Good morning, my name is Sharon, and I will be your conference operator or facilitator today. At this time, I would like to welcome everyone to the AAM's Third Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. I would like to -- I would now like to turn the call over to Mr. Christopher Son, Director of Investor Relations, Corporate Communications and Marketing. Please go ahead, Mr. Son.

Great. Thank you, Sharon, and good morning, everyone. I'd like to welcome everyone who is joining us today on AAM's Third Quarter 2013 Earnings Conference Call. Earlier this morning, we released our third quarter of 2013 earnings announcement. We also filed a Form 8-K, which contains an updated backlog disclosure. You can access these announcements on the aam.com website or through the PR Newswire services. To listen to a replay of this call, you can dial 1 (855) 859-2056, reservation number 85771783. This replay will be available beginning at 2 p.m. today through 5 p.m. Eastern Time, November 8. 2013. Before we begin, I would like to remind everyone that the matters discussed in this call may contain comments and forward-looking statements that 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 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 the reconciliation of these non-GAAP measures to GAAP financial information, is available on the aam.com website. Over the next several months, we will be participating in the following conferences: the Barclays 2013 Global Automotive Conference in New York City on November 13, the Bank of America 2013 Leveraged Finance Conference in Florida on December 3 and the Deutsche Bank Global Auto Industry Conference in Detroit, Michigan on January 15. Finally, we are also happy to host investors at any of our facilities. Please feel free to contact either myself or Liz Ventimiglia to schedule a visit. With that, let me turn things over to AAM's Chairman, President and CEO, David Dauch.

Thank you, Chris, and good morning to everyone. Thank you for joining us today to discuss AAM's financial results for the third quarter of 2013. Joining me on the call today are John Bellanti, our Executive Vice President of Worldwide Operations; and Mike Simonte, our Executive Vice President and Chief Financial Officer. To begin our discussions today, I will first provide the highlights of AAM's third quarter 2013 results. Then I will review the status of the key quarterly developments before I turn things over to Mike. After Mike covers the financial side of our comments, we will open up the call for any questions you may have. Let me first state that AAM's financial results in the third quarter of 2013 were highlighted by solid sales growth, improved margin performance and positive free cash flow. AAM's third quarter financial results include the following. First, AAM sales in the third quarter of 2013 were $821 million, up approximately 17% on a year-over-year basis. Second, EBITDA nearly doubled to $113.4 million in the third quarter of 2013 as compared to $56.8 million in the third quarter of 2012. EBITDA margin was 13.8% in the third quarter of 2013 as compared to 8.1% in the third quarter of 2012. In the third quarter of 2013, there were special items in the amount of $5.8 million, which adversely impacted AAM's EBITDA margin. Excluding these special items, AAM's adjusted EBITDA margin was 14.5%, which is much improved on a year-over-year basis. Third, AAM generated more than $20 million of positive free cash flow in the third quarter of 2013. The combination of strong sales growth and improved daily production and launch performance that drove our positive results in the third quarter position us for a strong finish here in 2013 and a good start…

Thank you, David, and good morning, everybody. Today, I will review the highlights of our financial performance in the third quarter of 2013. David covered the basics, so I will get right into the details, starting with sales. Net sales in the third quarter of 2013 increased nearly 17% to approximately $821 million. This compares to $703 million in the third quarter of 2012. The year-over-year increase in AAM's third quarter sales relates primarily to the impact of new business launches, including higher production volumes for GM's full-size pickups and SUVs and Chrysler's new Ram Heavy Duty series pickups. This accounted for approximately 3/4 of the increase. The other major driver of our sales growth in the third quarter is higher sales of AAM's newest driveline products, supporting rear-wheel drive and all-wheel drive passenger car and crossover vehicle applications. The biggest gains in this area of the business supported GM's Cadillac product line and global small vehicle program. In addition, the initial shipments of the EcoTrac Disconnecting All Wheel Drive system, in support of Chrysler's Jeep Cherokee, contributed nicely as well. The combination of AAM's strong position in the North American light truck market and the rapid expansion of our rear-wheel drive and all-wheel drive passenger car and crossover vehicle business will power AAM's sales growth over the next several quarters. On a sequential basis, AAM's sales in the third quarter of 2013 were up approximately $21 million or just under 3% as compared to nearly $800 million in the second quarter of 2013. Again, the primary drivers of the sequential increase in sales were higher shipments to General Motors for their full-size pickups and SUVs and higher sales of our products supporting passenger car and crossover vehicle programs. That's a consistent theme on a year-over-year basis and also a…

Great. Thank you, Mike, and thank you, David. We reserved some time for some questions, as Mike indicated. [Operator Instructions] . And so at this time, please feel free to proceed with any questions that you may have. I'll turn it over to Sharon.

[Operator Instructions] Your first question comes from Itay Michaeli from Citigroup.

So, Michael, I was hoping we could do a little sort of rough walk into the fourth quarter margin-wise. You do have strong sequential revenue growth, maybe some lower GM truck mix. Can you just give me your sense of kind of what we should think about in terms of the big bucket sequent? Just because your full year EBITDA margin range is still pretty wide. Maybe give us a sense of what could cause it to come at the high end versus the low end?

Okay, Itay. The -- I think you've hit on some of the most important issues relative to the fourth quarter of 2013. We do expect lower GMT900, K2XX production, not for really any reason other than a couple. One is there are fewer production days in this quarter and the second is that they're going to wind down GMT900 production and get ready to launch the K2XX SUVs and heavy-duty pickups early next year. So as is the case many fourth quarters, the aggregate amount of volume we expect in that program will be a little bit lower than what we saw here in the third quarter. So from a mix perspective, you're right. The margin profile of the business we're running in the fourth quarter should be a little lighter. The other issue that we talked about relative to the third quarter being a benefit, really, will -- we don't expect to continue into the fourth quarter and that's relative to our SG&A expense. We expect that to climb back pretty close to run rate. SG&A expense -- I'm sorry, R&D expense, I meant to say, should be up. Run rate of R&D that we anticipate is closer to $27 million a quarter than the $23 million we had in the third quarter. That was aided not only by the timing of product validation activity, but also the customer ED&D recoveries. So we do expect our SG&A expense to be higher in the fourth quarter of 2013. Those are probably the 2 most significant issues, Itay, in terms of walk-in performance from the third quarter into the quarter fourth quarter.

Okay. And any way to think about how the incremental margin on some of the new business coming on the fourth quarter, maybe -- does that offset some of these issues sequentially?

Yes, we're going to have -- look, we've got an opportunity in the fourth quarter to put a lot of people to work in Three Rivers on the EcoTrac all-wheel-drive system. We've been carrying, as you know, a lot of fixed costs in that facility. We were due to launch that program early in the year, in May, and for a variety of reasons, still slower than we thought. But hey, it's a great product. The markets going to love it and the customer is now ramping up to the run rate of activity we expected. So that's going to help a lot in terms of covering those fixed costs that heretofore really have not been properly covered, Itay.

Great. And then just lastly, a big-picture question. You disclosed on -- some nice backlog beyond 2015, I guess about $400 million through 2017. How does that tie into your kind of long-term CapEx expectation? Can you still bring CapEx down to that kind of 5% to 4% range that you previously talked about, even with this pretty healthy backlog beyond 2015?

Yes. Itay, this is David Dauch. As we've said, this year, our CapEx would be higher than the average that we put out or the guidance that we put out. And we feel very confident that we can operate in that 4% to 6% range, which we communicated earlier. So no change to that plan.

And, Itay, I would just add, incrementally, the change timing of some of the launches, specifically the one launch that moves out of the '13 to '15 time period and into the '16 to '17 time period, that should have an impact and, in this context, a positive impact on our CapEx in the near term, because we just defer some of those expenses out a little bit longer.

Your next question comes from Ryan Brinkman from JPMorgan. Ryan J. Brinkman - JP Morgan Chase & Co, Research Division: How should we just broadly think about the stronger-than-expected EBITDA margin in the quarter? Is that mostly a function of the fact that the higher-margin GM full-size truck business was a greater portion of the total as other programs were softer or pushed out, or is it also partly or materially attributable to something else that you might be doing from an execution or cost standpoint?

Ryan, this is Mike. I'll take that one. Look, in the third quarter, as we've said, we had really good conditions for peak margin performance, a very high capacity utilization on the K2XX, GMT900 program. Not just aggregate volume, but daily volumes were very good and that was great. We also had this SG&A run rate that was significantly below trends. So I think that's probably the factor that you need to take into consideration. If you look at the run rate of the full-size truck program at GM and how it impacts our business, we were at around 53% of total sales in the third quarter for this program. And as we work our way into 2014 and launch other programs, we think that will work its way under 50%. So there is, as we commented on for a while now, there will be a lower concentration of activity related to that program, in terms of our overall sales and margin profile, but that's still going to be a strong program for us next year. And the run rate that we had in the third quarter on a total volumes basis should be about the same as the run rate we expect next year. We'll still have some ups and downs on a quarterly basis based on production schedules and the number of production days, but overall, 285,000 units is pretty close to the run rate we anticipate next year. Ryan J. Brinkman - JP Morgan Chase & Co, Research Division: Okay, great. And GM, on its earnings call, Wednesday, said that it was working with you on some supply issues related to one of its V8 engines supporting the K2XX. They seem to have good line of sight on the call into resolving any sort of issue before the launch of the SUV variance, which I think is scheduled for January. Can you just give us any more color on what the issue exactly entails and when, presumably, I guess, in the fourth quarter, that you expect to be able to resolve the issue?

So, Ryan, this is David Dauch. First, let me make it very clear that AAM is meeting and exceeding our customer contractual requirements. We're obviously working very closely with General Motors to address what the market demand is out there and, as I indicated in my other comments, some of the unanticipated powertrain mix shifts that were taking place in the marketplace versus when the program was originally defined. So we're working with them on that. In regards to adjusting our mix as it relates to installed capacity, while also looking at and implementing additional capacity where required. I'm not going to get into the details as to when all that will go into place, but we expected to be able to be in a position to support the balance of the K2XX launch as we move forward. One thing I will point out is that the Fort Wayne facility, which is the one that's really been impacted on this, in the past, has run both light-duty pickup, as well as heavy-duty pickup. Light duty, in the past, represented about 85% of that production; and heavy duty represented about 15% of that production. They are not building any heavy duty at that facility at this point in time, only light duty, which is in line with the other capacity that we have put into place to support that. So as the heavy duty comes back online also at Fort Wayne, then it'll get the mix back in order. At the same time, as I indicated to you, we're working with them to address any changes in the market demand so we can truly align our capacity with that new market demand moving forward, so.

Your next question comes from Rod Lache from Deutsche Bank.

Just to follow up on that question. So it sounds like GM is thinking they're going to need more of the 9.5-inch axles and fewer of the 8.6-inch axles so that they can produce more of these V8s and fewer of the V6s. Just from a high level, is that a -- shouldn't that be somewhat of a positive for -- from American Axle's perspective, just given the higher content, or are there negative issues associated with just having to stretch your capacity versus your prior plan on the 9.5-inch ones?

Yes. Rod, this is David again. First and foremost, I mean, this is a great problem to have, okay? First, the truck is red hot in the marketplace, as we said. You're absolutely correct in regards to what we have to deal with some of the adjustments and the shifts in regards to products sizes. We're doing that. But as I indicated earlier, this will be a win-win for both General Motors and AAM when it's all said and done, when we get the capacity and the mix in line with what the market demand is. So we know what we need to do. We're in concert with General Motors regardless of what we need to do. And in the meantime, we're going to continue to run well above our contractual capacities to support the incremental volume that's there.

Okay. And just secondly, I was hoping you could maybe just give us some high-level comments about this level of profitability that you're achieving in the back half of this year. Obviously, this quarter, that was maybe 40 or 50 basis points from the lower R&D. But should we be able to extrapolate from this, to some extent, into 2014? What are some of the puts and takes that we should be thinking about there? Is there any reason to believe that the margins should be going below that level?

Okay, Rod, let me take it. The margin sustainability issues and the sort of puts and takes that we're going to be dealing with heading into 2014, we've already talked about a couple of them. And that is that the K2XX concentration and, for that matter, the combination of K2XX and the Ram Heavy Duty, a major North American light truck programs we have, there'll be a smaller percentage of the overall business. Still contributing very nicely, but on an overall margin basis, they'll contribute a little bit less in terms of percent of sales. On a dollar basis, we expect them to contribute more. So please don't misunderstand what I'm saying. The second issue is SG&A in the third quarter, again, commented on significant run rate lower than what we expect going forward. We expect that to pick up again in the fourth quarter. And it could grow a little bit even beyond into the '14 calendar year. That's what we expect right now based on the opportunities we have for new business, quoting, and things of that nature. Other issues to keep in mind for next year, we do have productivity commitments that we have committed to General Motors on the K2XX program. We talked about that publicly many times before. Those are in the neighborhood of 1% of sales. We don't disclose the exact terms and conditions of those productivity commitments, but we have those commitments beginning 1 year after the launch. And so they'll commence in 2014. Other than that, our launch costs should be about flat. While we will see a reduction in project expense and startup, as I mentioned before, we expect R&D to step up little bit. So the overall -- and when we launch this new business backlog, we get a more diverse top line, a little bit less concentration on just the 1 or 2 major North American light truck programs. We do expect our margin profile to run a little bit lower than where we were here in 2013 third quarter, but still to support good growth for us if you look at the longer-term trends. We were around 12% in 2012 on an adjusted basis. We're a little short of 13% on a year-to-date basis this year and we see opportunities to extend beyond that 12% to 13% range we've had over the last 7 quarters, in the fourth quarter this year and into 2014.

Okay. And just lastly, real quick. You mentioned that some of the 2014 launches have been pushed out. The 2015 backlog is unchanged versus your prior numbers. So shouldn't that have gone up if that gets pushed up, presumably from '14 to '15, or was there something else that offset that?

No. I think based on what we've covered with you with respect to the program delay on one of these light vehicle products, you can kind of calculate what that delay is based on the fact the '15 launch doesn't change and the 5-year backlog stays pretty well intact with the exception of $100 million. So it pushes that $150 million of the $250 million out into the '16, '17 calendar year period of time, from the '15 period of time we were talking about earlier.

Your next question comes from Brett Hoselton from KeyBanc.

Okay. So I guess I'm going to just kind of a follow-on with what Rod was asking you about the 2014 margins because -- I mean, I think that's the crux of the issue for you guys. So you did 14.5% EBITDA margins in the third quarter, 50 basis points due to the SG&A expense or 14%. It sounds like K2XX, your expectations, production-wise, into next year, kind of flattish. Is -- did I hear that correctly, from the third quarter level?

Yes, that's exactly right. If you look at that third quarter level, you multiply it by 4, you're right in the area of IHS guidance for 2014. And while I don't consider that the Bible on this topic, we -- that happens to be very much in line with expectations for next year.

Okay. And then as we think about the -- let's say, the 14.5% that you booked here in the third quarter, how do we think about inefficiencies, launch costs and various other things impacting that 14.5%, whether it'd be K2XX and/or Brazil?

Okay. So first of all, let me clear something up. I never said the SG&A issue is 50 basis points of margin impact. In fact, if you look at the adjusted SG&A for the quarter, it's around $52 million. It should be probably running closer to $60 million. That's more like 100 basis points of margin, just to clear that up. I don't really have anything different, Rod, to offer or to say really than what we've already commented on -- I'm sorry, Brett. It's really similar to Rod's question that's why I mentioned his name. We had -- we have a good solid production outlook for the K2XX program. We have a solid backlog of new business coming on, particularly with contributions from the EcoTrac all-wheel-drive system. That should drive a significant amount of non-GM sales growth over the course of the next year and put a lot of people to work at Three Rivers, as I commented earlier. All that is positive and should allow us to expand our margins beyond the 13% level that we're operating on for a year-to-date basis this year. We're going to offset some of that good guy news with the productivity commitments, little bit of inflationary pressures that we're going to see. We don't see an expansion or acceleration of material cost inflation, but we do see some lingering issues there. So those types of cost pressures take a little bit of the upside away, probably in terms of trying to think about running at 14.5% on an extended basis. But we do see some margin expansion opportunities. We're focused on executing that.

And conceptually, as we look out to 2015 guidance, I know that you used the word exceed. And so the 12.5% margins that the guidance implies, obviously, well below the 14.5% you booked here in the third quarter. You've talked in the past about your mix of business shifting and the GMT900 being quite profitable and then the launch business being a little less profitable, that being a bit of a headwind. But I'm also sitting here thinking, you're launching a lot of that new business this year and you're hitting 14.5% margins, or 14% or 13.5% or whatever. The -- your margins are actually very good this year. What's -- what, potentially, could cause some maybe additional headwind as you move into the going-forward years? Just increased mix of that business, is that what you're...

The biggest trend issue as you look out 2, 3, 4 years of our business is the mix of business that we're going to run. We're going to become a much more diversifier. We're targeting parity between GM and non-GM sales. And if you look at other diversification characteristics, a percentage of North American light truck vehicle versus other types of businesses, passenger car and other markets around the world, we're going to become much more diverse. And we're going to look a lot like the competition, more in terms -- not just in terms of sales concentration but also margin. And so what we've been particularly focused on is making sure to address the cost drivers in our business. And I'm speaking specifically of things like pension, funding, interest expense, CapEx. These -- what we referred to as sort of the fixed cost cash drivers in our business, we are making good progress reducing those. And so we feel that we can make a successful transition to a lower overall margin profile that will look a lot more like peer companies in our industry and still generate a very strong healthy free cash flow out during this time period. And you said it right, we're not saying our margin in 2015 is going to be 12.5%. We're simply illustrating that we expect our business to grow to about $4 billion by that time period and that we expect to generate substantial EBITDA and substantial free cash flow. And that's the reason for commenting on the magnitude of profitability that we expect at that time period. So at this moment in time, we'd be disappointed at 12.5% in 2015. So we certainly are targeting a higher-margin performance in that time period.

Your next question comes from John Murphy from Bank of America Merrill Lynch.

John Murphy. First question is on the delay in the backlog, if you will. I mean, what is the impact that you expect in the fourth quarter from that, on the top line?

We're not going to talk about the specific revenue expectations in detail, but I kind of mentioned on the budget for the capacity increase program being approximately $20 million -- $27 million. I think it was $23 million in the third quarter. It'll be similar to fourth quarter. So that will carry through and that probably is the most significant issue in that regard. The EcoTrac system, like I said, is operating pretty close to run rate here and we anticipate that being very strong in the fourth quarter.

That's helpful. And if we think about the cancellation at the Rayong facility, is there any reason to believe that this is anything but an isolated incident? I mean, I guess the point is, are you still pretty confident in your international operations?

This is solely an isolated incident. We're very confident in our international operations.

Your next question comes from Joe Spak from RBC Capital Markets.

Just maybe a couple of procedural and then just one a little bit longer term. The higher D&A in the quarter, I'm assuming that's because you had to start expensing that even if they're -- for something like EcoTrac is messed up [ph], even if there wasn't -- even if the sales were below what you originally expected. Is that fair?

That's exactly accurate.

Okay. And then, so you expect to begin to get to a better run rate on that program sometime in the first half of next year?

Yes. I think on that particular program, we should be at a much better run rate in the fourth quarter.

Okay. On -- and on the plant capacity, which was pulled back in Thailand, had you -- have guys made any investments for that, that now need to be maybe written off?

Let me -- yes, investments were made. We're working with the customer right now to address that commercial issue. And based on the resolution of those commercial discussions, we'll make some decision with respect to what we need to do. At the same time, we'll evaluate our backlog and new business. Then, and like we've done in the past, if we can reallocate equipment, then we'll reallocate it to other programs.

Yes, let me be clear. When we think about -- exactly what David said, one thing we're not planning to do, don't expect to do and don't have any reason to think we should, is have an impairment charge to write off that equipment. It's good equipment. It's really outstanding equipment. And we've got this business to load on it. In some cases, in Thailand, with programs that are in the backlog, if we need to move it around a little bit to support what we're doing in other factories, we have that ability. So we do not anticipate any accounting charges associated with that issue. I want to make that clear.

Okay. And then I just want to -- Mike, I think -- I thought heard you say the non-GM sales in the fourth quarter would hit about $300 million. I just wanted to confirm that. And then is that sort of the right base -- I recognize there are going to be some seasonality -- but to start thinking about the non-GM portion of the sales going forward?

Yes. So, Joe, what I said was we do expect to approach $300 million in sales in the fourth quarter. And yes, we -- as -- just by virtue of everything else we've said, we do expect that run rate of sales to stay at that level and increase as we're targeting parity in our total non-GM sales and GM sales by around the 2015 time period. So yes, we would expect that to start ramping up even more as we launch other significant parts of our backlog.

Okay. So, I mean, recognizing that, that picks up but there was also -- again, just trying to think of a '14 and '15 margins. So that's maybe a little bit of a headwind. But because it's sort of lower than expected prior, shouldn't that be margin mix accretive because -- or I guess what are we missing? How do we cross those 2 issues, I guess?

Well, the growth in our non-GM sales, the only difference from what we had been previously thinking are short-term issues in terms of launch timing in a couple of these programs. Big picture, the cadence and the overall activity levels associated with these non-GM programs that we feel will help us achieve parity in GM and non-GM sales, so that didn't change much. So, I mean, there is an issue and it really doesn't matter whether it's GM business or non-GM business, other than the K2XX program, as we commented on, a very unique program, very large program and a program that requires huge investment to support and, therefore, demands a higher margin profile in order to pay back. So that and the operating leverage, it can be achieved on a program that has over 1 million units with relatively little proliferation of product numbers and whatnot complexity. That's the reason why our margin profile changes over time. It's not really solely dependent on non-GM business.

Right. I guess what I was referring to was, in the past, you've talked about the new backlog. This is coming on at lower margins. And as you're launching a little bit less now in 2014, is there a little bit of a margin pickup from that?

Yes. In 2014, there is a situation where a sizable portion of our backlog launching next year relates to the new content on the K2XX program, new content on the Ram Heavy Duty series program and the launch, if you will, the full ramp on the EcoTrac system. And keep in mind, we've had fixed costs in place on -- in Three Rivers for that program now since early this year. So the margin, we have a better margin conversion opportunity in 2014 relative to the backlog than what we anticipate in 2015 and '16 because of the concentration of business in these 3 programs.

Your next question comes from Brian Johnson with Barclays.

Two questions. First, as you roll out the backlog, you're getting into markets like India, deeper into Brazil that have created kind of landmines for some of the other -- both around currencies, supply chain. Where are you addressing those and how should we think about those in the margin progression?

On the supply chain side -- I mean, this is David, let me address that first, then Mike can address on the margin side of things. We've established our footprint in a lot of these different emerging markets: India, Brazil, China and other places, as we've discussed before, Thailand. We're pushing very hard for local sourcing, local production, to try to mitigate some of the foreign exchange that takes place there. Obviously, we're dealing with inflationary issues and economic issues that have to be dealt with each and every year there. And we work with our customers and suppliers with respect to how we handle that from a commercial standpoint. And then from a financial standpoint, Mike, I want you to address the question with respect to margins there.

Yes. Brian, this is another way to illustrate the point that we commented on earlier in the call. As our business becomes more diverse and we take on more exposure to these markets, in the case of Brazil and India, as you commented on, markets that have much more complex regulatory environments, higher costs associated with inflation, risks and those types of things. We have to adapt what we're doing and we have to change the commercial approach we take with our customers. We need to change the way we think about the business. And we need to think about how much capital we put in these businesses relative to the overall risk-adjusted return expectations. So these areas, particularly India, do have lower overall margin expectations in our business profile and, we believe, our peers. But the trade-off is that we can put less capital to work in some of these markets to support these programs. And so we still found, we believe, some attractive investment opportunities, albeit with lower capital intensity, so that we can justify a lower margin profile. This is all part of the transition we'll make over the next 2 to 3 years to a lower overall margin profile, just simply -- our business was still heavily concentrated on the K2XX or North American light truck programs. As we become more typical with the rest of the industry, our margin profile will step down a little bit.

Okay. And second, just quick follow-up. The 2015 backlog, 2 questions. One, are you still assuming roughly 1 million K2XX at that time? And two, are there any costs and deferral of backlog in terms of installed capacity that will impact the overhead cover then?

Okay. So a couple of things. Our expectations were that K2XX program going forward is higher than 1 million units. That program should run around 1,080,000 units this calendar year. We already commented on the 1,150,000 range expected for next year, which is fairly close to our estimates of what straight-time capacity is for that program at the OE level. So no, the answer to your question is no. We expect that K2XX program to run higher than 1 million units.

Your next question comes from Ravi Shanker from Morgan Stanley.

Mike, if I can just follow-up on what you just said. Is that uptake in K2XX production estimate for '15 the reason why you're able to hold '15 guidance even with the backlog getting pushed out?

Yes, that's right. Although keep in mind, our guidance was not a point estimate, so we never intended to communicate that our sales were -- or our sales guidance, if you will, for that year was $4 billion. Obviously, with the backlog getting pushed out a little bit, it takes our challenge a little tougher. And you're exactly right. Based on where we are at this point in time, higher North American light truck volumes are offsetting some of the weakness we've seen in the backlog launch time. That's correct.

Got it. And I apologize if I missed this. Where there any cost disruptions from you running up against capacity for K2XX this quarter?

Yes. From a financial perspective, we were running above capacity, as David pointed out. We shipped tens of thousands of that, so above those contractual capacity levels. We have operated on a 70 basis to a significant degree and we have incurred some premiums associated with that. Some that customers borne and some we're eating. So the answer to your question is yes. We are running at a higher cost profile at the time being.

So the net impact is small?

Well, the net impact, I don't know that I would characterize it as small. But I would say that in the context of the program and the huge fixed cost investment we have in that program, the opportunity we have to earn back a margin, it's not disrupting our business. Our margin conversion is lower than it would be in the absence of these costs. So as David pointed out, we're evaluating what needs to be done, working very closely with GM. This program is off to a great start, very successfully received in the market. And there may be reasons we need to adjust our capacity going forward. We will assess that with the customer and we'll do you as directed.

Got it. And just finally, regarding the EcoTrac program. The customers had some fairly well-publicized transmission issues, which has delayed the commercial launch of the program. Can you confirm that the transmission software issues have nothing to do with the drivetrain?

That's a separate independent issue associated with the transmission itself. But remember, the 9-speed transmissions are first to market itself. They clearly had some issues with the development of that product from a software standpoint. It does not impact what we're doing from a Disconnecting All Wheel Drive systems standpoint. We're prepared for the launch. At the same time, Chrysler's released a lot of that product now to commerce and they're accelerating their launch curve. Just delayed from what the original program timing was.

Your last question comes from Emmanuel Rosner from CLSA.

Two really quick questions for me. The first one is your content-per-vehicle. I was a little bit surprised recently with your modest sequential improvement between the second and third quarter in light of what I would have assumed is generally a bigger mix of K2XX versus last quarter. How should we think about content-per-vehicle as we go through the rest of the K2XX launch for the next -- to the next year or so?

Okay. Emmanuel, our content-per-vehicle, while it was fairly more consistent with the second quarter, it was up 6.5% on a year-over-year basis. What you tend to see on a quarter-to-quarter basis is some variance in that content number based on the mix of heavy-duty and light-duty product. And then in the third quarter of 2013, we had a heavier concentration of light-duty product, both due to seasonal trends, as well as the launch activity on the K2XX, which, as you know, is concentrated on the light duty side this year. So the way we think about that issue is that it's going to grow. And we commented -- I commented earlier today, we expected to meet and exceed $1,600 per vehicle sometime early next year. And in -- that, I think, is a better way to look at it. If you compare that $1,600 to the aggregate full year content of around $1,475 in calendar year 2012, you're up just short of 10%, which is consistent with our expectations that we've communicated publicly now for a couple of years.

Okay. No, that's great. And then just finally, on the Thailand backlog cancellation. Just for a little bit more specificity, is it the customer that's canceling your program expansion, or are they canceling American Axle's participation in their program?

No, it's the customer canceling their program, not AAM's involvement in the program. We will continue to supply product for the original base program, but the capacity expansion program has been canceled by the customer.

Thanks, Emmanuel. And thanks, everyone, for those who participated on this call. We appreciate your interest in AAM and we look forward to talking with you in the future.

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