Good morning. My name is [Rebecca] and I'll be your conference operator today. At this time I would like to welcome everyone to the American Axle & Manufacturing Fourth Quarter and Full Year 2007 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session (Operator Instructions) I will now turn the conference over to Mr. Jamie Little, Director of Investor Relations. Mr. Little, please go ahead.

Thank you and good morning, everyone. Thank you for joining us today and your interest in American Axle and Manufacturing. This morning, we released our fourth quarter and full year 2007 earnings announcement. 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 p.m. today through 5 p.m. eastern time February 8 by calling 1-800-642-1687, reservation number 29997749. Before we begin, I would like to remind everyone that the matters discussed in this conference call may contain comments and forward-looking statements that are within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future results or conditions but rather are 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 you refer to our filings with the Securities and Exchange Commission. This information is also available on the aam.com website. During the 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 the aam.com website. We are audio webcasting this call through our website, aam.com. This call can be archived in the investor section of the website and will be available there for one year for later listening. During the quarter, we are plan on attending the Morgan Stanley Global Automotive Conference on March 19. In addition, we are always happy to host investors at our facilities either here in Detroit or at other locations. Please feel free to contact me to scheduled visit. With that, let me turn things over to AAM's Co-founder, Chairman and CEO, Dick Dauch.

Thank you, Jamie, and good morning everyone. Thank you for joining us today to discuss AAM's financial results for the fourth quarter and full year of 2007. Joining me on the call today are Yogen Rahangdale, our Vice Chairman, David Dauch, our Chief Operating Officer, and Mike Simonte, our Chief Financial Officer. To begin my presentation today, I'll provide a brief overview of our financial results for the fourth quarter and the full year of 2007. I'll then review highlights of AAM's achievement in 2007, which includes significant progress on our major initiatives that we communicated to you at the beginning of 2007. Finally, I will make a few comments on AAM's 2008 outlook before turning things over to Mike to discuss the details of our financial performance. After that, we will open the call up for questions that you ladies and gentlemen may have. Let me start off by saying that 2007 was a transformational year for AAM. We made significant advances in customer and geographic diversity along with product portfolio expansion. We also strengthened our balance sheet, returned to profitability and generated significant positive cash flow. AAM's operating performance in 2007 was solid. We maintained and improved upon AAM's world class levels of quality, warranty performance, reliability, delivery, new product launch and overall launch success. In 2007, AAM executed various restructuring actions in North America quietly, effectively and humanely. These actions included the production idling of our Buffalo Gear, Axle & Linkage facility on December 21 of 2007. Our company executed these restructuring actions, while we launched and prepared to launch new and expanded facilities throughout the world. Those areas include locations in Brazil, China, India, Mexico, Poland and Thailand as well as locally here in Oxford, Michigan. We are rapidly transforming our company into the truly global…

Thank you, Dick and good morning everyone. We have a lot to cover today, so I'm going to get right in to it. 2007 has now [reached] in the history books as it was a solid bounce back year for our company. As Dick said AAM posted full year 2007 GAAP earnings of $0.70 per share. As we have discussed during the previous calls, this result include the impact of special charges and non-operating cost primarily relating to attrition programs, and remember this company has got hourly and salary programs, and a redeployment of machinery equipment and other actions to rationalize underutilized capacity. In the fourth quarter of 2007, we also incurred $11.6 million of asset impairments. The total impact of these special items with $88.4 million, a $1.11 per share in the full year 2007. AAM's 2007 results also reflect the impact of an additional charge of $5.5 million or $0.07 per share for the write-off of unamortized debt issuance cost and other cost related to the prepayment of $250 million term loan, we made in the second quarter. This loan is otherwise due in 2010. We refer to this activity, as debt refinancing cost, again $0.07 in attrition for the $1.11 of restructuring items. No matter how you look at it excluding item, the including items with tax rate adjustments or without somewhere between AAM's financial results were much improved in 2007 as compared to a loss of $4.42 per share in 2006. Our improvement is even more pronounced in cash flow. We define free cash flow as GAAP cash from operating activities, but yes, I mean the top third of the cash flow statement less CapEx and dividends paid. In 2007 AAM generated $368 million of GAAP cash from operating activities that's more than 11% of sales…

Thank you, Mike and Dick. We have very reserved some time to take questions. I would ask you please limit your questions to no more than two. So, at this time, please feel free to proceed with any questions you may have.

(Operator Instructions) And your first question comes from Itay Michaeli with Citi.

Remind us, where your capacity utilization is today and how you see that progressing over the next two years towards your 90% goal in 2010?

The capacity utilization today on average is about 75%. With the initiatives, we have taken we are moving towards -- by 2009, 10 times same to 90% capacity utilization.

Right, that's helpful. And just moving on quickly, what is your implied assumption for sales of large full size pick-up trucks and SUVs in 2008 just beyond the actual production. What you are looking for sales in particular?

Itay, this is Mike. I think our working assumptions for 2008 that they are going to be reasonably correlated with our production volumes. We see our production volumes down about 8% to 9% in total on the full size programs. We will probably up a little bit higher than that particularly, the GMT 900 program mostly due to that inventory situation and we see result in itself early in calendar year 2008.

Great. And then just finally, I know, you are not talking about EPS and free cash flow guidance, specifically today. But do you plan to provide some guidance later on once the -- your mean contract visibility improves?

Well, we certainly Itay, we will be in a better position to analyze that in just a few weeks and we will reconsider doing that in our next earnings conference probably in April.

Terrific, thank you.

Thank you, Itay.

Your next question comes from Brian Johnson with Lehman Brothers.

How are you looking your operating margin performance in 4Q, it looks like when you back out special items it's about 3%, which should be the lowest operating margin of year. I mean A, is that the right way to look at it? And B, are there operational things beyond the contract, we should be aware of?

Yeah Brian, good morning. Couple of things I'd point out. Our volumes in the fourth quarter were down about 4.5% on an overall basis, a little weaker than the full year and had the impact on our margins, no question. Specific to one program, I haven't mentioned year today the Dodge Ram heavy-duty program was down about 50% on a year-over-year basis. So, in certain parts of our business we did have some challenges relative to volume volatility. We also as you know, we are winding down our operations and we will now idle Buffalo Gear & Axle facility. We are not complaining. We are simply explaining that we ran at a low-level of capacity utilization and efficiency of that operation into fourth quarter and that is now behind us. The other item I mentioned in my comments that had an impact on operating margin, I am not [preparedly] concerned about it quite frankly was the $5 million of non-cash asset disposals we had that were above and beyond the asset impairments. So, appropriate actions to take and reasonably well consistent with our prior experience. We had about $8.5 million with this activity of this year. If you go back and look at our history, we are somewhere between five and ten most of years. That was back weighted this year based on the nature of activity, we had and not really indicative of the run rate of our operations. I think, we felt pretty good about the progress, we made in the fourth quarter. From a margin perspective, we had a bunch of messy things impacting our press release and 10-Q and all that stuff this quarter. But when you step back and see the progress, we are making on productivity, material cost reductions, the improvement we've made on our market cost competitive positions particularly outside the U.S. and a variety of other things that Dick mentioned today. We feel we've got big moment on our side and feel very good about it Brian.

And so that $5 million asset impairment was in part of the special charge?

No, technically it's not impairment.

Okay.

I mean, these are relatively normal course of business activities. We didn't feel as appropriate despite the matter is the impairment or special charge. And I'm not trying to do that right now, just trying to explain that activity was back weighted in the fourth quarter.

Okay. And was there any new backlog I mean, 4Q or any backlog going to or some backlog specific 4Q was it delayed in terms of where revenues came in?

In 2007, Brian.

Yeah, 4Q 2007, was there a delayed backlog that should have hit that?

No, nothing significant. The revenue that we ended up with this -- in our view simply the result of the volumes and mix that we saw and we've described it you, and there were no changes from our expectation.

Okay thanks.

Thank you, Brian.

Your next question comes from the line of Brett Hoselton with Keybanc Capital.

Good morning, gentlemen.

Good morning.

Good morning Brett.

Dick, I've a couple of strategic questions for you. My questions are twofold. First, how do you view the commercial vehicle business? You are obviously involved in England and I'm wondering do you view this as a really good growth opportunity globally for you or is it more of an ancillary business what you currently have?

Well, first of all, the commercial business we've been in since 1998, when we acquired our fully owned subsidiary Albion based over in Glasgow, Scotland. We've been consistently as a management exploring ways over many years on how to leverage their particular expertise of the market especially in the emerging markets. As we take a look at that for example, we just recently announced to you and the public, an order valued in $30, $40 million bucks on MIL in India. There, we created a joint venture, which involves Mahindra and International Truck and as a result, we continue to expand on these kinds of things. So, that's what we are doing. We are focusing on commercial have been since 1998 and we also established an engineering organization in Portland, Indiana to supplement those things.

Would you have an interest at any point in time in making some sort of an acquisition to really accelerate the growth in that area?

If we did, we'll tell you.

Great. Then second question I've for you is and correct me if I'm wrong, Dick. I see your business in two pieces, the forging side of the business and the machining and assembly side maybe that's an incorrect perception. If that's a reasonable way of looking at it, how do you view the forging side versus the machining and assembly side? Do you see yourself continuing to invest and grow, and the forging side, is it a key component, a key asset, is it necessary for what you are doing?

Well, first of all forging is a very, very critical piece of the auto industry. Secondly, it's been around since the difficult times. Third it's still going to be around in the future. Fourth, we've one of the finest forging operations in the world [Barnett]. We've put in incredible investments into it over the last 14 to 15 years. It continues to help us and if you look at our track record the best quality, the best warranty, the best engineering, the best reliability on the road of anybody in our business in the world obviously forging has its contribution or we custom it for future business discussions on that potentially.

Okay, very good. Well, thank you very much gentlemen.

Thank you.

Your next question comes from Rich Kwas with Wachovia.

Yeah, just -- yeah, can you hear me?

Yes, we can hear you Rich. Good morning.

Good morning.

Good morning, Mike question here on these charges today, I'll hit the top line or is there some in SG&A?

Almost substantially all to the point I can say almost all of these charges hit the cost of good sale line.

Okay. And then, just remind me on the tax rate on a continuing ops bases you back this out, it seems like you got a tax credit this quarter, is that correct?

Well, yeah. What I described in my comments Rich was that I don't call it a tax credit item although R&D tax credits, foreign tax credits obviously they are credits embedded in our tax provision run rates. But in the fourth quarter we had about $4 million or 8 pennies per share upside associated with discreet item adjustments, as they refer to in their accounting whether it's -- these items will basically return to provision adjustments and little bit of currency translation impacted both to our provision and these were unusual items that arguably could be stripped out and viewed as nonrecurring. That's why I pointed them out.

Okay, perfect. And then just Dick on the quotable activity here the $800 million when we think about that from a geographic perspective? What are the split between non-North American, North America and then when you look at that business, its mostly non-GM within the North American keys would you be able to share what percentage of that business you're quoting in North America?

Richard, this is David Dauch. The majority of the business that we're quoting right now is non-GM related business the substantial amount is non-GM related. And I'd say based on the distribution between North America and global opportunities, there is probably a 50-50 split right now.

But they are sizable opportunity here in North America?

Yes, it is.

Okay, thank you.

Thank you, sir.

Your next question comes from Himanshu Patel with J. P. Morgan.

And Mike --Dick, I'm sorry, as I missed the miss part of this. Can you review the non-restructuring sort of one-time nonrecurring items you mentioned? I think you highlighted three of them, asset impairments, some transitional cost associated with Buffalo and then the non-cash asset disposal items?

No problems. First of all, you mentioned three times, I will review them. Asset impairment side, we characterize as restructuring and we've characterized as restructuring in our release. In addition to those asset impairments, we had approximately $5 million of ongoing normal activity in PPD disposals. Our typical run rate, as I said in this area is somewhere between 5 million to 10 million. For 2007, it was about 8.5 in total and in spite of that hitting the fourth quarter. So, little bit disproportionately affecting our results in the fourth quarter. Okay, so differentiate it from asset impairment. I mentioned really two other factors that impacted our margin performance in the fourth quarter. I mentioned that we had lower volumes in the fourth quarter as compared to other periods that our volumes were down 4.5% overall in that period compares to a 3.5% downside variance for the year. And specifically I pointed out that the Dodge Ram heavy-duty program was up about 50% in the fourth quarter on a year-over-year basis.

Can you able to quantity the impact of the underutilization at Buffalo this quarter?

No, I'm not going to get into all those details Himanshu. But it was worth mentioning significant not to mention and I think you and your comments this morning pointed out little bit lower operating margin performance overall for the quarter and I think these items explain that.

Okay. Couple of other questions. I know the union contract talks, it's a sensitive issue, but can you just refresh us for what happened in the last UAW contract talks in terms of timescale. When did the conversations really accelerate? How long did it take after the contract expired for you guys to set along something?

It's more important to take a look at what we are doing today and we started talking informally with the UAW, I think that's the union you are specifically talking about, maybe a couple of years ago and more formally let's say, middle of December of last year and we are now February one. Our contract expiration is February 25, 11:59. So, we've got about 3.5 weeks of intense work to you as a joint team.

Okay. Two separate questions. One, I think, you mentioned something about several sub-suppliers that you guys ended up assisting in 2007. Is that a way to quantify the cost associated with that and I guess my bigger question is, is there something on that front that is concerning you more now than it was at the start of the year?

Himanshu, let me tag-team this. I'm going to answer the financial aspect of this question. I also ask David Dauch to provide a little bit more color on the supply chain implications. What I said was the [required] rate handled approximately 25 bankruptcies and that is embedded in our net material cost reductions of approximately $15 million. We've many of these types of issues to manage every year. They are a little bit more acute in the calendar year of 2007, but we were able to overcome those and still achieve our financial goals in this area.

Okay and to continue with that as we mentioned earlier, we managed through about 20 different bankruptcies last year. Obviously it had some financial impact that was contained within the material productivity that we contributed to our overall performance. 2008 can be a difficult year on what we still factor that into our material performance which we expect to be favorable and positive in 2008 also.

I guess, my question is, I mean, given the magnitude of the production cuts in North-America in the first half. Could we've a situation where the fragility of some of these tier two suppliers as kind of retested in the first half? I mean, do you see the situation potentially being kind of at a cusp now where things could get considerably worse over the next six months or you don't have any reason to say that right now?

For our AAM, this is Dick Dauch talking. We have a solid supply base and we have nothing to announce today. We just have good stability and we are working coordinated with them. I want to put something in perspective. When we started our company, we only did our sourcing in two countries; U.S and Canada. Today, we source throughout the world 30 countries, five continents. We've more than doubled our cap price and sales. We are significantly reducing and rationalizing our supply base. We've much stronger supply base, much better technology and better financial situation. If we've something else to share, we’ll share with you at the right time.

And lastly, Mike have your provided any tax rate guidance for '08?

We provided no earnings or tax rate guidance of any sort for 2008. What I'd point out is that we'll continue to have healthy profitable growing operations outside the U.S. that will be taxed at rates much lower than the statutory rate of 35%. Depending on what happens in the U.S. both with the volume environment as well as our ongoing opportunities to improve our cost structure, is anybody's guess, where we end up on that relative to 2008.

Thank you.

Thank you, sir.

Your next question comes from Chris Ceraso with Credit Suisse.

Hi.

Good morning Chris.

Mike, just one more to follow-up on the tax thing just to make sure I understand where the numbers come from. Is it fair to think about it like okay, in the U.S. you had a loss of let's just pick a number 50 million bucks and that generated favorable tax of 35% on that? Outside the U.S. maybe your profit was 60 million or 61 so that you netted a positive 10 or 11, but the tax rate on that was maybe 15%. So, net you had positive pretax income, but a tax benefit as opposed to a tax provision, am I thinking about that right?

You're thinking about that it exactly right. I'm not commenting on the precision of your estimate. But you got exactly the right though process and that's exactly what I've been explaining, that's how, I'll look at it.

Okay, thanks. You mentioned the adjustment to your equity because of the favorable discount rate move in the pension and healthcare balances? Do you care to give us a feel for what that might do to the P&L expense of those two items in '08 versus '07?

We're not going to say anything about 2008, although you are right to point out that would have an impact. If you look at our previous disclosures about the impact of the 50 basis point movement in our discount rates, I think you'll get a pretty good indication and of course, that's why we require that types of disclosure.

Okay, that's helpful. And then on steel cost overall what are you seeing right now and I know you are expecting to achieve savings but is the market for steel and your cost of steel looking more challenging in '08 than it was in '07?

We actually see it being fairly stable. We've been in negotiations with several of our large steel suppliers most recently. So, we feel very comfortable where we are with our current contracts and commitments from our supply base.

Okay, thank you all very much.

Have a great day.

Your next question comes from Rod Lache of Deutsche Bank Securities.

Can you provide, just a rough number on the year-over-year savings that you are anticipating from the restructuring. It's just that what you've executed so far? How much benefit would that give you year-over-year in '08? And what exactly are your expectations from material cost changes; I know, you said its favorable '08 versus '07?

Yeah, Rod. This is Mike and well I'm sorry to treat this question this way. We probably have more color later date but we are just not in a position to provide earnings guidance right now. I think your basic analysis is right that we do see continuing favorable trends from this area. We've given you some broad indication that the structural cost reductions are well in excess of $100 million in total. And I look forward to answer that question because we think that it's going to be a very positive story for our company once we've more information about where exactly we've in 2008.

Did some of the 100 million flow into 2007.

Absolutely.

So, okay but you are not giving any color then on -- this is not an incremental savings from BSP and so forth.

Well, we've said, I'm not sure I totally understand your question Rod. You are saying is the $100 million incremental to 2007?

Right. Well, it's not incremental to 2007 but you've executed certain things over the fourth quarter including that BSP?

Exactly right. The SAP that was put in place largely in the fourth quarter of 2006. The first quarter of 2007 had a major positive impact in allowing our company to generate cost reduction in excess of $100 million. During the course of 2007, we had various salary attrition program activities. We of course have these rationalization activities relating to capacity utilization and other things that we are actively working on, you know exactly what that is. So, we're going to be well in excess of $100 million and there is going to be incremental opportunities for us in 2008 and we are working on that right now.

Okay, and on the raw materials

On the raw material side, I think David answered that question. We saw about $15 million of savings now two years in a row. We would expect to have similar and consistent opportunities in 2008 and that's our working assumption as we go forward.

Right. And can you quantify the amount of backlog that you are launching this year?

Rod, what we've said about our backlog as we've got about $800 million launch within the next three years. Substantial portion of that we are launching in 2009 and 2010, although we'll see some up pickup force in the fourth quarter, it's going to be reasonably small percentage 10% to 15% probably of about $800 million.

Okay, thank you.

Have a great day.

Thanks. We have time for one last question.

Your final question comes from the line of David Leiker with Robert W. Baird.

Can you hear me alright?

Yes. Good morning, David.

Hi, David.

Thanks. I've a couple of housekeeping items and then a bigger picture question. Your non-GM revenue base, I mean that's predominantly the Ram truck. How much of that is the Ram?

The

I think the different way to say is Chrysler is…

Yeah.

Around 10% to 12%

Exactly

Of our total revenue, multiplicity of components and you know how much of that is Ram.

I can figure that one out. Thank you. As you look at your footprint changes that you have been going through here? How far through that cycle are you or what percentage of that you've completed today?

Well, we're certainly happy with where our progress is today and as we've indicated we have gone from five troubled locations to around 30 at the end of this year. And we are extremely comfortable with where we are at especially with the way the world demographics are going and we got a couple of more that we'll announce at the right time.

Okay. So, I mean, they are everywhere that if you can't get North America kind of moving assets around how much of that is completed?

I did not understand your question at all.

You are moving your assets from the idle facility in Buffalo to other location. How much of that work is completed?

We've already announced what we are doing on that.

Okay. I mean, in terms of the [moves are down] and the costs are behind you?

David there is yeah there is not very much in the way of cost to be incurred on that. We still have some opportunities to redeploy some assets that are currently not being used. We told you that that would occur over roughly a three year time period in 2007, 2008, 2009, so that by 2010, we are going to be at 90% better capacity utilization. That's our plans and we are on track. We've incurred a fair amount of that cost in 2007 and when we provide guidance for 2008, if there is anything significant we'll include that in our guidance.

So, when you hit that 90% utilization do you have the margins you reached in the past?

David as we talked about before our margin performance as compared to where we were in the past and I think you are referring to the golden days of 2003, when we said there is really two major factors that have caused our margins to decrease. Three, I guess in one sense, one is the increased cost of materials and although we've a good success in the last couple of years, achieving material cost reductions we still have the elevated levels of metal market cost that may or may not go away. So, I'm not sure because we just can't control that part of the commodity market. I'm not sure whether that's going to be the case. But we would need that metal market cost to moderate back to levels that we saw that and we get all the way back to that sort of 14%, 15% levels is what we see right now.

Okay. And then just lastly here and I understand and appreciate the difficulty on providing guidance. But just see if you can put some things in some buckets. If you take your revenue line and you get your normal priced out and you got the volumes and you got the new business coming through. In 2008, would you expect your revenues to be up or down from what you are using in your macro assumptions right now?

David in our Form-8k filing this morning and I think also at the auto show conference we said that we would expect our volumes to be down 8% to 9% in total maybe 15% in the first half of the year and today we clarified that means with a range of $3 billion to $3.1 billion of sales in 2008.

Okay. And then -- again and the contracts that you got this labor negotiation and no one really knows how that's going to transpire, if you excluded that do you think your profitability is up or down on an operating basis in '08 versus '07?

David, you and everyone else is trying to take me down on that. We are simply not going to provide any guidance today. We look forward to providing that guidance as soon as we can get a better handle on the total picture. I think it's dangerous and just not prudent to speculate on all of these pieces until we understand the whole picture.

That 'I'll try another way.

Fair enough.

Thank you, David.

Thank you.

Thank you, David. And we thank all of you, who have participated on this call and appreciate your interest in American Axle & Manufacturing. We certainly look forward to talking with you in the future.

This concludes today's American Axle & Manufacturing conference call. You may now disconnect.