Good morning. My name is Amanda and I will be your conference operator today. At this time, I would like to welcome everyone to the American Axle & Manufacturing Third Quarter 2012 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) Thank you. Mr. Christopher Son, Director of Investor Relations, Corporate Communications and Marketing, you may begin your conference.

Thank you, Amanda and good morning everyone. I would like to welcome everyone who is joining us on AAM’s third quarter 2012 earnings call. Earlier this morning, we released our third quarter 2012 earnings announcement. You can access this announcement on the aam.com website or through the PRNewswire Services. To listen to a replay of this call, you can dial 1800-642-1687, provide the reservation number 32991103. This replay will be available beginning at noon today through 5:00 PM Eastern Time November 2nd. 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 Global Automotive Conference on November 14th in New York and the Bank of America Leveraged Finance Conference on December 3rd in Florida. We will also participate in the Deutsche Bank Global Auto Industry Conference in Detroit on January 15th and January 16th. 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 President and CEO, David Dauch.

Thank you Chris and good morning everyone. Thank you for joining us on today’s call as we discuss AAM’s third quarter 2012 financial results. Joining me on the call today are John Bellanti, Executive Vice President of Worldwide Operations and Mike Simonte, Executive Vice President and Chief Financial Officer. I’ll open my comments today with some highlights of AAM's third quarter 2012 results. I will also review the status of AAM’s key business initiatives before turning things over to Mike to discuss the financials. After that, we will open it up for a Q&A session when we’re completed. Let me first state that AAM’s financial results in the third quarter of 2012 were highlighted by solid sales growth driven by the launch of AAM’s new business backlog. AAM’s third quarter financial results include the following: First, the third quarter 2012, AAM sales were approximately $703 million. On a year-over-year basis, AAM sales in the quarter were up approximately $55 million. That’s an increase of approximately 8.5%. Second, our non-GM sales in the third quarter were approximately $199 million. On a year-over-year basis, AAM’s non-GM sales increased approximately $25 million. That represents an increase of 14%. Including the impact of the consolidated Hefei-AAM joint venture, non-GM sales were approximately 33% of total sales. For the first three quarters in 2012, AAM sales were approximately $2.2 billion. This represents an increase of $215 million or 11% versus the first three quarters of 2011. And finally, for the third quarter of 2012, AAM reported a net loss of approximately $8 million or $0.11. Our results in the quarter reflect the adverse impact of special charges and restructuring cost of $13.3 million or $0.18 per share. These special charges include $10.1 million of debt refinancing cost and $3.2 million of restructuring cost related to…

Thank you, David and good morning to everybody. David already covered the highlights of our third quarter earnings, so I am going to get into right into the details starting with sales. Net sales in the third quarter of 2012 increased approximately 8.5% to $703 million as compared to $648 million in the third quarter of 2011. This marked the 11th, consecutive quarter with year-over-year sales growth for AAM. On a year-to-date basis through the first three quarters of 2012, AAM sales were at $2.2 billion, up 11% on a year-over-year basis. This is approximately the same sales trend we expect to achieve over the next three years 2013, ‘14 and ‘15. That’s double the rate of growth expected in the US [arc] or the global [arc]. On a sequential basis, AAM’s sales in the third quarter of 2012 were down approximately $37 million or 5% as compared to the second quarter of 2012. The primary driver of this sequential and seasonal decrease in sales was lower production of GM’s full size pickups, SUVs and vans, and what I mean by this are the GMT 900 and GMT 610 programs. In the third quarter of 2012, we shipped product to support approximately 260,000 vehicles in these two programs. This compares to approximately 3000 units in the second quarter of 2012. In total, our sales supporting these two programs, again I am speaking to the GMT 900 and GMT 610, were down approximately $50 million sequentially as compared to the second quarter. An increase in new business launched in the quarter, partially offset to decrease in GMT 900 and GMT 610 volume. In the third quarter of 2012, AAMs non-GM sales increased by approximately 14% on a year-over-year basis to 198.8 million. Adjusted for the impact of our unconsolidated Hefei AAM…

Great, thank you Mike and thank you David. We have reserved some time for taking questions. I would ask that you please try to limit questions to no more than two so we can answer all the questions on the line. At this time, please feel free to proceed with any questions you may have, so Amanda if you can start the Q&A.

(Operator Instructions) Our first question is going to come from Itay Michaeli with Citigroup. Your line is open.

I guess I just wanted to revisit the 12% to 15% EBITDA margin goal that you have had going forward, your latest thinking around that given some of these temporary setbacks; if could talk about that perhaps on the 2013 and even ‘14, and ‘15 basis that will be helpful?

All right, Itay, this is David Dauch, I’ll start first and then I’ll turn it over to Mike. We’ve always said our range was at 12% to 15% from an EBITDA standpoint. The high end of the range is when we have lower material escalation and greater capacity utilization, the lower end is the opposite. And clearly, we are experiencing capacity utilization issues in some of our existing programs today that mean in the end of June, and the RAM program as we go into conversions to get ready for K2XX in the next RAM program. You are aware of the osculation that we have been dealing with all year to the tune of about $40 million to $45 million on the annualized basis. And then obviously we have introduced some operating issues into the third quarter here and based on our launches on a global basis and as I said in my comments, we got a lot of new products, a lot of new facilities with new work force globally around the world and that we’re incurring some launching efficiency that typically we don't incur at some of our well established facilities. So John Bellanti, myself and others are working on those, but that kind gives you where we are at this point in time. Our range is still in that 12% to 15% as Mike indicated to you and we see us getting stronger here in the fourth quarter over our third quarter performance in ‘12. And then we will still have some choppiness maybe into the first and second quarter just because of the critical launches that take place with some of the RAM and the K2XX, but nothing that we should be able to manage within our existing well established facilities. So Mike, do you any comments?

Yeah, first of all good morning Itay, the only significant comment, I am going to add to this is keep in mind that our 12 to 15% EBITDA guidance is long term guidance; its intended to be to true and consistent over a long period of time. There are going to be quarters and we never indicated otherwise, they could be higher or in this case little bit lower than the long term guidance, but we do feel confident that this 12% to 15% range is still the right range to think about in terms of the most probable outcomes for our business over the long term. It is full year still within the range clearly at 12.5% roughly on an adjusted basis and we do expect to improve as we work through the issues that David commented on and reap the benefit of the new business that was launched going forward.

Okay, as my follow-up question I appreciate all the detail around the financial impact in the quarter from the product expense and utilization issues, can you give a sense of what that looks like in the fourth quarter, or either numerically or just order of magnitude relative to the third quarter, those things get a little bit better or same, maybe a little - probably shouldn’t get worse with the $900 production. But just give us a sense of what those items look like sequentially here in the fourth quarter.

Okay, first of all we do not expect capacity utilization to be worse than the fourth quarter. We absolutely do not expect that. We do expect it to improve a little bit. There are fewer down weeks in the fourth quarter and there are a fewer production days. So in terms of that issue we expect it to be at least slightly and maybe a little bit improve, probably a little bit improved over the fourth quarter and we would see a more significant step function improvement in the capacity utilization in the first quarter. And these comments that I made so far relate to North America light truck programs I want to be clear about that. We will see capacity utilization improvements on the other new launch programs that I commented on. The Cadillac APS, the global CUV program, the 31UX will significantly improve those elements of the capacity utilization, and so overall we will be in a improved position in the fourth quarter. The second issue you commented on was the project expense, and in this case we really don't expect much improvement, the run rate of project expense again principally to prepare our facilities and equipment for launch and also to incur [PTAP] costs and other run-off and validation activities to recognize those expenses. We expect that to be relatively flat quarter-over-quarter.

How about the launch cost, just lastly, is that also going to be flattish sequentially.

The launch cost, from our perspective we believe that the third quarter was the trough of performance as it relates to these issues. We are making some measurable improvement in certain activities in the fourth quarter, some activities clearly are going to be hanging with us. But if you listen carefully to what we are saying about guidance, we do expect our fourth quarter to improve but not all the way and some of these operating inefficiencies take more than a couple of weeks to fix. In some cases we need to work them out over two to three, four months, because you got to get new suppliers or our own operations, revalidated or correct it in a way that you just can't do overnight. So we do expect some improvements in those launch costs in the fourth quarter, but over the course of the next two or three quarters we expect our operating performance to be a little choppy, maybe a little weaker than what we saw in the first half of 2012. But as we work through the next few quarters it should improve a little bit as we go and by the back half of next year we expect to be in a much improved situation.

Our next question comes from Rod Lache with Deutsche Bank. Your line is open.

A couple of things, one is just to clarify, I heard you go through the $50 million of capacity utilization impact and $4 million project expense. I missed the launch cost. Could you repeat that number?

Yeah, Rob, we didn’t quantify that number, but certainly our expectations at the 12% to 13% may be 14% EBITDA run rate that we experienced earlier in the year, I think it's fair to say that the significant delta between those expectations and where we ended up in the third quarter had to do with these launch cost.

Okay, and I am just wondering, you know, of these items, the capacity utilization project expense and launch, why do you figure they were unexpected when you published that 8-K earlier in the quarter, and I am also not entirely clear on why these things would diminish when you’ve got $450 million of net new business next year and the K2XX launch? Did the new business, did they go on the same lines? Does that help you in terms of capacity utilization? Could you just give us a little bit more clarity on what's behind your expectation there?

Rob, this is David. In regards to the 450 from next year as it relates to launch cost, most of that business is going down, well established lines or things are in place right now for the GMT-900, we're obviously converting those lines over (inaudible) project expense now. Similar things with the ramp program. The other programs are just going to be going through what Mike was referring to earlier, accelerated launch curves, but the cost to put those lines and debug those lines are in place. So we don’t expect to be seeing the same cost, the experiences that we’ve seen this year, especially here in the third quarter and then clearly on a global basis, like I said, it would give us new work forces, new facilities and new products where they don’t completely understand, may be all the drive (inaudible) the way that our well established facilities do and so there is some lessons learn there and for us in regards that we need to enhance some of the training which strengthen some of the support and that’s exactly what we are doing not only on the existing stuff today, but also the future things for the balance of this year and into next year.

Okay and why were these things unexpected, was there something that occurred relatively late in the quarter that caused them to be a lot larger than (inaudible).

There is a few things one it’s all about customers (inaudible) well over our established capacities but we had to get better in line first and foremost, if we could buy them he is your friend when you have that situation. But in this case it cleared some problem. Second, we had to extend the supply chain that was supporting multiple global programs and that got strained in cash because of this capacity or demand over our installed capacity. Third, our supplier capability and capacity was not in line with the new suppliers we brought on a global basis to support some of these launches. And then as I honestly said we have some of our own internal capacity and capability issues out of our facilities that quite honestly we didn’t expect.

Rob, this is John Bellanti and I would just say that some of these launches involves some significant new technology that we are launching for the first time, some wealthy processes and assembly that we experienced more difficulty than we had anticipated when we originally planted and we are addressing that.

Okay. Specifically with respect to the K2XX launch they’ve got four plants and my understanding is that, that gets spread out over like a year of launches for them. You had mentioned that you think some of these volatility happens over the next two or three quarters. Are you kind of segregating that out of the K2XX launches that expect it to be more smooth?

Yeah we expect the K2XX to be much more smooth; although as Mike indicated that we had roughly 17 weeks of downtime in the third quarter due to customer downtime with schedule adjustments. So we are experience probably 12 during the fourth quarter and an then additional amount but not as many in the first quarter as they continue the preparation for those major model changes that will be in between GM and Chrysler. So we don't expect we have major issues on the K2XX. Several of our products are carry over products, and some of the products that are new are running down similar lines, but just adjustments in [five] to the Axle. And then we have some new technology that AAM and GM are introducing and that’s where our focus will be on some of the K2XX.

Rob, it’s John Bellanti. I will just the K2XX and the Chrysler heavy duty are next generations of launches that we’ve done several times in the past, and we’ve got lot more experience with those launches and shouldn't expect nearly the problems we are having with new customers, new regions, new workforces and new processes.

And then lastly, how should we think about working capital going forward and raw materials?

I will deal with the second matter first; on raw materials we’ve experienced what we expected to experience. This year we commented on the last couple of calls I believe that we expected the margin impact on material cost inflation to be in the range of a 110 basis points maybe a 130 basis points of margin impact, that's up a little bit from the 70 to 90 basis points impact, we expect at the beginning of the year but relatively consistent now for the past couple of quarters as we’ve settled into that run rate. We do expect some material cost inflation into next year, but at a more moderate or lesser rate. We are not going to wait, we are not in the position Rob to give a lot more color and feedback on our guidance for next year but the material cost headwinds are still there in 2013 but to a lesser extent. Working capital this year we dealt with through the last couple of years we've dealt with some unusual items as it relates to accounts receivables. I don't expect any recurrence of those issues next year. Payable has been moving pretty much as expected. So inventory has been the outliner really other than receivables this year. We've got more inventory in the system. We are turn in right now around 12 times, that's significantly lower than the 13 times, 14 times, 15 times that we like to target. I think its probably not reasonable to expect that we could get our turn rate back up to 15 anytime real soon but we need to target that, an improvement here right to the levels say 13 times in the near-term across the next eight to 12 months. So that's really what we are focused on, otherwise I expect our working capital to reflect the growth in our business.

Our next question comes from John Murphy with Bank of America Merrill Lynch. Your line is now open.

To maybe ask this question a different way, we look at the three buckets of capital project expense and launch costs and you kind of quantify that the three of those are sort of $19 million sequential hit from the second quarter, is there anyway to parse that out between the changeover for the GM trucks versus all the other new projects, I mean it sounds like the other new projects or launches are really the bulk of it and the GM truck is a smaller part of it. I'm just trying to understand the breakout between those two?

Okay. John let me address the specific number you mentioned in your question. The capacity utilization issue I mentioned was about $15 million, a significant portion of that probably, two-thirds of that relates to the lower capacity utilization in our North American light truck programs across the GMT-900 dominating that. So a significant portion of that was the lower capacity utilization on higher downtime in the third quarter. We also had a significant downtime on the GMT-610 program that program ran about half of the production level that we saw in the second quarter. So I think relative to your question, that's an important first point. The other issues, most of the project expense and in most of the operating inefficiencies did not relate to the GMT-900 program. Really those are centered around new program launches. We did incur some project expense associated with the getting our plants ready for the Ram heavy-duty series launch, that's for sure, but the EcoTrac all-wheel-drive system launch in 2013, we incurred some project expenses associated with that and then most of the operating inefficiencies had to do with the other program launches and a lot of that was concentrated in Brazil, it has nothing to do with the GMT-900 program.

If I back up that $19 million or so in the third quarter, basically to an EBITDA margin of $12.07, I mean is that the kind of number we should be thinking about for next year? I mean something in the, to the low end of your guidance range I'm just trying to understand how much it would reverse, that all reversed it out that's where we end up?

Yeah, okay, but keep in mind that $19 million does not include the launch cost inefficiencies. So it’s a higher number which we did not quantify. What I said was sort of the gap between the run rate of activity we had in the first half of the year call it 13.5% to 14.5%, and where we ended up after you adjust with capacity utilization. The delta there is the other issues. So we're not ready to make a comment, John about 2013 with any level of specificity. I will say [12/7] seems a light. It seems significantly lower, meaningfully lower than what we're expecting for 2013 but I am not going to say much more than that right now.

If I back in those launch cost, it sounds like that was about almost $10 million hit, is that seem like a (inaudible) in the ball park?

Yes, I mean it's not an insignificant number. It was a pretty big number and when we talk about that number and [Ron] asked a question about why is someone that unexpected. I think the word unexpected in this context has to do with our expectations for the quarter. We clearly had some vision and visibility to these issues and that’s why in part we issued the 8-K in early September to address the fact that we had some of these issues. So these issues don’t occur overnight but they did creep up on uncertainly as we entered this quarter and get more involved in the launch activity and the extent of these issues, your estimate of $10 million not too far off from how we would estimate it but that’s pretty significant matter for us that we are dealing with right now.

I apologize I am asking this question again from different angle. So the $10 million, $4 million of project expense are things that are probably going to fade pretty significantly as we step forward and you get through your launch curves here and the $15 million from a lower cap you should fade as capacity utilization ramps up on new programs and the GMT-900 gets going. So as we look at the second, I mean this sound like stuff that’s going to continue to some extent through the first quarter of ’13 and by the time you get to the back half of ‘13 it may have faded pretty significantly almost completely?

Like we said there is going to be some downtime in the first quarter still tied to expect 900 conversion, so we will experience some of that, but we expect those capacity utilizations to get backup over 90% where they have drifted down because of some of the downtime right now that we are experiencing and we will continue to experience, so you will see fourth quarter of this year, first quarter of next year, some of the existing programs and then the rest of the global programs is just a matter of us working through our launch curves and [really] the accelerated launches of our customers.

Okay and then just lastly as we look at the out years of ’14, ’15, you are going to be launching $400 million to $500 million or so of new programs as it stands now hopefully may be more as you win more, what makes you think that those programs are going to be much more successful and smoother as they ramp up versus what you are going through right now?

The three quarters of our launches this year were on a global basis with new facilities, with new workforce and new products and new technology. We have got a lot of launches next year to still support the 450 or backlog that we talked about for 2013. When you break it down, there is really four major launches within that and that’s the Ram product with Chrysler another global OEM used in the EcoTrac type activity, the K2XX program and then our program with Volvo Powertrain. Those are the four big programs and some derivatives from that and those are for the most part all being launched at existing and established facilities with an experienced workforce.

Your next question comes from the line of Chris Ceraso with Credit Suisse. Your line is open.

So just a few things left to follow-up on, at what point in 2013 do you think that the output on the new GM truck and I guess the same would go for the Ram will outweigh the declining output on the T-900, in other words when do you get to a net positive from a build and a unit perspective, is that not until the third quarter?

Yeah, I say roughly in that area, Chris. I will get some specific there. We clearly understand there is second quarter type launch activity and we will be building both 900 and K2XX on similar lines as the customers can road over to the new program. And then we will have to leave the 900 out while we are accelerating the launch of the K2XX product.

And just one thing I want to add, this is Mike. There is nothing wrong with the 900 product. That’s very good and positive for us and well its true that the balance for the activity will start to swing towards K2XX third quarter certainly by the fourth quarter. We do expect more stable production levels next year on a total basis. And so certainly the impact on our operation should be less on this issue in 2013 then it has been at 2012.

Yeah, the big issue is still with the 900 K2XX conversion as where are going to be running multiple product on the on the same line and have greater changeovers then if we are running K2XX only and have more efficiency in our line. So that certainly impact us a little bit from an overall capacity utilization standpoint or throughput standpoint. So you can chalk that up to launch cars our operating inefficiencies whatever it maybe, but we wouldn’t be realistic if we didn't think we are going to have some increase downtime because of the multiple models we are working with.

I think most of other stuff you have covered a few times, but just one housekeeping item. Do you have a rough ballpark in early estimate on what you think interest expense and your tax rate will look like in 2013?

Yeah, Chris; as a result of the refinancing activity, interest expense should be running in the neighborhood of $28 million or so quarter a quarter. And the good thing about that from a working capital or cash flow standpoint is that we should see relatively constant interest payment activity each quarter, okay so we retime some of the payments and issued CR interest expense matching up a little bit more closely with our interest payments in 2013 and that should smooth out some of the volatile bumps we see right now with most of our interest being paid in the first and third quarter. So that's the first point. Second point on tax, you know some time soon it could very well be the fourth quarter, it might be some time in calendar year 2013, we expect to be in a position under GAAP to reverse our valuation allowance on US deferred tax assets. And what we've said about this issue Chris is that when that occurs and we release that valuation allowance and therefore have a need under GAAP to recognize deferred tax liabilities through our provision. We expect our tax provision rate to increase from the roughly 5% to 10% level that we are referring right now on an effective basis to 15% to 20% or so. So for 2013 we do expect our tax provision to trend up, 15% to 20% is the range that we currently expect and we guided to, I guess you would say for the last three or four quarters as we discuss this issue. Our cash tax provision however should be very low; it should continue to be low as we reap the benefits of those deferred tax assets.

And will it be one of the things Mike where if you go through Q1, Q2 of next year and its still at a low rate but let's say you reverse it in Q3, you are going to have to go back and restate as if you had run it at a 15% to 20% in the first half?

Chris I don't think so, that's a good question. I have to double check, I think the way we have to do it is simply recognize the new tax provision rate going forward from the date we changed those valuation allowances. There could be a GAAP requirement that I am not too in-depth on it; we do in the middle of the year and so we will have to double check that. But the basic idea I know is that at the point of time where we release the valuation allowances, deferred tax liabilities will start to run through our provision and that's going to have to be recognized.

Our next question comes from the line of Joe Spak with RBC Capital Markets.

Most of it has been addressed and I don't want to beat a dead horse, I just want to get some sort of clarification. Based on some of the commentary I think to John’s question it sounds like maybe the detrimental margins on the GMT-900 was about 30%. I know in the past you said you tried to manage at the 25%, is that sort of the type of improvement we should see sequentially?

Yes. Yeah, I mean the contribution margin sort of up and down detrimental, incremental is right around 30% and there was nothing unusual in this quarter as it relates to that matter.

And I just want to make sure when you brought the tax the GAAP loss in the quarter, that's not going to change the reversal of valuation allowance at all for next year?

I'm not sure. Let me what is going to happen and hopefully I’ll answer your question. At the time at which we reverse the valuation allowance, we expect to record a large one-time non-cash gain which would be recognized in our GAAP net income to release that valuation allowance. After that point in time, again the tax provision rate is expected to increase to a range of 15% to 20% and of course that would impact our ongoing net income performance on a quarterly basis.

I guess, and maybe I misunderstood should I thought, you needed to show a certain number of consecutive quarters of profitability for that to reverse. I am just wondering if the actual GAAP loss this quarter changes that all?

So the GAAP requirement while it’s not a bright lime test; the GAAP requirement stems around 12 consecutive quarters of profitability and yes the GAAP results for the third quarter need to factored into that situation just as every other quarter for the last 12 quarters or three years needs to. So yeah that does have an impact and sometime soon, we're right around breakeven, slightly positive on that 12 quarter test. As I said, it's not really a bright lime test, but we work with auditors and we’ll at the appropriate time, when it's right, when we're totally compliant with the GAAP literature, we’ll reverse that valuation allowance. Let me be clear that the context and premise under which I think these comments is that we're confident that we're going to realize the benefit of those deferred tax assets. Yeah, we have a business plan going forward that allows us to utilize those tax assets and that’s why I say and we believe it's only matter of time until we reverse that valuation allowance.

Our next question comes from Brian Johnson with Barclays. Your line is now open.

Good morning. I just want to maybe talk about the longer-term kind of organizational management question. As you think about some of these launch cost issues, it does seem as the first question there to kind of, not really would Axle typically delivers to the marketplace. Both domestically and then as we think about these kind of pods you’ve established overseas how do we get some comfort over the next year three years that we are going to get back to the kind of flawless execution we are used to?

Yeah Brian you hit it spot on. This wasn’t a traditional quarter as you expect or we would expect. It clearly comes down to leadership I take responsibility for the performance as the CEO of the company here. At the same time, I am working with our team to make sure that we address these issues in a timely manner, and that we also have the appropriate leadership and the appropriate region globally in the world to support us. Now we have already made changes to strengthen some of our leadership and some of the outlined global regions with some expats, while at the same time hiring some local nationals as that have drive-by experience there. So that’s a fair question and that’s the response.

Was this really the first quarter outside the US where you had this kind of volume of launch activity; just kind of a shake out all the problems in the system kind of quarter.

We’ve had some global launch issues before but nothing to the magnitude that we are dealing with now. As I said almost 75% of our launching this year were outside of the US that clearly put a strain on the organization and more importantly we didn’t execute to the plan that we put forward, and so therefore as we said earlier as we are putting more resources towards it at the same time some of our suppliers let us down in regards to their capacity and their capability which stressed the system, which created a domino impact. But that’s our job to manage those things and as we’ve demonstrated in the past we’ve done it successfully we didn’t do it this quarter and we need to restore that just come back in the operation and we will do that.

And how you are working on getting kind of timely updates, you certainly want to - Axle in the old days you could walk across the street and see what the plant was up to.

Brian we have daily performance reviews in regards to daily production, daily quality and daily attainments. If there are issues with the supply base our teams are fully aware of it. We have operating committee meetings every week to review the overall performance of the company by region and by plant, and whether at the [edge] we are going to scratch, we are going to put the right resource there; corporate, regional and the plant to get the job done.

Brain, I will just say to that, it’s John Bellanti. I mean operations reviews are in the DNA of our company. We conduct them every month, and I spend about 60% to 70% on my time on the road at these plants looking at daily performance, launch performance and future financial results. We are strengthening that and that’s the actions we take.

And Brain, just as mine and John Bellanti’s personal involvement and leadership then we will get the results.

Our next question comes from the line of Ryan Brinkman with JPMorgan. Your line is open.

All of my questions related to launch concept has been answered. I will just ask then briefly, if you could just help us to understand how you think about acquisition opportunity for the firm?

Well, truly right now our focus is to just adjust our own operating issues first and for most. But as I said when I get - put in my new position here is that we’ll evaluate strategic opportunities as we always do, but we will keep it in balance with the growing organically and also adjusting the other needs of the organization. As you all know we need to strengthen our balance sheet and do level the company from a debt standpoint but at the same time we need to continue to show meaning growth both organic and strategically, and right now we are also focused in regards to address these operations. So we are going to take care of the business that we have first before we start thinking about other things, but at the same time we will actively keep our (inaudible) open and our eyes open for both organic and strategic growth opportunities.

Our next question comes from Ravi Shanker with Morgan Stanley.

Again just a few housekeeping items to follow-up with. I'm sorry if I missed it and you said it; what's your expectation for T-900 production for 4Q.

Ravi it should be relatively close maybe a little higher to what we experienced in the three quarters. That's our current expectation.

And have you gotten any insight from GM as to their plans with T-900 production over the next two or three quarters, given their current inventory levels and the levels of [sell down] they expect.

Yeah, our expectations for production on the GMT-900 program were not really very different at all from what we’ve thought over the last several months, and we expect the total volume of production to improve in the first quarter relative to the third and fourth quarter, get back to a more stable steady overall production level. Clearly next year we will have the transition of product, GMT-900 and K2XX, and as David pointed out they will be building at different facilities. GM will be building both K2XX and GMT-900 products for a good portion of the year. But on an overall basis, we expect that the shelling rates, the inventory levels, the introduction of new truck, all that take into consideration, we expect a good solid production activity in 2013 on these programs. Inventory levels will moderate as we work to the production this year. Today is what October 26, there are only 37 production days left in the months of November-December and there are 60 selling days and just like it does every year, it will help to moderate inventory levels coming into Christmas time.

Understood. We had another supplier say that they expect the K2XX launch to continue for about 18 months to 24 months. You guys have typically said nine months to 12 months. I mean you still see that as the timeline for your launch right?

We are still sticking to the timeline that we communicated earlier. We are not aware of anything else and nothing has been communicated to us.

Understood and then finally any further clarity on the actual launch timing itself. Are you still sticking with second quarter because I mean GM has said they are going to show the truck on December 13, that's maybe a little sooner than people expected but we've also heard other reports that it may actually be coming a later than expected, so are you also sticking to the second quarter?

We are still sticking with the second quarter, correct.

Our final question comes from Peter Nesvold with Jefferies.

Maybe a little bit earlier short one because I did jump on very late, so tell me just to read this transcript if you really just, already (inaudible) all this, so I definitely hear the commitment to getting your launch costs right and frankly it’s a high class problem when you got so much new business coming on. I guess the concern perhaps out there right now is that there are a lot of examples when you get behind the curve on launches, that it’s taken longer than you expect and (inaudible) controls would be the prime example over the last several years. So what's different in this particular case, is there a specific plan to me you point to number one and number two, what would you say is the normalized EBITDA margin, once you do phase in the launch costs, sorry once you phased in the backlog?

Okay, let me take the first part and I will let Mike speak to the second part of it. You are absolutely right. The only way to [beat] a launch is upfront and we got ourselves behind on a couple of these launches, largely because these things that we [can] control but also because of the impact on some of our suppliers. We feel very confident that we can get the supplier things taken care. We’ve already put a lot of things in place. We're localizing some component treats to the regions that are being consumed versus having to incur premium freight, another off standard cost because of their capability and capacity issues. At the same time, we're not looking to invest in any new equipment. We just need to debug some of the existing equipment we have and that’s within our control. So the biggest thing we need to stop is some of the supplier issues that we're dealing with, some of premium freight issues we're dealing with and then deal with the operational inefficiencies that we're dealing with new launch in our minds.

Peter, I want to address the margin question. Earlier on the call, you may have missed it. There was a question that dealt with our long-term EBITDA guidance its roughly 12% to 15%. You asked a more specific question, which is after you launch this business, what do you expect to normalize level of returns to be in the business and what I would say about this is the same thing that again, we’ve said about this over the past couple of years is that overtime we expect our EBITDA margin or any other profit margin to decline a little bit overtime. So that the upper half of that guidance launch or guidance range 13.5% to 15% which is very steadily been since our restructuring was completed in 2009. That’s not really expected to be sustainable over the long-term as we launch this entire new business backlog. That does not mean that we don’t expect to have good solid improved performance in 2013 or 2014, but overtime as a larger percentage of our business is represented by programs that are lower in scale and less volume in scale in GMT-900 or even the Ram heavy-duty series pick-up truck program. We would expect our margins to come down a little bit. From our perspective that’s okay, if we deal with the fixed cost structure that is currently depressing our cash flow performance where (inaudible) specifically is we need to moderate our capital spending. Right now, we are trending little higher than 6%, our long-terms thoughts about that in the range of 4% to 6%. So we need to moderate that a little bit. The second issue deals with pension. We’ve addressed that now. We have no significant pension funding issues for at least the next three years or four years probably a little bit longer than that. So there is no real significant cash call right now in the business associated with the pensions. And the third issue is interest expense. Interest expense can come down a little bit in 2014 time period if we are successful and we are able to refinance the nine in a quarter notes to something lower. There is an opportunity in ‘14 of course the bigger opportunity is to pay down debt by generating cash in the business. We have not accomplished that in the last couple of years, that’s a significant priority for us in the next couple of years. Clearing out the pension obligations, launching this new business and of course clearing out these launch cost problems are keys to our success of being able to do that.

Thanks Peter and we thank all of you who have participated on this 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.