the fourth quarter of 2009.

This was our second consecutive quarter of profitability.

This is notable only because of the difficulties our industry has endured over the past two years.

Let me just say this.

Every winning streak has to start somewhere.

We believe this is a start of AAM's new winning streak.

As Dick mentioned, our fourth quarter of 2009 results include a tax gain of $48.8 million.

That equates to roughly $0.80 per share.

This gain represents the benefit that AAM will receive under the Worker, Home Ownership, and Business Assistance Act of 2009.

Of course, that was passed into law in November of 2009.

We have filed a US tax refund claim under applicable provisions of this Act, which allow for a special five-year carry-back election on our 2008 net operating loss.

We recognized the accounting benefit associated with this refund claim in the fourth quarter of 2009.

We expect to receive the favorable cash flow benefit in the first half of 2010, probably in the first quarter of 2010 -- that's our expectation, but it is outside of our control.

Also included in our fourth quarter results was a net charge for special items of $8.5 million or $0.14 per share.

The most significant element of this net charge was a $7.7 million non-cash write-off of unamortized debt issuance cost related to the prepayment of the $250 million term loan otherwise due in 2012.

There was a small portion of this write-off associated with the termination of the Class B revolver commitments as well.

Also in this fourth quarter charge, we recorded pension and post retirement benefit curtailment gains of $4.3 million.

The curtailment gains were offset by $5.1 million of other charges, primarily relating to attrition programs and related statutory benefits.

Let me stop here and add some color regarding these charges.

First of all, the debt refinancing cost results from a very successful in our view set of debt refinancing and equity transactions we completed in December of 2009.

As Dick said, these transactions extended debt maturities, bolstered our liquidity position, and advanced our efforts to improve the balance of our debt and equity capitalization.

To be more specific, our refinancing plan consisted of the following.

First of all, we amended our senior secured revolving bank credit facility.

We extended the maturity of a significant portion of this revolver from year-end 2011 to June of 2013.

As part of this amendment, we reduced the aggregate size of the facility from $477 million to approximately $296 million now, and down to $243 million on January 1st of 2012.

Second, we issued new senior secured notes due in January of 2017.

We issued these bonds at an aggregate face amount of $425 million, and a coupon rate of interest of 9.25%.

We used the net proceeds from this capital raise to refinance the reduction in our revolver commitments, and to repay or prepay the $250 million term loan.

Again, that was otherwise due in June of 2012.

The third element of our refinancing activity was an equity offering.

We sold 16.1 million shares of AAM's common stock, raising net proceeds of approximately $110 million.

Simply said, these transactions take off the table any concerns about AAM's capital structure and financial sustainability.

Giving effect to these transactions, AAM has no significant debt maturities until the 2013 to 2014 time period.

The second thing I wanted to mention about the special item was that we are not projecting significant special charge activity in 2010.

We may have some trailing charges or gains associated with attrition program activity, or ongoing capacity rationalization or benefit curtailment.

However, at this time, we have no visibility to planned actions that would generate a significant accounting impact on the income statement.

If that should change, we will make appropriate disclosure.

Okay.

Let's get back to the financial highlights of our fourth quarter results.

The fourth quarter of 2009 marks our second consecutive quarter of generating positive free cash flow.

We define free cash flow to be net cash provided by or used in -- but in this case it's provided by -- operating activities less CapEx, net of proceeds received from the sale of equipment, which is not material in this quarter.

On this basis, AAM's positive free cash flow of $16 million in the fourth quarter of 2009 was approximately $126 million better than the $110 million use of cash we incurred in the same period last year.

It's also about $13 million -- almost $14 million better than the third quarter of 2009, and in our view that's a major positive turnaround this year in 2009.

Let me now review the income statement in further detail, beginning with sales.

In the fourth quarter of 2009, we posted sales of $464 million.

This was our highest quarterly sales total in 2009 and a sequential increase of 13% when compared to the third quarter of 2009.

On a year-over-year basis, our fourth quarter sales were down 8% versus the fourth quarter of 2008.

Now, the changes in our production volumes for major programs closely track these total sales trends, so I'm not going to comment further on those metrics today, other than to say we believe sales and production activity in these programs is fundamentally improving.

So we see more sequential growth as we move ahead to the first quarter.

I'll address this point further when I comment on our new and improved 2010 outlook.

In the fourth quarter of 2009, AAM's content per vehicle was $1,401.

This is almost exactly the same as our full year 2009 content per vehicle metric of $1,403.

Non-GM sales were $103 million in the fourth quarter of 2009, and remember, of the $300 million of our new business backlog launching in 2010, approximately two-thirds of that or $200 million is non-GM sales.

So we should see that non-GM sales concentration increase nicely in calendar year 2010.

Gross margin in the fourth quarter was 14.7%.

Operating margin in the fourth quarter was 6.3%.

As adjusted to exclude the impact of debt refinancing costs, EBITDA was in excess of 13%.

On a sequential basis, we estimate that we dropped approximately 28% of our incremental sales to the bottom line in the fourth quarter of 2009 in the form of additional EBITDA.

While we are working to further improve these metrics in the future, we are pleased to report such an improved set of financial performance metrics at this time.

We believe these results demonstrate excellent progress on our financial goals in a relatively short period of time.

A key driver of this margin improvement is productivity.

For the full year of 2009, AAM pulled through approximately $237 million of total productivity gains to offset the impact of lower volumes, metal market and foreign exchange volatility, higher interest expense, and of course taxes.

In the fourth quarter of 2009, AAM's total year-over-year productivity gain on this basis was approximately $51 million.

This major step function improvement in productivity we achieved in 2009 relates primarily to the implementation of AAM's new labor agreements and other fixed cost reductions we accomplished in the process of reducing our operating breakeven to a US SAAR equivalent of approximately 10 million light vehicle units.

While our total productivity gains measured on a year-over-year basis in 2010 are not expected to be eye-popping as we had reported in 2009, we will continue to benefit from these massive, lasting, and structural changes that we implemented in these agreements and other cost reduction activities in 2009 for many years to come.

SG&A, which includes R&D spending, in the fourth quarter of 2009 was approximately $39 million as compared to $44 million in the third quarter of 2009.

AAM's SG&A costs were $48 million in the fourth quarter of 2008.

In the fourth quarter of 2009, our research and development spending was approximately $16.3 million.

For the year in total, R&D spending was approximately $67 million, just short of 4.5% of sales.

On a sequential basis, our SG&A spending in the fourth quarter of 2009 was really not that much different than the third quarter, if adjusted for unusually high amount of restructuring costs we incurred as part of our SG&A expense in the third quarter of 2009.

I called these out for you in our previous earnings teleconference on October 30th of 2009, but let me remind you that we booked $6.3 million of these unusual costs in SG&A in the third quarter of 2009.

Most of these restructuring costs related to fees paid to financial advisors and legal counsel that were necessary to work our way through the commercial agreements and bank amendments that helped us to complete our restructuring outside of a bankruptcy process.

We had a very good experience with these people.

They did a great job for us.

They moved on to other companies and other industries and are simply not part of our cost structure on a go-forward basis.

Let me comment on interest expense and EPS before we move on to cash flow and the balance sheet.

In the fourth quarter of 2009, net interest expense was approximately $25 million.

However, that includes a $1.35 million write-down of a money market investment we hold at the reserve.

Recall that this was the money market fund that broke $1 in the third quarter of 2008 due to holdings in Lehman Brothers.

If we adjusted [interest] income in the fourth quarter to exclude that charge, net interest expense would have been approximately $23.5 million.

Reflecting the impact of our recent debt and equity financing transactions, as well as higher free cash flow expectations we have for 2010, we expect the quarterly run rate for net interest expense in 2010 to be around this level, probably a little bit lower, around $23 million per quarter.

For the full year 2009, net interest expense was $82.5 million.

So the bottom line on our fourth quarter of 2009 was a profit of $48.6 million based on a weighted average number of shares outstanding of 61 million.

Due to the impact of our stock offering in December, as well as all other outstanding stock options and warrants, we are currently estimating a weighted average of 76 million shares outstanding for purposes of measuring diluted EPS in 2010.

Said another way, that's our EPS denominator -- that's our guidance for that metric in 2010.

Okay.

Let's move on to cash flow details.

GAAP cash provided by operating activities in the fourth quarter was a use of $37 million.

CapEx in the fourth quarter of 2009 net of vendor deposit activity and some proceeds from the sale of equipment was $21 million or 4.5% of sales.

I want to stress the metric of 4.5% of sales, because that's where we see CapEx going in 2010, between 4% and 5% of sales.

Reflecting these levels of cash provided by operating activities and CapEx, we generated positive free cash flow of approximately $16 million in the fourth quarter of 2009.

Now, for those of you keeping score at home, thinking that our positive free cash flow was only possible because of the favorable impact of accelerated payment terms with GM, I want to point out this was entirely offset by payments that we made in the fourth quarter for BDP cashouts and other attrition program obligations.

So from our perspective, the $16 million is relatively clean.

For the full year of 2009, our free cash flow was a use of $88.4 million.

Of course, most of that relates -- really all of that relates to the first half of the year.

For the second half of the year, our free cash flow was just about $20 million.

Please note that we consider the entire $110 million cure payment we received from GM in the third quarter of 2009 to be a component of free cash flow.

Couple things we should address on the balance sheet.

Trade accounts receivable at year-end 2009 stood at $129.7 million as compared to $186.9 million in 2008 year-end.

The year-over-year decline in accounts receivable is almost entirely explained by the move to net 10 day payment terms with GM that we secured as part of the commercial and settlement agreement dated September 16th of 2009.

For the full year of 2009, AAM's GAAP cash provided by operating activities includes a benefit of approximately $62 million related to these accelerated payment terms.

As I just said, we realized approximately $26 million of this working capital benefit in the fourth quarter, and the balance, or $36 million roughly, was in the third quarter.

AAM's year-end 2009 inventories were valued at $90.6 million, as compared to $111.4 million at December 31st of 2008.

AAM's 19% reduction in inventory this year outstripped the year-over-year sales decline of approximately 8% in the fourth quarter of 2009.

This was achieved by a focused effort, including an activity we call plan for every part, to reduce inventories by eliminating waste in the value stream and localizing sources of supply as much as possible.

The third balance sheet item you may have noticed in our press release is a large increase in prepaid assets, $114 million at 2009 year-end versus $61 million at December 31st, 2008.

The primary driver of this increase is the tax refund claim of $48.8 million, that's the line item in which it's classified.

Number four, accounts payable stood at $201 million at 2009 year-end as compared to $251 million at year-end 2008.

Approximately half of this year-over-year reduction is due to lower CapEx in the fourth quarter of 2009.

The impact of lower sales activity and supplier request for accelerated payment explain most of the rest of the year-over-year decline.

The latter issue, accelerated supplier payments, is being addressed right now.

There is no reason for this any more.

And that will be a benefit for us as we change back to standard terms in 2010.

Number five, our stockholders equity finished up at a deficit of $559.9 million at the end of 2009.

This deficit is $179.6 million lower, and by that I mean better than the deficit we reported at September 30th of 2009.

Two items account for most of the activity in the fourth quarter.

First of all, as Dick mentioned, I think I mentioned as well, we raised net proceeds of $110 million from the sale of 15.1 million shares of common equity in December.

Second, our net income of $48.6 million.

That's the most significant activity.

Other lesser significant items were the effect of currency translation and the impact of the year-end 2009 valuation of our pension and OPEB liabilities.

If you need more information about these items, just ask a question and we can get into further detail.

AAM ended 2009 with a liquidity position of approximately $481 million, consisting of available cash, short-term investments, and committed borrowing capacity on AAM's US credit facilities, and that includes the GM second lien term loan credit facilities.

This is approximately $110 million higher than where we were at the end of the third quarter.

The increase is due primarily to the impact of the equity issuance and of course our positive free cash flow generation in the fourth quarter.

This is a strong liquidity position for us, representing approximately four to five times what we need to run the business.

This liquidity position is even stronger if you consider that, number one we have no significant maturities of long-term debt due until the 2013 or 2014 time period, and number two, more importantly, the fact that we expect to generate positive free cash flow in 2010, which will allow us to further strengthen our liquidity position heading into 2011.

Let me close with some comments on our updated, or as we like to say, new and improved 2010 outlook.

As we developed our business plan for 2010, and even still we are admittedly conservative about our underlying economic and market assumptions, given all that has transpired here over the past two to three years, we would much rather overcorrect our business and cost structure than take lesser action and continue to suffer losses if growth is slower than expected.

Having said that, we are growing more optimistic about the prospects for a meaningful recovery in 2010 production volumes.

This is true for many reasons, including the fact that inventory levels for the major programs we support in North America are simply too low.

Where inventory reduction was a major headwind for the automotive supplier community in 2008 and 2009, we are now poised to benefit from a potential inventory build, and we believe a likely inventory build in 2010 and 2011.

As Dick said, we are raising our outlook for the US SAAR 2010 to a range of 11 million to 11.5 million light vehicle units.

We believe the risk in this assumption is skewed to higher sales and production, not lower.

Based on this and other factors, including the expected launch timing of AAM's $1 billion new and incremental business backlog, we are raising our sales guidance to a range of $1.9 billion to $2.1 billion.

This represents expected sales growth of 25% to as much as 40% on a year-over-year basis.

We don't want to get carried away with estimates at this point in time of the year of higher levels of sales, although we are prepared to support this growth and higher volumes if necessary.

This is a great chance for our Company to get healthy in a hurry.

As for the GMT-900 program, which should continue to represent approximately 50% to 60% of our sales in 2010, we are now planning for total program production in the range of 800,000 to 850,000 vehicle units.

By this, I mean all pickups and SUVs, all name plates for global demand.

We are tracking at the high end of that range in the early months of 2010 based on current customer release schedules.

Again, we think it's too early to make a stronger call in our judgment, but it would not be surprising if production volumes exceeded these levels.

For example, if aggregate sales of the GMT-900 program name plates increased just 10%, which is roughly the same trend rate of growth we expect in the overall US SAAR, and if GM increased inventory days on hand to approximately 65 to 75 days on hand, which we believe they will do, then total GMT-900 program volumes in our estimate could approach 900,000 units or a little more in 2010.

That would be great news for AAM if it came to pass.

We're not ready to bake that into our business plan at this point in time.

We are not going to provide detailed earnings and cash flow guidance for 2010 in total or for any individual quarter.

We are focused on building value for our stakeholders on a long-term basis.

And we're simply not going to fan the flames of unnecessary obsession with short-term metrics.

However, we will make the following comments.

Number one, we expect to be profitable in 2010.

Solidly profitable.

Number two, we expect to generate EBITDA margins in the range of 12% to 15%.

We expect that this is our longer range expectation for the years 2010 to 2013.

We would be disappointed if we did not perform at or above the mid-point of that range in 2010.

Number three.

We expect to generate positive free cash flow in 2010.

Among other factors, this is based on our expectation of making payments in the range of $40 million to $50 million for our remaining obligations under the buydown program and other related attrition program activity and capacity rationalization.

And this includes of course plant idling and closure costs.

We're not saying that we're going to be positive free cash flow in 2010 if we adjust for these payments.

We're saying that after considering these payments, we'll still generate positive free cash flow in 2010.

I want to make that clear.

Our plan is to limit CapEx to a range of 4% to 5% of sales in 2010, and 4% to 6% on a long-term basis.

In 2010, that translates to CapEx in the range of $80 million, not higher than $100 million.

So that should help you understand our free cash flow expectation.

Number four.

We expect to make rapid improvement in important credit metrics.

By mid-year 2010, we're targeting a trailing 12 month net debt to EBITDA leverage ratio of approximately 3.5 times.

By year end 2010, we expect to be in the neighborhood of three times.

As to EBITDA, to net interest coverage ratio, we're targeting a three times trailing metric or annual metric by the end of 2010.

We expect that the combination of significant sales growth; improved revenue diversity, including significant launches of new customers, new product mix and geographic concentrations; structural cost reductions; our much improved liquidity position, stable liquidity position; and our financial performance would lead to improved credit ratings for our Company as well.

We don't control that process but we're certainly going to have our day in court, so-to-speak.

We are approaching 2010 with as much urgency and determination as we had in 2008 and 2009 as we remade our Company and completed the difficult process of rightsizing our business and cost structure.

We don't view our recent restructuring accomplishments as the end of anything, but rather the beginning of a cycle and a very important cycle of recovery and value creation.

We are a dramatically different Company in 2010 than we were just 12 to 18 months ago.

We appreciate your recognition of this important development and look forward to letting our future financial results prove out our plan.

Thank you for your time and participation on the call this morning.

I'm going to stop here and turn the call back over to Chris so that Dick and David and I can take your questions.

All right.

Thank you, Mike, and thank you, Dick.

We have reserved some time for some questions.

So I would ask that you try to limit your questions so we can accommodate all of the individuals in the queue.

At this time, please feel free to proceed with any questions that you may have.

(Operator Instructions).

We'll pause for just a moment to compile the Q&A roster.

Your first question comes from Chris Ceraso with Credit Suisse.

Your line is open.

Thanks, good morning.

Good morning, Chris.

Good morning, Chris.

Just a couple items.

Can you just remind us of the ballpark difference in content on a T-900 SUV versus a pickup?

I know that the four wheel drive penetration tends to be higher on the SUVs, right?

That's right, Chris.

There's not as much variation across the entire portfolio of pickups versus SUVs, because as you get into the heavier duty applications on the pickups, the size of the axles drives higher content.

On an apples to apples basis, at the lower end of the pickup duty range, you're probably talking about roughly $100 increase in content on those SUVs.

Okay.

Mike, on the taxes, I was surprised to see on an ex items basis that you had a tax benefit.

You've been running a small tax provision.

Can you explain that and what do you expect for 2010?

In the fourth quarter, I wouldn't make too much of that.

It was really just the accounting impact of making relatively small adjustments to our tax accrual.

Of course, relatively small adjustments are big when our earnings are where they are right now.

On a go-forward basis, what I can tell you is that for our internal planning purposes we are planning on a tax provision in the range of 15%, and that of course reflects the entire portfolio of our businesses on a global basis, most of our earnings of course coming from the country of Mexico in the next year or two.

Okay.

And then last one, bigger picture.

The outside of the changes in volume from 2009 to 2010 and the new business that's coming on-stream, can you give us an idea of some of the bigger items that will influence the change in profit, things like material cost changes, any launch costs that you expect, comp accruals, that kind of stuff?

I think one thing specifically would be the very enhanced productivity.

And I'll just keep that at a macro level.

Productivity is becoming very positive and getting normal to where we were when we were a strong Company.

We're becoming strong again.

That's another major contributor.

The other thing is our launches are launching so flawlessly, it's giving us a better margin contribution.

Chris, I think as you -- when we're sitting together here a year from now talking about 2010, the big driver of our profit improvement's going to be the contribution margin on increased sales.

We see relatively moderate inflation this year.

We see the opportunity to offset inflation in our material purchases with productivity as Dick just mentioned.

We're going to have some higher SG&A expense in calendar year 2010.

We -- of course, all of our salaried associates took 5% to 10% pay cuts in calendar year 2009.

Those have been put back in 2010 and we do have an opportunity to earn some incentive compensation, our executives do, in calendar year 2010.

So that will drive some moderate growth in our SG&A costs.

By far and away the key driver of profitability and year-over-year activity is going to be that contribution margin.

We have got our cost structure, our fixed cost structure down to such a degree now that we'll see very strong contribution margins -- we long-term said 30%, maybe a little higher on the GMT-900 program.

We won't do quite that well on some of the new programs we're launching, but we're holding ourselves to a 25%, maybe 30% incremental margin.

We achieved the 28% incremental margin in the fourth quarter, and we see that and maybe a little bit better going forward.

So I think, Chris, that's going to be the key driver next year.

Okay.

Thanks, guys.

Thank you, Chris.

Your next question comes from Himanshu Patel with JPMorgan.

Your line is open.

Hi, good morning, guys.

Good morning, Himanshu.

Good morning, Himanshu.

First, I just wanted to clarify one of your comments.

Did you say that you would be disappointed if 2010 EBITDA margins weren't towards the high end of that 12% to 15% range?

Yes, Himanshu, what I said specifically was we would be disappointed if our 2010 EBITDA margin was not at or above the mid-point of that range, 12% to 15%.

We talked about that range of 12% to 15% at the auto show, and I think you or maybe one of two others very accurately explained our thinking about that range, that -- because over the long term, and remember, that guidance range was established for a long-term time period, we may see some material inflation like we saw back in 2004 and 2005.

So the lower end of that range is really a situation where we have maybe lower volumes -- that's certainly not the case in 2010 -- or higher materials inflation.

So we feel we can execute our plan at the mid-point or slightly higher in 2010.

Now, we don't want to get you guys all excited and have you run your models at 15% quite yet.

Let us gain some traction under our business plan, get some new programs launched.

And you know what?

If the 900 program and other programs in our portfolio take off the way they could, if some of your overall SAAR estimates are accurate, remember ours our a little more conservative, then we can talk about the higher end of that range.

Thanks for that color on 2010.

But I mean, just when you look beyond 2010, medium term, I'm just trying to understand why you wouldn't be at the high end of that range, even in the outer years.

I mean, you're exiting this year it looks like on an adjusted basis at about a 13.3% EBITDA margin, which is the the mid-point of your long-term guidance, and just baking in some operating leverage.

I guess this goes back to Chris' questions, but what are the sort of additions of costs that you see over the next couple of years that make you reluctant to think you're not going to be at the high end there?

Hold on a minute.

I don't want you to think I'm reluctant to think that we can achieve at the high end of the range.

I was answering your question specifically about calendar year 2010.

Let's not get too carried away.

We're just months away from relatively low -- historically low SAAR levels and a whole bunch of problems and difficulties for the entire industry.

We think the higher end of our EBITDA range is achievable as we execute our plan and it may be achievable for 2010.

Otherwise, we wouldn't state that the range is 12% to 15%.

We just -- we think it's a little bit too early to be projecting everything to the higher end or the best possible case scenario.

So we just want to make sure that we get a few quarters under our belts here before we start getting carried away on that metric.

Okay.

And then can you talk a little about -- is there a big content per vehicle difference between the 900 light duty and the medium duties?

Himanshu, there is.

As I mentioned to Chris, based on the fact that the axle sizes are higher, they're bigger on the heavier duty versions of the GMT-900 program.

So we do see higher sales content on those versions, yes.

Can you quantify that?

Well, we've discussed over the years that the range on that could be roughly $1,300 to $1,400, on up to $2,000 or so.

But we're not going to be more specific about any specific items.

I'm just asking because it looks like in the quarter overall T-900 production was sequentially up 5%, but the medium duty variant was down like 27% or so.

So it looks like there was a lot of inter T-900 mix degradation.

Was that a big headwind for you guys this quarter?

Not really.

There were a couple things working there.

First of all, as you know, GM is preparing to launch the new version of those pickup trucks early in 2010.

The heavy duty version I'm speaking of, which is really the essence of your question.

So I'm working down inventory and managing that part of the process I'm sure is at play.

The other thing is the availability of the diesel engines for those applications is constrained now.

So I guess you could characterize it as a mild, moderate headwind, but we were pleased to have the higher volumes on the lighter duty versions.

In total our GM T-900 production was higher in the fourth quarter than the third quarter, so we see the 900 program as nothing but headwind, Himanshu.

I'm sorry, tailwind.

So used to saying headwind, I said it.

I meant tailwind.

Last housekeeping, Mike, you mentioned 5% to 10% pay cuts were going to be reversed.

What's the dollar impact of that on full year 2010 versus 2009.

It's in the range of $8 million to $10 million, and then there are some higher amounts for other elements of the comp structure.

But that element is about $8 million to $10 million.

Okay.

Great.

Thank you.

Have a great day, Himanshu.

Your next question comes from Brian Johnson with Barclays Capital.

Your line is open.

Good morning.

Good morning, Brian.

Good morning, Brian.

Just wanted to get in since a lot of questions have focused on GM T-900 which you explained well, on the non-GM part of the business, so a couple things.

What are you thinking about in 2010, how should we think -- what percent of the revenue and what percent of the EBIT is coming from outside GM, roughly?

Well, Brian, as you know, the outside GM portion of our business is going to grow nicely.

We've got about $200 million of our $300 million backlog launching in 2010 for new customers or non-GM customers.

We've got the Mack Truck order, the Tata Ace program in India, the Nissan USA van program, and others launching here in 2010.

So our sales growth will be up about $200 million on that activity.

So it will help us to contribute.

One of the best things about that is we've got some infrastructure cost in place to support those programs that have been nothing but a cost drag for us, and now in 2010 we'll see some contribution margin.

I'm not going to get into specific profitability contributions from any individual programs or even this relatively small group of programs, but I will say that these programs are going to contribute to our profitability margin in 2010, whereas in 2008 and 2009 due to engineering costs and getting ready to launch, we've had nothing but cost, no contribution at all.

Is there a range of increment margin we should be thinking about the new business that's coming from outside GM?

Some of this business, for example the Tata Ace program, is the first bit of business we have the new facility.

So the incremental margin on that is going to be closer to the gross margin or EBITDA margin versus 30%, maybe a little higher percent margins we see on the GM T-900, where our fixed cost structure is really established.

So I would say, Brian, that we'll see a mixed bag.

We'll see probably 10% to 15%, 20% contribution margins on roughly half of that.

Little bit higher on some of it, because in Mexico we've got our fixed cost structure in place.

But remember, we're launching, it's a ramp curve.

So in the early months of 2010, it will be on the lower side of contribution.

But by the time we get to the second half of the year, these programs will be contributing nicely.

And within the pickup truck segment, what's the impact of the 2010 guidance -- within 2010 and within last quarter of the various refreshes going on in the three-quarter ton truck line, the Ram heavy duty, of course Ford's relaunching, and GM has a freshened three-quarter ton truck as well.

How does that play out in the cadence in the next few quarters?

I think Himanshu mentioned, and he's certainly accurate, that the production volumes right now on the heavy duty series, 900 program down a little bit and we expect they will stay down here through the first quarter and then start to pick up again as they launch the new trucks in the springtime.

So on the GMT-900 program for the year, we do expect good, solid contribution from that part of the program as they restock inventories and we believe put a very solid competitor on the street.

So we're looking forward to that.

On the Dodge Ram heavy duty program, that's going to be a nice contributor for us as well and it's already helping us right now in the first quarter.

That program launched in the fourth quarter of 2009, so production volume on a sequential basis was up substantially on that program.

To give you context in the whole year, 2009, we had orders of roughly 50,000 to 55,000 on that program.

We're conservatively estimating somewhere in the 80,000 range for 2010.

So you can see that's an increase of higher than 40%.

So that's going to be a good profit driver for us in 2010.

Okay.

And final question, could you maybe recap between accounts payable and then the receivables for GM, how we should be thinking about trade days over the next year or two?

Okay.

Let's separate these two items.

The accounts receivable situation, I mentioned that at the end of the year we were around $130 million receivables and that reflected about $62 million of benefit on the accelerated GM payment terms, versus the [Product 25] terms that we had up until September 16th.

So that's the impact there.

Through the course of 2010, we would expect to see another $10 million or so of benefit associated with those accelerated payment terms as production volumes increase.

Okay?

So that might get us to roughly $75 million of total liquidity benefit at the end of 2010.

That's our best estimate at this point in time.

What's going to happen, potentially, anyway, is we -- the earliest time that we can terminate these accelerated payment terms is June 30th of 2011.

We think that's the right day for us to target, but we have the ability to keep those terms outstanding until December 31st of 2013.

When we transition to standard payment terms at that point, what's going to happen is that we're going to give back the approximately $75 million of benefit that we enjoy under these terms versus [Project 25].

And then we're going to extend out to roughly a 50 day payment cycle with General Motors.

So we'll give back the $75 million, and then maybe another $25 million to $50 million, depending on production volumes.

And so we'll have a net liquidity impact of about $125 million or so, that's our current estimate, at the time we make that transition.

Okay?

So accounts receivable, I think that's the way to think about that.

On accounts payable, in 2010 of course we'll have a lower CapEx, so that's going to drive a lower nominal payables balance.

We've been running $140 million, roughly, CapEx over the last couple of years.

We're transitioning to a level closer to $80 million.

You're going to be $10 million, maybe $15 million lower structurally on your payables, just based on CapEx.

So that's the first thing to keep in mind.

From a trade situation, we see no significant changes in our payables terms with our suppliers, other than the fact that we are transitioning all of our suppliers back to standard payment terms at this point in time, and we'll probably see a net benefit in 2010 of roughly $10 million, maybe $15 million or $20 million, associated with that transition.

We still had a few discussions open with suppliers.

Settlement agreement with GM was September 16th and of course our refinancing didn't occur until December.

So right now, in fact, we've got a lot of it done in January.

Right now we are transitioning, so we'll see that benefit in 2010.

Okay.

Thank you.

Your next question comes from Joe Amaturo with Buckingham Research.

Your line is open.

Hi, good morning, guys.

Good morning, Joe.

Good morning, Joe.

If we could just touch on the pension funding status, where you finished out 2009 and what the asset return was and I guess as it relates to that subject, if you are now going to -- when you put it in your 10-K, are you going to include the receivables associated with the legacy liabilities from GM that you excluded from the 2008 number?

Okay, Joe, there's a number of questions there.

Let me peel them off one at a time.

You might recall, our underfunded position, funded status I guess is the technical term at December 31st, 2008 was roughly $255 million.

At the end of 2009, apples and apples, it was $261 million.

So a very small, slight degradation in that funded status.

Now, getting into the details, our asset return was in excess of 20% in 2009.

We were pleased with that return.

Our outside investment management firm, SGI, that handles that for us did a good job.

We transitioned our overall portfolio to a more balanced mix now of equity and bonds.

So based on all the right metrics, that was a good return -- our asset managers did a good job.

The discount rate on our pension liabilities was lower at year-end 2009 by about 40 basis points, so that pretty much offset the impact of favorable investment returns well ahead of our 8% long-term assumption.

So net-net, our pension funded status was about the same year-over-year.

Now, as it relates to the portion of our OPEB liability covered by General Motors, let me leave pension aside and move to OPEB, because there is no legacy issue in our accounting with GM on pension.

They record their share of the pension on their balance sheet.

We record ours.

Pensioners actually receive two different checks.

It's in the area of post retirement healthcare, where we do have a commonly administered program.

Our aggregate post retirement benefit obligations are measured at around $507 million at the end of 2009.

That's about $8 million lower than it was a year ago.

Two factors driving that.

Number one, we had curtailment gains of $69 million in 2009, and so that drove our liability lower.

Now, unfortunately, the the discount rate as I mentioned was down about 50 basis points on this liability, so that drove our liabilities back up on an actuarial basis.

So net-net, our OPEB liabilities are are about the same on a year-over-year basis.

Net of GM receivable basis, we're at $278 million at year-end 2009.

That's about $15 million to $16 million lower than where we were at the end of 2008.

Okay.

And then one final one.

If in fact Gm T-900 production does go to 900,000 units, where do you think your capacity utilization will be and where was your capacity utilization during the fourth quarter?

Joe, this is David Dauch.

To answer your last question first, our capacity utilization at the end of the fourth quarter was over that 80% range.

At the same time, with volumes trending upward with the GM T-900 program and potentially going even higher, we definitely we can achieve and get up over that 90% range, which is what our target was.

The important thing is, we can handle the volume that GM has reserved for the program.

And know that the way GM measures that is to ensure the supply base is ready to handle lot higher volumes, because seasonally volumes are going to be higher and lower depending on what's going on.

We can handle much higher volumes, much higher even than 900,000.

Okay.

Thank you.

Your next question comes from John Murphy with Banc of America.

Your line is open.

Good morning, guys.

Good morning, John.

A lot of my questions have been answered here, asked and answered.

But Mike, you had mentioned something about having liquidity and cash that's four to five times what you need to run the business.

Obviously, that's not all in the balance sheet.

Some of that is in revolver capacity.

As you step forward and you generate cash, what are going to be the priorities for that cash?

Are we looking at debt paydown or are there other investment activities or other things you see as potentially creating shareholder value?

John, that's a great question.

Listen, first of all, we need to and we plan to generate free cash flow from operations to improve the leverage position of our Company.

So debt paydown is clearly a very important priority, probably the most important priority in the short run.

We think we can create a lot of value for our shareholders by essentially transferring that enterprise value created in the business back to the equity owners of the Company and paying down some debt.

That's number one.

Now, in the short run, we really don't have much in the way of debt that we can pay down so we do expect to build some cash on the balance sheet, at least until we transition back to standard payment terms with General Motors.

So in terms of the dynamic between cash and revolver, we'll likely be out of the revolver early in 2010 and then allow any cash generated this year to simply be on the balance sheet.

I don't want to lead you to believe that our only focus here is on paying down debt.

While we do think we can create a lot of value there, we do think that investing that cash in the continuing diversification and profitable global growth of our Company is very important.

So we continue to be looking at ways that we can establish new relationships with other customers, potentially expand some of our joint venture relationships that we have, particularly in China, and penetrate new markets such as that commercial vehicle market.

So John we're going to be, particularly once we -- I guess I should say if we, but we think we will -- generate positive free cash flow and further strengthen our liquidity position, we're going to be very focused on quote, unquote, strategic activities that can allow us to drive further sales and profitability growth in 2011 and forward.

Great.

And then just one last question.

Dick, I mean, obviously you've been in the industry for a while and have some of your own personal ties to Chrysler.

Just wondering what your thoughts were there as they transition some [PI] product potentially to the North American market, and if there would be any opportunities -- what you think the success of that could be?

And if there's any opportunities to grow within Chrysler outside of the heavy duty pickup truck that you have good exposure to now?

Good morning, John.

First of all, we are delighted to continue to be part of the key Chrysler program on this heavy duty Dodge Ram, which Mike has already discussed with you.

Guys are bringing it up to speed.

We're very happy with them and happy with ourselves on that.

Point two, we have oodles of opportunity with Chrysler as they are now organized and with their affiliate and their ownership in Fiat.

And we also see that not only in North America, we see that on a global scale.

So we see lots of opportunities.

We're very focused on that.

And I don't want to go any further, because it's still in a discussion point.

David, if you want to add something, please do.

The only other thing I would say is we're going to stay focused in regards to what we think their core brands are.

At the same time obviously we've got to manage any and mitigate any risk that might potentially be there with some of the products.

But we're actually excited in regards to some of the new opportunities that are presenting themselves based on Fiat bringing some of their platforms and their technology and where our technology can meet up with theirs to help drive some of these [CAFE] and fuel efficiency.

Thank you very much.

Thank you, John.

Your next question comes from Rod Lache with Deutsche Bank.

Your line is open.

Good morning, everybody.

Most of my questions were answered, but maybe just a housekeeping one.

Could you tell us what the T-900 production was in the quarter?

Looked to me like it was annualizing at around 780,000.

Is that correct?

The total production -- hold on just a second here.

I have the data.

I've just got to pull it out.

Our total production was around 206,000 units for the GM T-900 program in the fourth quarter, and I would -- I believe that's annualizing closer to about 825,000 to 850,000 annual pace.

Again, remember, the production days in the second half of the year are much lower than the first half of the year.

And much as I said for the early months of 2010, we're tracking around 850,000 pace roughly now or somewhere -- well, four months of history, through January, and the customer release schedules that we have through the months of May now tracking at that same level.

Okay.

So basically you're smack in the middle of the range that you're giving for 2010.

That's the run rate that you were already at right now.

And then you had the $300 million of additional business, so if you're annualizing it, $1.85 billion, with the $300 million of additional business, minus whatever productivity is shared, that's how you're getting to the $1.9 billion to $2.1 billion -- is that correct?

Yes, it is.

But you've got to be careful when you look at that backlog.

There are portions of that backlog that relate to activity that launched in the second half of 2009.

Okay.

So in the early quarters of 2010, for example, we'll be posting our first ever sales in the first quarter for Tata and for the Mack Truck program, but some of those programs were already in a run rate in the fourth quarter.

The $300 million for next year is not all in that calendar year?

No, no, it's all in the calendar year.

What I'm saying is you've got just in terms of evaluating the run rate of that quarter on its own.

Some of the programs are already in the fourth quarter.

Part of that $300 million relates to [what we] realize in the fourth quarter or second quarter, so by the time you get to the third quarter, on a year-over-year basis, it's a push.

I understand.

It's a comparison against the full year 2009, not versus the fourth quarter.

The way to think about the guidance range that we provided is that we've got roughly $1.5 billion in sales this year, 2009.

Last year, really, but 2009.

We've got backlog estimated to launch around [300].

That takes us to about $1.8 billion.

We've got growth expected in the GMT-900 program for sure, the Dodge Ram program.

There's some other programs where we don't expect growth.

So net-net, we're calling for $100 million, maybe $200 million of growth in those programs.

And we have a very conservative -- certainly compared to your expectation, Rod, we have a very conservative view on the SAAR.

We know it's conservative.

We understand that.

If the SAAR turns out to be more like 12.5 million to 13 million, like many are calling for, we'll take a look at our guidance range, and we may have to change it.

We're trying to be cautious about how we're planning for the business, and we don't want to get caught up in a situation where we or others establish expectations for the year that are based on a short-term inventory build and don't have legs because of economic weakness.

Thanks for the clarification.

Thank you, Rod.

Thanks, Rod.

We've got time for one last question.

Your last question comes from Brett Hoselton with KeyBanc.

Your line is open.

David, Mike, Chris.

Good morning, Brett.

Hi, Brett.

First of all, point of clarification.

The free cash flow, wanted to make sure that we're basically including the $49 million in tax refund as well as the $40 million to $50 million cash outflow for the workforce payment.

So the two net against each other, to some extent.

Am I correct in that?

That's exactly right.

Switching gears, the upside for the GM T-900 -- you didn't say that but I'm thinking that.

As we think about the content per vehicle, the $1,400 that you're currently running at -- is that a fair number to use for the GM T-900?

Maybe because of the some of the factors that we discussed earlier today, maybe $1,350, maybe a little bit higher than that.

Between $1,350 and $1,400 is the right blended average rate to use.

And then I'm thinking -- we've been talking 25% contribution margins might be reasonable number to use.

If you're just talking about the specific GM T-900 program, we would be a little higher than that.

Got it.

Okay.

But if you're looking at the blended contribution margin on all of our programs, we were in the 28% incremental margin performance in the fourth quarter sequentially.

Probably 25% ish is a good expectation going forward.

Least for the next couple quarters as we launch new programs, because we're just not going to get a 30% margin on some of the new programs where our fixed cost structure is not totally established.

And you probably won't be able to answer this, Mike, but I just want to ask you this, the tax rate on those incremental numbers, 15%, 20%, 25%?

Would you take a pass on that?

I know it's difficult to say.

As we emerge from this period of time, we expect to emerge from this period of time where we have significant losses in some quarters, profits in others, you get some funky accounting for that.

If we have stable, solidly profitable situation as we're expecting here in 2010 there should be less volatility in our tax provision.

So I think I mentioned to an earlier question, we think the best way to think about the tax provision and in fact the specific way that we're modeling it for our internal purposes is a provision rate of about 15%.

Okay.

Excellent.

It could be a little bit higher, could be a little bit lower, but 15%'s a good estimate as far as we know right now.

Okay.

Very good.

Very helpful.

Thank you very much, gentlemen.

Thank you.

Thanks, Brett and we thank all of you who have participated on the call and appreciate your interest in AAM.

We look forward to talking with you in the future.

This concludes today's conference call.

You may now disconnect.