This management's discussion and analysis (MD&A) should be read in conjunction
with the unaudited condensed consolidated financial statements and notes
appearing elsewhere in this Quarterly Report and our Annual Report on Form 10-K
for the year ended December 31, 2020.

Unless the context otherwise requires, references to "we," "our," "us" or "AAM"
shall mean collectively (i) American Axle & Manufacturing Holdings, Inc.
(Holdings), a Delaware corporation, (ii) American Axle & Manufacturing, Inc.
(AAM, Inc.), a Delaware corporation, and its direct and indirect subsidiaries,
and, (iii) Metaldyne Performance Group, Inc. (MPG) and its direct and indirect
subsidiaries. AAM Inc. and MPG are wholly-owned subsidiaries of Holdings.

COMPANY OVERVIEW



We are a global Tier 1 supplier to the automotive industry. We design, engineer
and manufacture driveline and metal forming technologies that are making the
next generation of vehicles smarter, lighter, safer and more efficient. We
employ approximately 20,000 associates, operating at nearly 80 facilities in 17
countries, to support our customers on global and regional platforms with a
focus on quality, operational excellence and technology leadership.

Major Customers



We are a primary supplier of driveline components to General Motors Company (GM)
for its full-size rear-wheel drive (RWD) light trucks, sport utility vehicles
(SUVs), and crossover vehicles manufactured in North America, supplying a
significant portion of GM's rear axle and four-wheel drive and all-wheel drive
(4WD/AWD) axle requirements for these vehicle platforms. We also supply GM with
various products from our Metal Forming segment. Sales to GM were approximately
38% of our consolidated net sales in the first six months of 2021, 40% in the
first six months of 2020, and 39% for the full year 2020.

We also supply driveline system products to Stellantis N.V. (Stellantis) for
programs including the heavy-duty Ram full-size pickup trucks and its
derivatives, the AWD Chrysler Pacifica and the AWD Jeep Cherokee. In addition,
we sell various products to Stellantis from our Metal Forming segment. Sales to
Stellantis were approximately 19% of our consolidated net sales in the first six
months of 2021, 16% in the first six months of 2020, and 19% for the full year
2020.

We are also a supplier to Ford Motor Company (Ford) for driveline system
products on certain vehicle programs including the Ford Bronco Sport, Ford Edge,
Ford Escape and Lincoln Nautilus, and we sell various products to Ford from our
Metal Forming segment. Sales to Ford were approximately 11% of our consolidated
net sales in the first six months of 2021, and were approximately 12% for both
the first six months of 2020 and the full year 2020.

No other customer represented 10% or more of consolidated net sales during these periods.



COVID-19 Update

In the first six months of 2021, our operations continued to return to more
normalized levels of production and we did not experience significant reductions
in production volumes as a result of the impact of COVID-19. Continuing to
sustain increased levels of production will depend on future developments,
including the number of COVID-19 cases reported, the potential reimplementation
of shelter-in-place orders, and customer production levels, which are outside of
our control. We continue to monitor the impact of COVID-19 on our operations, as
well as the operations of our customers and suppliers, as a resurgence in cases
could have a sudden and significant impact on our operations, financial
condition and financial results.
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RESULTS OF OPERATIONS -- THREE MONTHS ENDED JUNE 30, 2021 AS COMPARED TO THREE MONTHS ENDED JUNE 30, 2020

Net Sales Net sales were $1,283.3 million in the second quarter of 2021, as
compared to $515.3 million in the second quarter of 2020. The increase in net
sales in the second quarter of 2021, as compared to the second quarter of 2020,
primarily reflects increased production volumes as net sales in the second
quarter of 2020 were adversely impacted by an estimated $947 million associated
with the decline in global automotive production as a result of COVID-19. Net
sales in the second quarter of 2021, as compared to the second quarter of 2020,
also increased by approximately $82 million associated with the effect of metal
market pass-throughs to our customers and the impact of foreign exchange related
to translation adjustments. These increases were partially offset by a reduction
in production volumes on certain vehicle programs that we support as a result of
the semiconductor shortage that is impacting the automotive industry, the impact
of which we estimate to be approximately $162 million for the second quarter of
2021.

Cost of Goods Sold Cost of goods sold was $1,093.3 million in the second quarter
of 2021, as compared to $614.2 million in the second quarter of 2020. The change
in cost of goods sold principally reflects the net increase in production
volumes on the vehicle programs that we support as we estimate that cost of
goods sold in the three months ended June 30, 2020 was impacted by approximately
$648 million associated with the decline in global automotive production volumes
as a result of COVID-19. Cost of goods sold in the three months ended June 30,
2021 also increased by approximately $105 million related to metal market costs
and the impact of foreign exchange. These increases were partially offset by a
reduction in production volumes resulting from the semiconductor shortage, which
we estimate reduced costs of goods sold by approximately $116 million for the
three months ended June 30, 2021.

In the first quarter of 2021, one of our Major Customers announced its intention
to cease production operations in Brazil in 2021 as part of their restructuring
actions. This decision impacts certain of the programs that we support and, as a
result, we have accelerated approximately $11 million of depreciation on certain
property, plant and equipment in the second quarter of 2021.

For the three months ended June 30, 2021, material costs were approximately 60%
of total cost of goods sold, as compared to approximately 41% for the three
months ended June 30, 2020. Material costs as a percentage of cost of goods sold
was impacted in the second quarter of 2020 as a result of lower product
shipments caused by COVID-19, which drove lower material costs and caused fixed
costs to be a greater component of cost of goods sold.

Gross Profit  Gross profit was $190.0 million in the second quarter of 2021, as
compared to gross loss of $98.9 million in the second quarter of 2020. Gross
margin was 14.8% in the second quarter of 2021, as compared to (19.2)% in the
second quarter of 2020. Gross profit and gross margin were impacted by the
factors discussed in Net Sales and Cost of Goods Sold above. While we were able
to significantly reduce our variable costs during the three months ended June
30, 2020, the sharp decline in sales that began during the first quarter and
extended into the second quarter as a result of the impact of COVID-19, as well
as the magnitude of the decline in sales, resulted in a reduction of both gross
profit and gross margin.

Selling, General and Administrative Expenses (SG&A) SG&A (including research and
development (R&D)) was $86.2 million or 6.7% of net sales in the second quarter
of 2021, as compared to $73.8 million or 14.3% of net sales in the second
quarter of 2020. R&D expense, net of customer engineering, design and
development (ED&D) recoveries, was approximately $30.1 million in the second
quarter of 2021, as compared to $31.7 million in the second quarter of 2020. The
increase in SG&A in the second quarter of 2021, as compared to the second
quarter of 2020, was primarily attributable to higher compensation-related
expense, as temporary salary reductions were implemented in the second quarter
of 2020 in response to COVID-19 and as a result of higher incentive compensation
accruals in the second quarter of 2021. These increases in SG&A were partially
offset by lower net R&D expense.

SG&A as a percentage of sales was higher during the three months ended June 30,
2020, as compared to the three months ended June 30, 2021, due to lower sales in
2020 as a result of COVID-19.

Amortization of Intangible Assets Amortization expense related to intangible assets was $21.4 million for the three months ended June 30, 2021 and $21.6 million for the three months ended June 30, 2020.

Restructuring and Acquisition-Related Costs Restructuring and acquisition-related costs were $15.9 million in the second quarter of 2021 and $11.3 million in the second quarter of 2020. See Note 2 - Restructuring and Acquisition-Related Costs for additional detail.


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Loss on Sale of Business In the second quarter of 2021, we completed the sale of
our remaining ownership interest in a consolidated joint venture. As a result of
the sale, we recognized a loss of $0.1 million in the three months ended June
30, 2021.

Operating Income (Loss)  Operating income was $66.4 million in the second
quarter of 2021, as compared to operating loss of $205.6 million in the second
quarter of 2020. Operating margin was 5.2% in the second quarter of 2021, as
compared to (39.9)% in the second quarter of 2020. The changes in operating
income (loss) and operating margin were primarily due to factors discussed in
Net Sales, Cost of Goods Sold and SG&A above.

Interest Expense and Interest Income  Interest expense was $49.9 million in the
second quarter of 2021, as compared to $54.6 million in the second quarter of
2020. Interest income was $2.6 million in the second quarter of 2021, as
compared to $3.0 million in the second quarter of 2020. The weighted-average
interest rate of our long-term debt outstanding was 5.9% in the second quarter
of 2021 and 5.5% in the second quarter of 2020.

Debt Refinancing and Redemption Costs In the second quarter of 2021, we made a
voluntary prepayment of $138.8 million on our Term Loan B Facility due 2024 and
$4.2 million on our Term Loan A Facility due 2024. As a result, we expensed
approximately $1.3 million for the write-off of a portion of the unamortized
debt issuance costs that we had been amortizing over the expected life of these
borrowings.

Also in the second quarter of 2021, we issued an irrevocable notice to the
holders of our 6.25% Notes due 2025 to voluntarily redeem a portion of our 6.25%
Notes due 2025 in the third quarter of 2021. In July 2021, this resulted in a
principal payment of $100 million and $1.8 million in accrued interest.
Subsequent to June 30, 2021, we expensed approximately $1.4 million for the
write-off of a portion of the unamortized debt issuance costs that we had been
amortizing over the expected life of the borrowing, and approximately
$3.1 million for the payment of an early redemption premium.

Other Income (Expense), Net Other income (expense), net includes the net effect
of foreign exchange gains and losses, our proportionate share of earnings from
equity in unconsolidated subsidiaries, and all components of net periodic
pension and postretirement benefit costs other than service cost. Other income
(expense), net was income of $0.6 million in the second quarter of 2021, as
compared to income of $0.1 million in the second quarter of 2020.

Income Tax Expense (Benefit) Income tax expense (benefit) was expense of $2.4
million for the three months ended June 30, 2021, as compared to a benefit of
$43.9 million for the three months ended June 30, 2020. Our effective income tax
rate was 13.0% in the second quarter of 2021, as compared to 17.1% in the second
quarter of 2020.

During the three months ended June 30, 2020, we finalized an advance pricing
agreement in a foreign jurisdiction, which resulted in a tax benefit of
approximately $6.8 million and we recognized a tax benefit of approximately $7.0
million related to our ability to carry back projected current year losses under
the CARES Act. In addition, during the three months ended June 30, 2020, we
recognized a tax expense of approximately $36 million to establish a partial
valuation allowance in the U.S. This partial valuation allowance was released in
the third quarter of 2020 as a result of final regulations issued on July 28,
2020 by the Internal Revenue Service and the U.S. Department of Treasury.

Our effective income tax rate for the three months ended June 30, 2021 varies
from our effective income tax rate for the three months ended June 30, 2020 as a
result of the items described above. For the three months ended June 30, 2021
and 2020, our effective income tax rates vary from the U.S. federal statutory
rate of 21% primarily due to favorable foreign tax rates, as well as the impact
of tax credits and the effect of the items described above.

Net Income (Loss) Attributable to AAM and Earnings (Loss) Per Share (EPS) Net
income (loss) attributable to AAM was income of $16.0 million in the second
quarter of 2021, as compared to a loss of $213.2 million in the second quarter
of 2020. Diluted earnings per share was $0.13 in the second quarter of 2021, as
compared to diluted loss per share of $1.88 in the second quarter of 2020. Net
income (loss) attributable to AAM and EPS for the second quarters of 2021 and
2020 were primarily impacted by the factors discussed above.

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RESULTS OF OPERATIONS -- SIX MONTHS ENDED JUNE 30, 2021 AS COMPARED TO SIX MONTHS ENDED JUNE 30, 2020

Net Sales Net sales were $2,708.4 million in the first six months of 2021 as
compared to $1,858.8 million in the first six months of 2020.  The increase in
net sales in the first six months of 2021, as compared to the first six months
of 2020, primarily reflects increased production volumes as net sales in the
first six months of 2020 were adversely impacted by an estimated $1,116 million
associated with the decline in global automotive production as a result of
COVID-19. Net sales for the first six months of 2021, as compared to the first
six months of 2020, also increased by approximately $126 million associated with
the effect of metal market pass-throughs to our customers and the impact of
foreign exchange related to translation adjustments. These increases were
partially offset by a reduction in production volumes on certain vehicle
programs that we support as a result of the semiconductor shortage that is
impacting the automotive industry, the impact of which we estimate to be
approximately $225 million for the six months ended June 30, 2021.

We are monitoring the semiconductor shortage as it may continue to adversely
impact automotive production volumes. Due to the uncertainty associated with the
semiconductor shortage, the ultimate impact on our net sales and results of
operations is unknown.

Cost of Goods Sold Cost of goods sold was $2,291.3 million in the first six
months of 2021 as compared to $1,762.4 million in the first six months of 2020.
The change in cost of goods sold principally reflects the net increase in
production volumes on the vehicle programs that we support as we estimate that
cost of goods sold in the first six months of 2020 was impacted by approximately
$770 million associated with the decline in global automotive production volumes
as a result of COVID-19. Cost of goods sold in the six months ended June 30,
2021 also increased by approximately $144 million related to metal market costs
and the impact of foreign exchange. These increases were partially offset by a
reduction in production volumes resulting from the semiconductor shortage, which
we estimate reduced costs of goods sold by approximately $159 million for the
six months ended June 30, 2021.

In the first quarter of 2021, one of our Major Customers announced its intention
to cease production operations in Brazil in 2021 as part of their restructuring
actions. This decision impacts certain of the programs that we support and, as a
result, we have accelerated depreciation on certain property, plant and
equipment beginning in the first quarter of 2021. The impact on cost of goods
sold of this acceleration was approximately $22 million in the first six months
of 2021 and we expect the full year impact to be approximately $32 million.

For the six months ended June 30, 2021, material costs were approximately 60% of
total costs of goods sold as compared to approximately 51% for the six months
ended June 30, 2020. Material costs as a percentage of cost of goods sold was
impacted in the first six months of 2020 as a result of lower product shipments
caused by COVID-19, which drove lower material costs and caused fixed costs to
be a greater component of cost of goods sold.

Gross Profit  Gross profit was $417.1 million in the first six months of 2021 as
compared to $96.4 million in the first six months of 2020. Gross margin was
15.4% in the first six months of 2021 as compared to 5.2% in the first six
months of 2020. Gross profit and gross margin were impacted by the factors
discussed in Net Sales and Cost of Goods Sold above. While we were able to
significantly reduce our variable costs during the six months ended June 30,
2020, the sharp decline in sales that began during the first quarter and
extended into the second quarter as a result of the impact of COVID-19, as well
as the magnitude of the decline in sales, resulted in a reduction of both gross
profit and gross margin.

SG&A SG&A (including R&D) was $176.2 million or 6.5% of net sales in the first
six months of 2021 as compared to $164.1 million or 8.8% of net sales in the
first six months of 2020. R&D expense, net of ED&D recoveries, was approximately
$61.8 million in the first six months of 2021 as compared to $68.3 million in
the first six months of 2020. The increase in SG&A in the first six months of
2021, as compared to the first six months of 2020, was primarily attributable to
higher compensation-related expense, as temporary salary reductions were
implemented in the first six months of 2020 in response to COVID-19 and as a
result of higher incentive compensation accruals in the first six months of
2021. These increases in SG&A were partially offset by lower net R&D expense.

SG&A as a percentage of sales was higher during the six months ended June 30,
2020, as compared to the six months ended June 30, 2021, due to lower sales in
2020 as a result of COVID-19.

Amortization of Intangible Assets Amortization expense related to intangible
assets for the six months ended June 30, 2021 was $42.9 million as compared to
$43.4 million for the six months ended June 30, 2020.


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Impairment Charges In the first six months of 2020, the reduction in global
automotive production volumes caused by the impact of COVID-19 represented an
indicator to test our goodwill for impairment. As a result of this goodwill
impairment test, we determined that the carrying values of our Driveline and
Metal Forming reporting units were greater than their respective fair values. As
such, we recorded a total goodwill impairment charge of $510.0 million in the
first six months of 2020. See Note 4 - Goodwill and Other Intangible Assets for
further detail.

Restructuring and Acquisition-Related Costs Restructuring and
acquisition-related costs were $33.4 million for the six months ended June 30,
2021, as compared to $28.9 million for the six months ended June 30, 2020. We
expect to incur approximately $50 million to $65 million of total restructuring
charges in 2021. In addition, we expect to incur approximately $5 million of
integration charges in 2021 as we finalize the integration of ERP systems at
legacy MPG locations. See Note 2 - Restructuring and Acquisition-Related Costs
for additional detail regarding our restructuring, acquisition and integration
activity.

Loss on Sale of Business In the first six months of 2021, we completed the sale
of our ownership interest in a consolidated joint venture. As a result of the
sale and deconsolidation of this joint venture, we recognized a loss of $2.7
million. In the first six months of 2020, we finalized certain customary
post-closing calculations associated with the sale of the U.S. operations of our
casting business that was completed in the fourth quarter of 2019, resulting in
an additional loss on sale of $1.0 million.

Operating Income (Loss)  Operating income (loss) was income of $161.9 million in
the first six months of 2021 as compared to a loss of $651.0 million in the
first six months of 2020. Operating margin was 6.0% in the first six months of
2021 as compared to (35.0)% in the first six months of 2020. The changes in
operating income (loss) and operating margin were due primarily to the factors
discussed in Net Sales, Cost of Goods Sold, Gross Profit, SG&A, and Impairment
Charges above.

Interest Expense and Interest Income  Interest expense was $101.0 million in the
first six months of 2021 as compared to $106.1 million in the first six months
of 2020. Interest income was $5.5 million in the first six months of 2021 as
compared to $5.8 million in the first six months of 2020. The weighted-average
interest rate of our long-term debt outstanding was 5.9% for the six months
ended June 30, 2021 and 5.6% for the six months ended June 30, 2020. We expect
our interest expense for the full year 2021 to be approximately $195 million to
$205 million.

Debt Refinancing and Redemption Costs In the first quarter of 2021, we made a
voluntary prepayment of $100.0 million on our Term Loan B Facility due 2024 and
$4.3 million on our Term Loan A Facility due 2024. As a result, we expensed
approximately $1.1 million for the write-off of a portion of the unamortized
debt issuance costs that we had been amortizing over the expected life of these
borrowings.

In the second quarter of 2021, we made a voluntary prepayment of $138.8 million
on our Term Loan B Facility due 2024 and $4.2 million on our Term Loan A
Facility due 2024. As a result, we expensed approximately $1.3 million for the
write-off of a portion of the unamortized debt issuance costs that we had been
amortizing over the expected life of these borrowings.

Also in the second quarter of 2021, we issued an irrevocable notice to the
holders of our 6.25% Notes due 2025 to voluntarily redeem a portion of our 6.25%
Notes due 2025 in the third quarter of 2021. In July 2021, this resulted in a
principal payment of $100 million and $1.8 million in accrued interest.
Subsequent to June 30, 2021, we expensed approximately $1.4 million for the
write-off of a portion of the unamortized debt issuance costs that we had been
amortizing over the expected life of the borrowing, and approximately
$3.1 million for the payment of an early redemption premium.

In the first six months of 2020, we voluntarily redeemed $100 million of our
6.625% Notes due 2022. As a result, we expensed approximately $0.4 million for
the write-off of a portion of the unamortized debt issuance costs that we had
been amortizing over the expected life of the borrowing, and approximately $1.1
million for the payment of an early redemption premium.

Other Income (Expense), Net Other income (expense), net includes the net effect
of foreign exchange gains and losses, our proportionate share of earnings from
equity in unconsolidated subsidiaries, and all components of net periodic
pension and postretirement benefit costs other than service cost. Other income
(expense), net was income of $1.8 million in the first six months of 2021 as
compared to expense of $2.2 million in the first six months of 2020.


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At June 30, 2021, we have a $3.0 million cost method investment in REE
Automotive, an e-mobility company that had previously announced entry into a
merger agreement with a Special Purpose Acquisition Company in an effort to
become publicly traded. In July 2021, REE completed its merger and, as a result,
the form of our investment in REE changed from a cost method investment to an
investment in the equity securities of the publicly traded entity. These equity
securities will be measured at fair value each reporting period with changes in
fair value reported through an unrealized holding gain or loss within Other
income (expense), net in our Condensed Consolidated Statement of Operations. We
are subject to a customary restriction on transferring any of our shares of the
publicly traded entity for 180 days following the closing of the merger. As of
July 29, 2021, our investment in REE shares was valued at approximately $41
million based on a closing price on that date of $8.35 per share.

Income Tax Expense (Benefit) Income tax expense (benefit) was expense of $11.2
million for the six months ended June 30, 2021 as compared to a benefit of $40.6
million for the six months ended June 30, 2020. Our effective income tax rate
was 17.0% in the first six months of 2021 as compared to 5.4% in the first six
months of 2020.

During the six months ended June 30, 2020, we finalized an advance pricing
agreement in a foreign jurisdiction, which resulted in a tax benefit of
approximately $6.8 million, we recognized a tax benefit of approximately $7.0
million related to our ability to carry back projected current year losses under
the CARES Act and we recognized a net tax benefit of approximately $7.5 million
related to our ability to carry back losses from prior years under the CARES
Act. In addition, during the six months ended June 30, 2020, we recognized a tax
expense of approximately $36 million to establish a partial valuation allowance
in the U.S. This partial valuation allowance was released in the third quarter
of 2020 as a result of final regulations issued on July 28, 2020 by the Internal
Revenue Service and the U.S. Department of Treasury.

Our effective income tax rate for the six months ended June 30, 2021 varies from
our effective income tax rate for the six months ended June 30, 2020, as a
result of the items described above, and also as a result of the impact of the
goodwill impairment charge recorded during the first six months of 2020, which
had no corresponding income tax benefit. For the six months ended June 30, 2021
and 2020, our effective income tax rates vary from the U.S. federal statutory
rate of 21% primarily due to favorable foreign tax rates, as well as the impact
of tax credits and the effect of the items described above.

Due to the uncertainty associated with the extent and ultimate impact of COVID-19 and the semiconductor shortage on global automotive production volumes, we may experience lower than projected earnings in certain jurisdictions in future periods, and as a result, it is reasonably possible that changes in valuation allowances could be recognized in future periods.



Net Income (Loss) Attributable to AAM and Earnings (Loss) Per Share (EPS) Net
income (loss) attributable to AAM was income of $54.6 million in the first six
months of 2021 as compared to a loss of $714.5 million in the first six months
of 2020. Diluted EPS was $0.46 per share in the first six months of 2021 as
compared to a loss of $6.33 per share in the first six months of 2020. Net
income (loss) attributable to AAM and EPS for the first six months of 2021 and
2020 were primarily impacted by the factors discussed above.

SEGMENT REPORTING



Our business is organized into Driveline and Metal Forming segments, with each
representing a reportable segment under ASC 280 Segment Reporting. In the first
quarter of 2021, we completed a reorganization of our segments, which included
moving certain locations that were previously reported under our Driveline
segment to our Metal Forming segment in order to better align our product and
process technologies. The amounts in the tables below for the three and six
months ended June 30, 2020 have been retrospectively restated to reflect this
reorganization.

The results of each segment are regularly reviewed by the chief operating decision maker to assess the performance of the segment and make decisions regarding the allocation of resources to the segments.

Our product offerings by segment are as follows:



•Driveline products consist primarily of front and rear axles, driveshafts,
differential assemblies, clutch modules, balance shaft systems, disconnecting
driveline technology, and electric and hybrid driveline products and systems for
light trucks, SUVs, crossover vehicles, passenger cars and commercial vehicles;
and
•Metal Forming products consist primarily of axle and transmission shafts, ring
and pinion gears, differential gears and assemblies, connecting rods and
variable valve timing products for Original Equipment Manufacturers and Tier 1
automotive suppliers.

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The following table represents sales by reportable segment for the three and six months ended June 30, 2021 and 2020 (in millions):


                       Three Months Ended June 30,                  Six

Months Ended June 30,


                            2021                   2020                2021                 2020
Driveline       $          935.4                 $ 375.9      $      1,961.5             $ 1,321.8
Metal Forming              440.1                   168.2               929.4                 650.3

Eliminations               (92.2)                  (28.8)             (182.5)               (113.3)
Net Sales       $        1,283.3                 $ 515.3      $      2,708.4             $ 1,858.8



The change in Driveline sales for the three and six months ended June 30, 2021,
as compared to the three and six months ended June 30, 2020, primarily reflects
increased production volumes as net sales for the three and six months ended
June 30, 2020 were adversely impacted by an estimated $718 million and $855
million, respectively, associated with the decline in global automotive
production as a result of COVID-19. These estimated reductions include
approximately $668 million and $796 million, respectively, related to external
customers.

The change in Driveline sales also reflects increases of approximately $45
million and $69 million, respectively, associated with the effect of metal
market pass-throughs to our customers and the impact of foreign exchange related
to translation adjustments. These increases were partially offset by a reduction
in production volumes on certain vehicle programs that we support as a result of
the semiconductor shortage that is impacting the automotive industry, the impact
of which we estimate to be approximately $129 million and $190 million for the
three and six months ended June 30, 2021, respectively.

The change in net sales in our Metal Forming segment in the three and six months
ended June 30, 2021, as compared to the three and six months ended June 30,
2020, primarily reflects increased production volumes as net sales for the three
and six months ended June 30, 2020 were adversely impacted by an estimated $373
million and $430 million, respectively, associated with the decline in global
automotive production as a result of COVID-19. These estimated reductions
include approximately $279 million and $320 million, respectively, related to
external customers.

The change in Metal Forming sales also reflects increases of approximately $37
million and $57 million, respectively, associated with the effect of metal
market pass-throughs to our customers and the impact of foreign exchange related
to translation adjustments. These increases were partially offset by a reduction
in production volumes on certain vehicle programs that we support as a result of
the semiconductor shortage that is impacting the automotive industry, the impact
of which we estimate to be approximately $33 million and $35 million for the
three and six months ended June 30, 2021, respectively.

We use Segment Adjusted EBITDA as the measure of earnings to assess the
performance of each segment and determine the resources to be allocated to the
segments. We define EBITDA to be earnings before interest expense, income taxes,
depreciation and amortization. Segment Adjusted EBITDA is defined as EBITDA for
our reportable segments excluding the impact of restructuring and
acquisition-related costs, debt refinancing and redemption costs, loss on the
sale of a business, impairment charges, pension settlements, and non-recurring
items.

The amounts for Segment Adjusted EBITDA for the three and six months ended June 30, 2021 and 2020 are as follows (in millions):


                                           Three Months Ended June 30,                   Six Months Ended June 30,
                                            2021                   2020                  2020                  2020
Driveline                             $        151.3          $     (25.0)         $       321.8          $     109.5
Metal Forming                                   71.3                (27.1)                 163.7                 51.7

Total segment adjusted EBITDA $ 222.6 $ (52.1)

$ 485.5 $ 161.2





For the three and six months ended June 30, 2021, as compared to the three and
six months ended June 30, 2020, the increase in Segment Adjusted EBITDA for the
Driveline segment was primarily attributable to a net increase in production
volumes on the vehicle programs that we support, as well as improved operating
performance and our continued emphasis on cost management, partially offset by
increased metal and commodity costs.


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The increase in Metal Forming Segment Adjusted EBITDA for the three and six
months ended June 30, 2021, as compared to the three and six months ended
June 30, 2020, was also attributable to a net increase in production volumes on
the vehicle programs that we support, as well as improved operating performance
and our continued emphasis on cost management, partially offset by increased
metal and commodity costs.

Reconciliation of Non-GAAP and GAAP Information



In addition to results reported in accordance with accounting principles
generally accepted in the United States of America (GAAP) in this MD&A, we have
provided certain non-GAAP financial measures such as EBITDA and Total Segment
Adjusted EBITDA. Such information is reconciled to its closest GAAP measure in
accordance with Securities and Exchange Commission rules below.

We define EBITDA to be earnings before interest expense, income taxes,
depreciation and amortization. Total Segment Adjusted EBITDA is defined as
EBITDA for our reportable segments excluding the impact of restructuring and
acquisition-related costs, debt refinancing and redemption costs, loss on the
sale of a business, impairment charges, pension settlements, and non-recurring
items. We believe that EBITDA and Total Segment Adjusted EBITDA are meaningful
measures of performance as they are commonly utilized by management and
investors to analyze operating performance and entity valuation. Our management,
the investment community and the banking institutions routinely use EBITDA and
Total Segment Adjusted EBITDA, together with other measures, to measure our
operating performance relative to other Tier 1 automotive suppliers and to
assess the relative mix of Adjusted EBITDA by segment. We also believe that
Total Segment Adjusted EBITDA is a meaningful measure as it is used for
operational planning and decision-making purposes. These non-GAAP financial
measures are not and should not be considered a substitute for any GAAP measure.
Additionally, non-GAAP financial measures as presented by AAM may not be
comparable to similarly titled measures reported by other companies.

                                                  Three Months Ended June 30,                 Six Months Ended June 30,
                                                   2021                  2020                 2021                  2020
Net income (loss)                            $        16.0          $

(213.2) $ 54.6 $ (714.4) Interest expense

                                      49.9                 54.6                 101.0                106.1
Income tax expense (benefit)                           2.4                (43.9)                 11.2                (40.6)
Depreciation and amortization                        143.6                139.1                 285.6                268.7
EBITDA                                       $       211.9          $     (63.4)         $      452.4          $    (380.2)
Restructuring and acquisition-related costs           15.9                 11.3                  33.4                 28.9
Debt refinancing and redemption costs                  1.3                    -                   2.4                  1.5
Impairment charges                                       -                    -                     -                510.0
Loss on sale of business                               0.1                    -                   2.7                  1.0
Non-recurring items:
Malvern Fire charges, net of recoveries               (6.6)                   -                  (5.4)                   -
Total segment adjusted EBITDA                $       222.6          $     (52.1)         $      485.5          $     161.2




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LIQUIDITY AND CAPITAL RESOURCES



Our primary liquidity needs are to fund debt service obligations, capital
expenditures and working capital requirements, in addition to advancing our
strategic initiatives. We believe that operating cash flow, available cash and
cash equivalent balances and available borrowing capacity under our Senior
Secured Credit Facilities and foreign credit facilities will be sufficient to
meet these needs.

At June 30, 2021, we had over $1.5 billion of liquidity consisting of approximately $588 million of cash and cash equivalents, approximately $895 million of available borrowings under our Revolving Credit Facility and approximately $61 million of available borrowings under foreign credit facilities. We have no significant debt maturities before 2024.

Operating Activities In the first six months of 2021, net cash provided by operating activities was $346.2 million as compared to net cash used in operating activities of $3.1 million in the first six months of 2020. The following factors impacted cash from operating activities in the first six months of 2021, as compared to the first six months of 2020:



Impact of COVID-19 We experienced lower earnings and cash flows from operating
activities as a result of the significant reduction in production volumes during
the six months ended June 30, 2020 due to the impact of COVID-19.

Accounts receivable For the six months ended June 30, 2021, we experienced a
decrease in cash flow from operating activities of approximately $265 million
related to the change in our accounts receivable balance from December 31, 2020
to June 30, 2021, as compared to the change in our accounts receivable balance
from December 31, 2019 to June 30, 2020. This change was primarily attributable
to a significant reduction in sales in the second quarter of 2020 due to the
impact of COVID-19.

Accounts payable and accrued expenses For the six months ended June 30, 2021, we
experienced an increase in cash flow from operating activities of approximately
$381 million related to the change in our accounts payable and accrued expenses
balances from December 31, 2020 to June 30, 2021, as compared to the change in
these balances from December 31, 2019 to June 30, 2020. This change was
primarily attributable to reduced sales and purchasing activity in the second
quarter of 2020 due to the impact of COVID-19.

Income taxes Income taxes paid, net was $8.0 million in the first six months of
2021, as compared to $17.6 million in the first six months of 2020. During the
first six months of 2021, we received an income tax refund of approximately $6
million related to the utilization of net operating losses under the provisions
of the CARES Act. During the first six months of 2020, we finalized an advance
pricing agreement in a foreign jurisdiction, which resulted in a cash payment to
the tax authorities of $18.5 million.

Malvern Fire In the first six months of 2021, we received $40.1 million of cash
as reimbursements and advances under our insurance policies, of which $28.0
million was associated with operating expenses incurred as a result of the
Malvern Fire and has been presented as an operating cash inflow in our Condensed
Consolidated Statement of Cash Flows for the period. At June 30, 2021, we have
an insurance recovery receivable of $20.6 million, which is included in Prepaid
expenses and other in our Condensed Consolidated Balance Sheet. See Note 15 -
Manufacturing Facility Fire and Insurance Recovery for additional detail.

Restructuring and acquisition-related costs For the full year 2021, we expect
restructuring and acquisition-related payments in cash flows from operating
activities to be between $50 million and $65 million, and we expect the timing
of cash payments to approximate the timing of charges incurred.

Pension and other postretirement benefits Due to the availability of our
pre-funded pension balances (previous contributions in excess of prior required
pension contributions), we expect our regulatory pension funding requirements in
2021 to be less than $1 million. We expect our cash payments for other
postretirement benefit obligations in 2021, net of GM cost sharing, to be
approximately $17 million.


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Investing Activities In the first six months of 2021, net cash used in investing
activities was $74.3 million as compared to $108.8 million for the six months
ended June 30, 2020. Capital expenditures were $82.4 million in the first six
months of 2021 as compared to $105.6 million in the first six months of 2020. We
expect our capital spending in 2021 to be approximately 4% to 4.5% of sales.

In the first six months of 2021, in addition to the $28.0 million of cash
reimbursements and advances received under our insurance policies associated
with operating expenses incurred as a result of the Malvern Fire, we received
$12.1 million of cash associated with machinery and equipment that was damaged
or destroyed as a result of the Malvern Fire. This cash received has been
classified as an investing cash flow based on the nature of the associated loss
incurred.

Also in the first six months of 2021, we paid $4.9 million of cash for the acquisition of the Emporium, Pennsylvania Manufacturing Facility. See Note 14 - Acquisitions and Dispositions for further detail.



Financing Activities In the first six months of 2021, net cash used in financing
activities was $240.2 million, as compared to net cash provided by financing
activities of $480.2 million in the first six months of 2020. The following
factors impacted cash from financing activities in the first six months of 2021,
as compared to the first six months of 2020:

Senior Secured Credit Facilities Our Senior Secured Credit Facilities, which are
comprised of our Revolving Credit Facility, our Term Loan A Facility due 2024,
and our Term Loan B Facility due 2024, provide back-up liquidity for our foreign
credit facilities. We intend to use the availability of long-term financing
under the Senior Secured Credit Facilities to refinance any current maturities
related to such debt agreements that are not otherwise refinanced on a long-term
basis in their local markets, except where otherwise reclassified to Current
portion of long-term debt on our Condensed Consolidated Balance Sheet.

In June 2021, Holdings, AAM, Inc., and certain subsidiaries of Holdings entered
into an agreement (the Agreement) amending the Second Amendment to the Credit
Agreement. For the period from April 1, 2020 through March 31, 2022 (the
Amendment Period), the Agreement modified a covenant in the Second Amendment
restricting the ability of Holdings, AAM and certain subsidiaries of Holdings to
make certain voluntary payments and distributions of, or in respect of, certain
senior unsecured notes of AAM during the Amendment Period, which modification
permits voluntary payments and redemptions of the 6.25% senior notes due 2025
issued by AAM.

In the first six months of 2021, we made voluntary prepayments totaling
$238.8 million on our Term Loan B Facility due 2024 and $8.5 million on our Term
Loan A Facility due 2024. As a result, we expensed approximately $2.4 million
for the write-off of a portion of the unamortized debt issuance costs that we
had been amortizing over the expected life of these borrowings.

At June 30, 2021, we had $895.2 million available under the Revolving Credit
Facility. This availability reflects a reduction of $29.8 million for standby
letters of credit issued against the facility. The borrowings under the
Revolving Credit Facility are used for general corporate purposes. See Note 5 -
Long-Term Debt for additional information regarding our Senior Secured Credit
Facilities.

Subsequent Event In the second quarter of 2021, we issued an irrevocable notice
to the holders of our 6.25% Notes due 2025 to voluntarily redeem a portion of
our 6.25% Notes due 2025 in the third quarter of 2021. As a result, we made a
principal payment of $100 million and $1.8 million in accrued interest in July
2021. Subsequent to June 30, 2021, we expensed approximately $1.4 million for
the write-off of a portion of the unamortized debt issuance costs that we had
been amortizing over the expected life of the borrowing, and approximately
$3.1 million for the payment of an early redemption premium.

Redemption of 6.625% Notes due 2022 In the first quarter of 2020, we voluntarily
redeemed a portion of our 6.625% Notes due 2022. This resulted in a principal
payment of $100.0 million and $2.0 million in accrued interest. We expensed
approximately $0.4 million for the write-off of a portion of the unamortized
debt issuance costs that we had been amortizing over the expected life of the
borrowing, and approximately $1.1 million for the payment of an early redemption
premium. We voluntarily redeemed the remaining $350 million that was outstanding
under our 6.625% Notes due 2022 in the third quarter of 2020.

6.875% Notes due 2028 In the second quarter of 2020, we issued $400 million in
aggregate principal amount of 6.875% senior notes due 2028 (the 6.875% Notes).
Proceeds from the 6.875% Notes were used primarily to fund the redemption of the
remaining $350 million of 6.625% senior notes due 2022 and for general corporate
purposes. We paid debt issuance costs of $6.0 million in the six months ended
June 30, 2020 related to the 6.875% Notes.

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Foreign credit facilities We utilize local currency credit facilities to finance
the operations of certain foreign subsidiaries. At June 30, 2021, $108.7 million
was outstanding under our foreign credit facilities, as compared to $88.8
million at December 31, 2020. At June 30, 2021, an additional $60.7 million was
available under our foreign credit facilities.

Treasury stock Treasury stock increased by $4.2 million in the first six months
of 2021 to $216.2 million as compared to $212.0 million at year-end 2020, due to
the withholding and repurchase of shares of AAM stock to satisfy employee tax
withholding obligations due upon the vesting of performance shares and
restricted stock units.

Subsidiary Guarantees of Registered Debt Securities Our 6.875% Notes, 6.50%
Notes, 6.25% Notes (due 2026), and 6.25% Notes (due 2025) (collectively, the
Notes) are senior unsecured obligations of AAM, Inc. (Issuer); all of which are
fully and unconditionally guaranteed, on a joint and several basis, by Holdings
and substantially all domestic subsidiaries of AAM, Inc. and MPG Inc (Subsidiary
Guarantors). Holdings has no significant assets other than its 100% ownership in
AAM, Inc. and MPG Inc., and no direct subsidiaries other than AAM, Inc. and MPG
Inc.

Each guarantee by Holdings and/or any of the Subsidiary Guarantors is:



•a senior obligation of the relevant Subsidiary Guarantors;
•the unsecured and unsubordinated obligation of the relevant Subsidiary
Guarantors; and
•of equal rank with all other existing and future unsubordinated and unsecured
indebtedness of the relevant Subsidiary Guarantors.

Each guarantee by a Subsidiary Guarantor provides by its terms that it will be automatically, fully and unconditionally released and discharged upon:



•Any sale, exchange or transfer (by merger or otherwise) of the capital stock of
such Subsidiary Guarantor, or the sale or disposition of all the assets of such
Subsidiary Guarantor, which sale, exchange, transfer or disposition is made in
compliance with the applicable provisions of the indentures;
•the exercise by the issuer of its legal defeasance option or covenant
defeasance option or the discharge of the issuer's obligations under the
indentures in accordance with the terms of the indentures; or
•the election of the issuer to affect such a release following the date that
such guaranteed Notes have an investment grade rating from both Standard &
Poor's Ratings Group, Inc, and Moody's Investors Service, Inc.

The following represents summarized financial information of AAM Holdings, AAM
Inc. and the Subsidiary Guarantors (collectively, the Combined Entities). The
information has been prepared on a combined basis and excludes any investments
of AAM Holdings, AAM Inc., or the Subsidiary Guarantors in non-guarantor
subsidiaries. Intercompany transactions and amounts between Combined Entities
have been eliminated.

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Statement of Operations Information

(in millions)


                                                       Six Months Ended June        Year Ended December
                                                             30, 2021                    31, 2020
Net sales                                              $          2,099.2          $          3,649.8
Gross profit                                                        233.2                       301.2
Income (loss) from operations                                         3.4                      (458.3)
Net loss                                                            (59.4)                     (521.3)

Balance Sheet Information                                                (in millions)
                                                           June 30, 2021             December 31, 2020
Current assets                                         $          1,059.0          $          1,155.1
Noncurrent assets                                                 2,650.8                     2,765.2

Current liabilities                                               1,221.4                     1,075.9
Noncurrent liabilities                                            3,874.8                     4,233.6

Redeemable preferred stock                                              -                           -
Noncontrolling interest                                                 -                           -

At June 30, 2021 and December 31, 2020, amounts owed by the Combined Entities to non-guarantor entities totaled approximately $785 million and $660 million, respectively, and amounts owed to the Combined Entities from non-guarantor entities totaled approximately $740 million and $750 million, respectively.

CYCLICALITY AND SEASONALITY



Our operations are cyclical because they are directly related to worldwide
automotive production, which is itself cyclical and dependent on general
economic conditions and other factors. Typically, our business is also
moderately seasonal as our major OEM customers historically have an extended
shutdown of operations (normally 1-2 weeks) in conjunction with their model year
changeover and an approximate one-week shutdown in December. Our major OEM
customers also occasionally have longer shutdowns of operations (up to six
weeks) for program changeovers. Accordingly, our quarterly results may reflect
these trends.

LITIGATION AND ENVIRONMENTAL MATTERS

We are involved in, or potentially subject to, various legal proceedings or claims incidental to our business. These include, but are not limited to, matters arising out of product warranties, contractual matters, and environmental obligations. Although the outcome of these matters cannot be predicted with certainty, at this time we do not believe that any of these matters, individually or in the aggregate, will have a material adverse effect on our financial condition, results of operations or cash flows.



We file U.S. federal, state and local income tax returns, as well as foreign
income tax returns in jurisdictions throughout the world. We are also subject to
examinations of these tax returns by the relevant tax authorities. Based on the
status of these audits and the protocol of finalizing audits by the relevant tax
authorities, it is not possible to estimate the impact of changes, if any, to
previously recorded uncertain tax positions. Negative or unexpected outcomes of
these examinations and audits and any related litigation could have a material
adverse impact on our results of operations, financial condition and cash flows.

We are subject to various federal, state, local and foreign environmental and
occupational safety and health laws, regulations and ordinances, including those
regulating air emissions, water discharge, waste management and environmental
cleanup. We will continue to closely monitor our environmental conditions to
ensure that we are in compliance with all laws, regulations and ordinances. We
have made, and anticipate continuing to make, capital and other expenditures
(including recurring administrative costs) to comply with environmental
requirements at our current and former facilities. Such expenditures were not
significant in the second quarter of 2021.

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