Good morning. My name is Kirk, and I will be your conference facilitator today. At this time, I'd like to welcome everyone to the American Axle & Manufacturing First Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the call over to Ms. Liz Ventigmilia, Manager of Investor Relations. Please go ahead, Ms. Ventigmilia.

Thank you, and good morning, everyone. I would like to welcome everyone who's joining us on AAM's first quarter of 2013 earnings call. Earlier this morning, we released our first quarter of 2013 earnings announcement. You can access this announcement on the AAM.com website or through our -- the PR newswire services. To listen to a replay of this call, you can dial 1 (855) 859-2056, reservation number 32371382. This replay will be available beginning at noon today through 5 p.m. Eastern Time, May 10. 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 2013 High Yield and Syndicated Loan Conference in Chicago on May 21, the KeyBanc 2013 Automotive and Industrial Conference in Boston on May 29 and the Deutsche Bank Industrial Conference in Chicago on June 13. In addition, we are always happy to host investors at any of our facilities. Please feel free to contact myself or Chris Son to schedule a visit. With that, let me turn things over to AAM's President and Chief Executive Officer, David Dauch.

Thank you, Liz, and good morning, everyone. Thank you for joining us today to discuss AAM's financial results for the first quarter of 2013. Joining me on the call today are Mike Simonte, our Executive Vice President and Chief Financial Officer; and John Bellanti, AAM's Executive Vice President of Worldwide Operations. To begin my comments today, I will provide some highlights of AAM's first quarter 2013 results. I will also review the status of AAM's key business initiatives before turning things over to Mike. After that, we will open up the call for any questions you may have. Today, AAM is reporting solid financial results in the first quarter of 2013 with continued sales growth and improved earnings performance. Let me briefly cover a few key points from our first quarter financial highlights. First, for the first quarter of 2013, AAM's sales were approximately $756 million. This marks AAM's 13th consecutive quarter of year-over-year sales growth. Second, non-GM sales were $188.1 million. Included in the impact of our Hefei joint venture, non-GM sales were approximately 30% of total sales for the first quarter of 2013. Third, net income was $7.3 million, and earnings per share was $0.10 per share in the first quarter of 2013. AAM's quarterly results reflect the impact of $11.3 million or $0.13 per share of debt refinancing and redemption cost. Fourth, AAM's profitability in the first quarter of 2013 improved significantly on a sequential basis. Adjusted EBITDA increased 34% sequentially to $86.6 million in the first quarter of 2013 or 11.5% of sales. And finally, in the first quarter of 2013, we took another major step in improving AAM's balance sheet strength. The debt refinancing activities successfully completed in the quarter were highlighted by the issuance of $400 million of 6.25% of senior notes due in…

Thank you, David, and good morning, everybody. David covered the highlights of our first quarter 2013 financial results, so I'll get right into the details and start that discussion with sales. Net sales in the first quarter of 2013 were $755.6 million. That's up slightly versus the $751.5 million in the first quarter of 2012. When analyzing this year-over-year variance, keep in mind that the first quarter of 2012 benefited from an unusually high GMT900 build. In addition, sales for the RAM Heavy Duty program were lower in the first quarter of 2013 as compared to the prior year, primarily due to launch timing of the new 2013 and a half model year program, of course, the precursor to the later launch this year of 2014 model year RAM Heavy Duty series pickup trucks. In total, sales for the major North American light truck programs we support for GM and Chrysler were off by almost $50 million on a year-over-year basis. For the remaining 3 quarters of 2013, we expect strong sales gains from these programs as compared to the calendar year 2012 quarters. In the first quarter of 2013, AAM's sales were adversely impacted by the labor strike occurring at General Motors' Rayong, Thailand assembly facility. We estimate that lost sales in the quarter from this disruption were approximately $12.5 million, and we had previously disclosed this could be as much as $15 million. However, sales in the last week of the quarter were stronger than we expected as GM began the process of increasing production in that facility. AAM's content per vehicle in the first quarter of 2013 was $1,504. Similar to the trend in total sales, we expect this critical metric to increase during the rest of the year, primarily due to additional content we are providing…

Thank you, Mike, and David. We have reserved some time to take questions. [Operator Instructions] Kirk, please go ahead.

[Operator Instructions] And your first question comes from the line of Rod Lache from Deutsche Bank.

A couple of things. One is, could you just talk a little bit about how much your Brazil operations improved sequentially? How far away are you from breakeven, and your expectations for when you would get there?

Okay, Rod. I'll make a couple of comments, and David may want to elaborate a little bit. From a purely financial perspective, we had roughly $15 million of P&L hit from our Brazilian subsidiary in the second half of 2012. We were close to breakeven in the first quarter of 2013, but we were a little shy, probably right around $1 million gross profit loss in the first quarter of 2013. Now the improvements that we're making in that business and the ones that we could tangibly access immediately are around the premium freight activity, getting our operations in line, meeting our daily production requirements, and that's going very well. The other area is the area of pricing, and we commented on the fact that we needed to make some improvements to address the economic inflationary trends in that market, and that the pricing improvements that we have in that business would show up in the first half of the year, and that's exactly what happened, Rod.

Okay. And then just another question on the trajectory of margins just first of all, in the short term from Q1 to Q2 if you could just describe some of the pluses and minuses and how you expect that to flow? And then assuming that you exit the year, this year with 14% margins, can you help us understand just broadly what happens next year? You've said before that you give back some pricing on the new truck 12 months after the launch. Could that be offset by the productivity, the nonrecurrence of the launch costs and volume? Do you believe that this exit rate is something that can be sustainable a little bit through next year? Or do -- some new things come down that kind of bring it back down?

Okay, we'll talk about '14. As you might imagine, we're much more focused on '13 right now. In the cadence of our 2013 margins, there's not a whole lot going on first quarter versus second quarter in terms of major changes to the factors that will affect our profit performance. We expect the sales mix to be roughly flat. In fact, we would expect sales mix to be about flat or roughly the same now for the rest of the year. So we've made the improvement we expect to make in that area. Of course, as it relates to our Thailand facility as it stands right now, customers recovering nicely, and we would expect to regain the margin lost on the strike impact in the second quarter. That's roughly about 40 basis points, Rod. In terms of production performance, we do see some opportunities to make some gains in the second quarter. I wouldn't characterize those as major opportunities. I think we see some better opportunities in the back half of the year as we really strive to get Brazil to profitability, for example. But the one thing that we are facing in the second quarter is again the continuation of launch preparation costs. We don't expect any material increases in R&D quarter-to-quarter. The project expense will probably tick up a little bit. The EcoTrac All Wheel Drive system requires a lot of attention in the second quarter as we get ready to launch that product. And so I think big picture, as we said right from the beginning of the year, around 11% to 12% is the expectation we have for calendar year 2013 first half. We're going to do everything in our power to access the higher end of that range. And if we can exceed it, we'll…

Your next question comes from the line of Chris Ceraso from Credit Suisse. Christopher J. Ceraso - Crédit Suisse AG, Research Division: You just covered a lot of what I was thinking about as well. So not much changed from Q1 to Q2 maybe the expense is up a little bit, but Brazil gets better, Thailand gets better. Is that a decent summary?

Yes, yes. Certainly we're going to try to do better than that kind of put and take watch, but yes, that's exactly right. Christopher J. Ceraso - Crédit Suisse AG, Research Division: Okay. And then I noticed in the quarter if I isolate your business to just the GM revenue and what we believe to be the GM products that you're on, it looked like the content per vehicle was up pretty nicely. Was there anything that changed from let's say the back half of last year to the early part of this year on your content on GM products specifically?

Well, Chris, it's really just mixed math. What I mean by that is the GMT900 was significantly higher on a run rate basis. Recall last year, there was significant downtime in the back half of the year. In the first quarter of 2013, we were up about 35,000 units on that program, and the content contribution on that program is very nice. So no, there wasn't any material change in the nature of the content we're providing, although we did launch the new truck for -- the RAM Heavy Duties, but mostly it's just the fact that the GMT900 volume was up, and that has a positive impact on that calculation.

Your next question comes from the line of Brett Hoselton from KeyBanc.

Back to Rod's question. Outside of price downs, outside of operating efficiencies, do you see any major puts and takes? Obviously, production could be up or down. You've got some new business launches. You want to factor that in, but do you see maybe any other puts and takes that might impact your margins in 2014 in a significant way? And again I'm kind of comparing it to your exit rate versus the second half of '13.

Yes. We think we're going to head into '14 with some tailwind certainly from a production standpoint. The estimates for production on the K2XX program are very bullish at this point in time. And certainly, we would expect opportunity for those to be higher than the production rates that we're seeing in calendar year 2013. If that's true, that's likely also going to be true for the RAM Heavy Duty program and quite possibly the 610 van program. So that could give us an opportunity to have excellent operating leverage and really a darn near perfect environment for us to have a very solid year, both from a profitability and cash flow standpoint, Brett. But as you pointed out, volumes could be up, it could be down. Our perspective this year is to focus on getting our launches made effectively. And if we do that, we're going to exit '13 in a good spot. We're going to set ourselves up for very good performance in '14.

And then secondly, we've kind of seen steel pricing drift a little bit here down, and can you talk a little bit about whether or not you see that as a tailwind or is it even significant? I know you've changed your arrangements with GM. So some of that's going to be passed through and so forth, but would you just generally consider that to be maybe a little gravy or is there actually a potential significant benefit there?

No. Brett, this is David Dauch. As you know, we've got long-term strategic relationships put into place with a number of the different steel mills. We feel that we're buying at a very market competitive level especially based on the fact we're vertically integrated with our forging business and because of the volume level that we put through and utilize therefore, we get the benefit of some of the economy of scale. Clearly, we have the proper material agreements with all of our customers, GM just being one of them, but all of them to make sure that we can pass through the appropriate increases where it applies and where it's been negotiated. But we don't see any substantial change going forward with our business right now.

Brett, if I could just add briefly. The market data that you're tracking, that really reflects the economic risk that is passed through to the customers. The actual base price itself is not following that same trend necessarily, and that's really what drives our economics, so that factor that you're looking at, that would have a much larger impact on GM, Ford, Chrysler and the OEMs that actually take that risk in the supply relationships.

Your next question comes from the line of John Murphy from Bank of America.

This is John Lovallo on for John Murphy. Question for you would be I guess on R&D. It did trail off a little bit in the quarter. I know you guys give some color on this, but I guess what we're trying to kind of think about here it appears to be more efficient use of R&D spend, I mean, versus any kind of program pushouts or delays? I mean, is that a fair way to think about it?

Absolutely. Yes, we put a lot of money into our product and process and systems technology over the years. We're continuing to do that. Not only have we closed some gaps where we had more importantly we've been focused on putting industry-leading technology out there. And now we're bringing in -- we're commercializing it. We're bringing it to market with the EcoTrac Disconnecting All Wheel Drive system, which we said launches later this year. We've also commercialized some of our EcoTrac All-Wheel-Drive technology through our subsidiary there. We've also commercialized and put into production our efficient axles for some of the luxury passenger car work that we're doing. And clearly with how we're changing over the product portfolio with both the RAM and the K2XX, we've got a very modern product portfolio that's out there. And it's a matter of how we continue to advance to stay on the cutting edge ahead of our competition.

Great, that's very helpful.

John, one other quick one I'd add to that. This will be particularly relevant as we work through the year, but the nature of the work we're doing this year, there's a much higher ED&D recovery from our customer base that's going to be factored into the calendar year 2013 activity. That really is different from certainly 2011 and '12. So while the first quarter is really not impacted by that significantly, as we work our way through the year, that will be another factor that reduces our net R&D spending because we have some situations where the customer is actually bearing that cost.

Great. That's very helpful. The second question would be -- is there carryover from Rayong in the second quarter that we should think about?

It should not be significant, John, no.

Yes, no. John, GM is pretty well approaching where the volume used to be prior to the strike. But at the same time, we got to just continue to watch what's going on with their workforce over there. They replaced a lot of their existing workers with replacement workers, but they're delivering a good quality product over there, and we expect volumes not only to stabilize, but hopefully improve going forward or increase.

Your next question comes from the line of Itay Michaeli from Citi.

So I just want to clarify, are you still assuming 1 million units of T900 K2XX production this year? And in your answers to the earlier questions around the 2014 perspective outlook and your formal 2015 target, is the assumption still about 1 million units of production there?

Okay, Itay, let me peel that off one at a time. For 2013, $3.25 billion is tracking right around 1,025,000 units of production. As we said before, the customer is communicating to the supply chain to expect to build more. We are probably now also expecting that. But in terms of the math, $3.25 billion, which is our current guidance is based on around 1,025,000 units of production in 2013. Going forward, '14 -- and I can be very specific about '15, our 2015 target of $4 billion of sales, that is still based on 1 million units of production. There's nothing different about that, and so there's certainly some upside, Itay, that's possible on either of these couple analyses, whether you're looking at '13 or '15.

That's great. And just 2 quick follow-up question on cash flow. One, it looks like CapEx is trending closer to 6% of sales in Q1 or are you maybe tracking a little bit below the full year guide? And Mike this -- the positive free cash flow outlook for the year include I believe the $8.7 million of cash flow impact from the debt redemption?

Yes. Right. So the $8.7 million, we didn't have full visibility to that when we provided our guidance at the beginning of the year, but we certainly hope to be able to absorb that and accomplish positive free cash flow. With respect to the timing of CapEx, it just adds timing. We quite frankly, budgeted and expected our CapEx in the first quarter to be a little higher. And just based on the timing of customer activities. I commented, I think David commented also that we had some timing changes, in some cases, minor delays, I guess you'd say, of certain launch activity. Not anything to be concerned about, but they did move out the timing of certain activities, and so that allowed us to defer some of the CapEx into periods later this year.

Your next question comes from the line of Brian Johnson from Barclays.

A couple of questions about operations in Latin America, including Mexico. First, GM produced 7 K2XX in Silao. Can you maybe give of us some color on the ramp up in Guanajuato? And also are a lot of the validation and quality control costs that you talked about, given your factories going to supply, as I understand that the American factories as well for that product going to be out of the way? And the second one, talk about your Brazilian supply chain.

Okay, Brian, this is David. The K2XX, starting in Mexico, GM is clearly on track. They launched the vehicle on April 29 in Silao. They'll have a later launch at their other light duty pickup truck facility later this year. Everything is clearly on schedule both for General Motors, as well as American Axle at this time. We see no issues at this time, we're prepared for the launch. GM is prepared for the launch and we will follow their ramp up schedule as we move forward. As it relates to some of the heavy-duty product that you talked about coming out of our Three Rivers facility in the future, that's a later year launch or early next year launch. That change isn't as large to the heavy-duty platform as it is to the light duty platforms. So most of the changes are already put into place or pulled ahead into the 900 vehicle. So we don't expect as big of a change at the Three Rivers facility as we're experiencing in Mexico right now. So hopefully that addresses your question regarding K2XX. And then with respect to Brazil, as Mike touched on earlier, we've spent a lot of time in regards to stabilizing the operations. They are making sure that we're meeting all of our daily production requirements building in the quality that I mentioned earlier. We've got -- the pricing issue is being worked on. And as we had indicated, it was going to take us into the second quarter of this year and even into the second half to localize some of our material suppliers to the South American markets, specifically Brazil. That is clearly on track to our plan at this point in time. We still have some validation that we need to work through internally, as well as with our customers in certain cases. So that'll take a little bit more time as we go forward, but some of the things that we wanted to get done are already done and on track. We're ahead of schedule with what we had committed to. So we expected to support the sequential improvement in our financials every quarter moving forward here.

Your next question comes from the line of Ryan Brinkman from JPMorgan. Ryan Brinkman - JP Morgan Chase & Co, Research Division: Just another question on the GM full-sized pickup trucks. There's been a few, but you mentioned in response to the last question that I think you're looking for 1,025,000 units. I guess that's of the combined K2XX and GMT900 pickups and SUVs, and that looks to be unchanged. But I'm curious how you think about that number given that we learned during the quarter, that GM's 5.3-liter V-8 in the Silverado and the Sierra will be surprisingly more fuel efficient than the turbocharged V-6 and the F-Series. Maybe you had a better idea than Wall Street that the fuel efficiency would track as well as it did just because you're close to the program. But if not, does that provide some upward pressure on your outlook? And then just second to that, I think you had felt for a long time that IHS was too conservative on their outlook for the program, but it looks like that they have recently upgraded their full your outlook to 1,081,000 from 1,054,000 last month, which was itself upgraded. So I'm surprised to see that your outlook now below their's. Might that be another reason to think that your outlook could be likely to improve as the year progresses?

Yes, okay. Yes, listen, first of all, I think I had mentioned to Rod -- Itay, I'll be very clear with you. We do see upside potential to the 1,025,000. Itay's question I interpreted to be very specifically around what was the assumption built into the models that drive the guidance. Of course, we have many other programs in our business. So we have not, at this point in time, made an adjustment to our full year sales outlook. But with respect to this program, we do see some upside. IHS has been very conservative now for 2 or 3 years. I think we've noticed the same increase in their outlook for production as you have, and we see that being much more in line with what the customer has been communicating to the supply chain and probably represents a reasonable upper bound for what's going to happen here in calendar year 2013. So we do see some upside on that program, Ryan, and we're very pleased about it. We're very pleased about the expected performance of these vehicles with respect to fuel efficiency, and we do expect it to be a very competitive product given the recent upswing in the overall market conditions, we see this as a major tailwind for our company. Not just the fact that the GMT900 K2XX transition will be good, but we see the strength in this market helping the RAM Heavy Duty program -- the large vans we support for General Motors and many other programs we're a part of. So we see the current market conditions setting up very nicely for our company for the next couple of years. Ryan Brinkman - JP Morgan Chase & Co, Research Division: Great. That's all very good color. Just another one -- you've guided the 7% CapEx as a percentage of sales for the full year. And while we've only just begun the year, it looks like the trend thus far is that your sales are coming a little better-than-expected and your CapEx may become a little bit lower than expected. It looks like about 5.8% of sales in the quarter. So did 1Q maybe track lower than your expectation. You didn't really provide the cadence earlier, I don't think. Or did you always just assume more spending as the year progresses whether that support the K2XX launch or something else that you've anticipated?

Ryan, you and the others should still plan 10% with sales for CapEx for the year. It's just the timing issue as Mike communicated earlier.

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

Just if we could go back to R&D real quick, I think last quarter you said it would be about $3 million to $5 million higher in the first half, but still down for the year. Now it sounds like there's been a little bit of a change in the timing, but also some greater efficiency. So how should we think about -- is that $3 million to $5 million higher still accurate, but maybe pushed out? Or are there actually more savings than you thought a quarter ago?

Yes, Joe, this is Mike. I do think the R&D spend is not likely to be a lot higher than what it was in the back half of last year. That isn't changed in the last 90 days or so as we have managed the timing of the various launches that we have to support, and we have been able to find some efficiencies in our R&D activities, and we've managed to get some things done at a lower validation cost, lower than we had anticipated. I guess that's maybe the best way to say it. So that is an opportunity that we've taken to improve our 2013 cost structure with respect to R&D.

Okay. Great. And then if I sort of back envelope do all the puts and takes you said on the sales in the quarter, it looks like maybe about call it $50 million to $60 million of backlog or new business came in this quarter. Just was wondering if you think that's directionally right and also if that still obviously implies the greater ramp in the back half. Is that how you're thinking about the business coming on this year?

Joe, we said we were going to launch $400 million of business this year across the full year, 1/3 in the front half of the year, 2/3 in the back half of the year. So we're still on schedule for that.

And, Joe, the major -- I'll just add a little bit more color to that. The major programs that drive the sales gain this year are launched. The EcoTrac All-Wheel-Drive system, the K2XX of course, the additional content and the RAM Heavy Duty series pickup truck program. And with the exception of the RAM, those launches are yet to come in terms of financial impact. So that's the reason behind what David just being right on.

Your last question comes from the line of Ravi Shanker from Morgan Stanley.

Your non-GM business was down year-on-year. Can you let us know what exactly drove that and also remind us how much of the backlog comes from non-GM this year and what the cadence of that is going to be?

Yes, Ravi, on a year-over-year basis, we noted that the RAM heavy-duty series pickup truck program was down. And from a dollars and cents standpoint, that's the significant reduction. We did see some additional weakness in some commercial vehicle business, but that was relatively small as compared to the RAM program activity being lower. In terms of launch, we talked about the EcoTrac program being a significant non-GM program this year. Of course, the RAM Heavy Duty series pickup truck programs and other things that we're involved in, in China and India. So we have a higher percentage of non-GM versus GM. I'll get back to you after the call. I don't have the detail with me right now, but it's certainly much more than 50% non-GM business this year. Last year, as you recall, we had a much more GM-centric launch cadence for backlog. This year, it flips, and it's much more non-GM. I think it's in the neighbor of 2/3, 1/3 roughly, but I can confirm that detail for you later.

Got it, and just a follow-up, the EcoTrac launch, I think that's on the Cherokee. So how much of that is in the U.S. versus China?

It's a U.S. program right now.

We thank all of you who participated on this call and appreciate your interest in AAM. We certainly look forward to talking with you in the future.

This concludes today's conference call. You may now disconnect.