DCH 10-K & 10-Q changes, risk factors and insider trading

Our supply chain, as well as our customers' supply chain, is also at risk of unanticipated events such as pandemic or epidemic illness, natural disasters, industrial incidents, changes in governmental regulations and trade agreements, including tariffs, or financial or operational instability of supplierssuppliers, natural disasters, industrial incidents or pandemic or epidemic illness that could cause a disruption in the supply of critical components to us and our customers. As a result, we may experience volatility in our sales and production schedules, including manufacturing downtime and increased inventory levels, which could negatively impact our production efficiency and financial condition.

Our business is significantly dependent on sales to GM, StellantisFord and Ford.Stellantis.

Sales to Ford accounted for approximately 15% of our consolidated net sales in 2025, 13% in 2024, and 12% in 2023, and sales to Stellantis accounted forwere approximately 13% of our consolidated net sales in both 2025 and 2024, and 16% in 2023, and 18% in 2022, and sales to Ford accounted for approximately 13% of our consolidated net sales in 2024, and 12% in 2023 and 2022.2023. A reduction in our sales to either StellantisFord or FordStellantis or a reduction by StellantisFord or FordStellantis of their production of the programs we support, as a result of market share losses or otherwise, could have a material adverse effect on our results of operations and financial condition.

Our business may also be adversely affected by reduced demand for the product programs we currently support, or anticipate supporting in the future, or if we do not obtain sales orders for successor programs that replace our current product programs, as a result of a shift in vehicle architecture from ICE to electrification, or otherwise.programs.

A high concentration of our global business is supported by our Guanajuato Manufacturing Complex (GMC) in Mexico. GMC represents a significant portion of our net sales, profitability and cash flow from operations and we expect GMC to continue to represent a substantial portion of these metrics for the foreseeable future. A significant disruption to our GMC operations, as a result of changes in customer sourcing strategies, trade agreements between Mexico and other jurisdictions, including the U.S.,expected 2026 review of the United States-Mexico-Canada Agreement (USMCA), tariffs, compliance with customs regulations, exchange rate fluctuations between the U.S. dollar and the Mexican peso, tax law changes, changes to our operating structure in Mexico, labor disputes or shortages, logistical constraints, natural disasters, availability of natural resources or utilities, pandemic or epidemic illness, or otherwise, could have a material adverse impact on our results of operations and financial condition.

We rely upon information technology networks and systems to process, transmit and store electronic information, and to manage or support a variety of critical manufacturing and business processes or activities. Additionally,In weaddition, both our organization and certain of ourselect third-party vendors collectgather and storemaintain personal or confidential information, including personally identifiable information, inas connectionpart withof our human resources operationsactivities andor other aspectsbusiness of our business.operations. The secure operation of these information technology networks and systems and the proper processing and maintenance of this information areis critical to our manufacturing and business operations. AlthoughChallenges wesuch haveas implementedmalware, robustunauthorized securityaccess measures,and wecyber cannotattacks, beincluding certainthose that the security measures we have in place to protect these systems and data will be successful or sufficient to protect our IT systems from current and emerging technology threats and damage from computer viruses, unauthorized access, cyber attack, including increasingly sophisticated cyber attacks that incorporate the use ofadvanced artificial intelligence, andphishing campaigns that target our associates, as well as other similardisruptions, disruptions.continue to evolve and may surpass our current safeguards. In addition, we are exposed to similar risks resulting from cyber attacksincidents experienced by our customers, suppliers and third-party service providers. The occurrence of any of these events could compromise our networks, or the networks of our suppliers and third-party service providers, and the information stored there could be accessed, publicly disclosed or lost.

Any such access, disclosure or other loss of information could result in disruption of our operations, legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, the disruption of our operationsinformation or damage to our reputation. In the future, we may be required to incur significant costs to protect against or repair damage causedresulting by thesefrom disruptions or security breaches, oras well as ato result of implementingimplement business continuity processesmeasures in response to disruptionssuch or security breaches.events. See Item 1C. Cybersecurity for additional detaildetails regarding our cybersecurity risk management, strategy and governance.

We may also experience difficulties with the performance of our supply chain, or the supply chains of our customers and their suppliers, on program launches, which could result in our inability to meet our contractual obligations to key customers. Production shortfalls or production delays, if any, could result in our failure to effectively manage our manufacturing costs relating to these program launches. In addition, our customers may delay the launch or fail to successfully execute the launch of these new product programs, or any additional future product program for which we will supply products. Our revenues, operating results and financial condition could be adversely impacted if our customers fail to timely launch such programs or if we are unable to manage the timing requirements and costs of new product program launches.

Our company may not realize all of the revenue expected, or we may experience delays in realizing the expected revenue, from our new and incremental business backlog.business.

The realization of incremental revenues from awarded business is inherently subject to a number of risks and uncertainties, including the accuracy of customer estimates relating to the number of vehicles to be produced in new and existing product programs and the timing of such production, as well as the fluctuation in exchange rates for programs sourced in currencies other than our reporting currency. Further, as a portion of our backlogbusiness is associated with electric vehicles, these risks could be exacerbated due to uncertainty related to end-user acceptance rates and the availability of critical charging infrastructure. It is also possible that our customers may delay or cancel a product program that has been awarded to us. Our revenues, operating results and financial condition could be adversely affected relative to our current financial plans if we do not realize substantially all the revenue from our new and incremental business backlog.awards.

We are exposed to warranty, product recall or field action and product liability claims in the event that our products fail to perform as expected, and we may be required to participate in a recall of such products. We are not responsible for certain warranty claims that may be incurred by our customers, which include returned components for which no defect was found upon inspection, discretionary acts of dealer goodwill, defects related to certain directed buy components, and build-to-print design issues. We review warranty claim activity in detail, and we may have disagreements with our customers as to responsibility for these types of costs incurred by our customers. In addition, as we continue to diversify our customer base, we expect our obligation to share in the cost of providing warranties as part of our agreements with new customers will increase. CostsMany of the products that we produce are complex and certain of the programs for which we have warranty obligations are high volume in nature. The repair or replacement of these components can be labor intensive or could impact a significant number of components, either of which could result in significant costs. As a result, costs and expenses associated with warranties, field actions, product recalls and product liability claims could have a material adverse impact on our results of operations and financial condition and may differ materially from the estimated liabilities that we have recorded in our consolidated financial statements.

A significant portion of our hourly associates worldwide, as well as the workforces of our customers and suppliers, are, or may become, members of industrial trade unions employed under the terms of collective bargaining agreements. There can be no assurance that future negotiations with labor unionsunions, including those related to the 2026 expiration of the collective bargaining agreement with the labor union representing certain of our associates at our largest U.S. facility, will be resolved favorably or that we, our customers or suppliers will not experience a work stoppage or disruption that could have a material adverse impact on our results of operations and financial condition. Additionally, in 2023, newrecent labor agreements between the UAW and our three largest customers were ratified and resulted in significant compensation increases for the UAW associates. There can be no assurance that future negotiations, whether between AAMthe Company and the labor unions representing certain of our hourly associates or between our customers or suppliers and the labor unions representing certain of their hourly associates, will not result in additional labor cost increases or other terms and conditions that could adversely affect our results of operations and financial condition, our ability to compete for future business or our ability to attract and retain qualified associates.

Our success depends, in part, on the efforts of our executive officers and other key salaried and hourly associates, such as global operational leadership, engineers, information technology professionals and associates with experience in skilled trades.trades, and those associates joining the Company as a result of the Business Combination. In addition, our future success will depend on, among other factors, our ability to continue to attract and retain qualified personnel, particularly engineers and other associates with critical expertise and skills that support key customers and products. The loss of the services of our executive officers or other key associates, unexpected turnover, or the inability to attract or retain associates, including those associates joining the Company as a result of the Business Combination, could have a material adverse effect on our results of operations and financial condition.

Annual price reductions are a common practice in the automotive industry. Many of our contracts require us to reduce our prices in subsequent years andand, mostin of our contracts allow us to adjust prices for engineering changes requested by our customers. Ifaddition, we occasionally accommodate a customer's demand for higher annual price reductionsreductions. andIf we are unable to offset the impact of any such price reductions through continued technology improvements, including the potential use of artificial intelligence, cost reductions or other productivity initiatives, our results of operations and financial condition could be adversely affected.

The markets in which we compete are highly competitive. Our competitors include the in-house operations of many vertically integrated OEMs, as well as many other global companies possessing the capability to produce some or all of the products we supply. In addition to traditional competitors in the automotive sector, the growth of advanced electronic integration and electrification has increased the level of new market entrants, including technology companies. Some of our competitors are affiliated withFurther, OEMs and otherstheir suppliers from China are expanding into other regions and could havegain economicmarket advantagesshare, asespecially comparedin regions where the potential shift to our business, such as scale of operations, patents, existing underutilized capacityelectric and lowerhybrid wagevehicles andis benefit costs. Technology, design, quality, delivery and cost are the primary elements of competition in our markets. As a result of these competitive pressures and other industry trends, OEMs and suppliers are developing strategies to reduce costs.emerging.

Some of our competitors are affiliated with OEMs and others could have economic advantages as compared to our business, such as scale of operations, patents, existing underutilized capacity and lower wage and benefit costs. Technology, design, quality, delivery and cost are the primary elements of competition in our markets. As a result of these competitive pressures and other industry trends, OEMs and suppliers are developing strategies to reduce costs. These strategies include supply base consolidation, as well as insourcing, vertical integration, global sourcing by OEMs and use of artificial intelligence and machine learning. Further, some traditional automotive industry participants are developing strategic partnerships with technology companies as each party seeks to leverage the existing customer relationships and technical knowledge of the partner, and expedite the development and commercialization of new technology. Our business may be adversely affected by increased competition from suppliers benefiting from OEM affiliate relationships or financial and other resources that we do not possess. Our business may also be adversely affected if we do not sustain our ability to meet customer requirements relative to technology, design, quality, delivery and cost.

There are significant risks inherent in the industry shift to electric vehicles and expansion of vehicle electrification, as well as the resulting change in product mix toward systems and components that will support this shift. These risks include significant capital investment, often with long lead times prior to start of production for these programs, accelerated product development cycles, and material and labor requirements and sources which differ from those used in internal combustion engine vehicle components. In addition, barriers to the adoption of electric vehicles by end-users, such as safety concerns, infrastructure limitations, range and performance anxiety and cost, create difficulty for our customers to predict the rate at which consumers will accept electric vehicles. This creates significant uncertainty in estimating production volumes and associated profitability for electric vehicle programs and the timing of production for these programs. This uncertainty could result in AAM’sthe Company’s actual revenues differing materially from those previously estimated and included in our new and incremental business backlog or could result in a change in the timing of recognizing revenues as production dates are subject to change.

A substantial portion of our revenue is derived from products supporting internal combustion engine light truck and SUV platforms and crossover vehicle platforms in North America, Europe and Asia. Sales and production levels of these vehicle platforms can be affected by many factors, including changes in consumer demand and preference; adverse economic conditions, such as recession or recessionary concerns; the impact of vehicle price on consumer demand; product mix shifts favoring other types of light vehicles, such as passenger cars; fuel prices; vehicle electrification; and government regulations. Reduced demand in the market segments we currently supply could have a material adverse impact on our results of operations and financial condition, or our ability to invest in the necessary research and development activities to continue developing new and innovative products.

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, such as vehicle cost, credit availability, interest rates, fuel prices, consumer preference and confidence, and the ability of end-users to secure affordable financing. Our business may be adversely affected by an economic decline or fiscal crisis, including prolonged recessionary periods, that result in a reduction of automotive production and sales by our customers.

Our Senior Secured Credit Facilities, comprised of our Revolving Credit Facility, as well as our Term Loan A Facility andFacility, Term Loan B Facility and Tranche C Term Facility, and the indentures governing our senior secured notes and senior unsecured notes, contain customary affirmative and negative covenants. Some or, with respect to certain covenants, all of these agreements include financial covenants based on leverage and cash interest expense coverage ratios and limitations on Holdings,Dauch, American Axle & Manufacturing, Inc. (AAM, Inc.,Inc.) and their restricted subsidiaries to make certain investments, declare or pay dividends or distributions on capital stock, redeem or repurchase capital stock and certain debt obligations, incur liens, incur indebtedness, or merge, make certain acquisitions or sales of assets.

The Senior Secured Credit Facilities and the indentures governing our senior secured notes and our senior unsecured notes also include customary events of default. Obligations under the Senior Secured Credit FacilitiesFacilities, our senior secured notes and our senior unsecured notes are required to be guaranteed by most of our U.S. subsidiaries that hold domestic assets. In addition, the Senior Secured Credit Facilities and our senior secured notes are secured on a first priority basis by all or substantially all of the assets of AAM, Inc., the assets of HoldingsDauch and each guarantor's assets, including a pledge of capital stock of our U.S. subsidiaries that hold domestic assets, including each guarantor, and a portion of the capital stock of the first tier non-U.S. subsidiaries.

A violation of any of these covenants or agreements could result in a default under these contracts, which could permit the lenders or note holders, as applicable, to accelerate repayment of any borrowings or notes outstanding at that time and levy on the collateral granted in connection with the Senior Secured Credit Facilities.Facilities and our senior secured notes. A default or acceleration under the Senior Secured Credit Facilities or the indentures governing the senior secured notes and the senior unsecured notes may result in defaults under our other debt agreements and may adversely affect our ability to operate our business, our subsidiaries' and guarantors' ability to operate their respective businesses and our results of operations and financial condition.

Our business and financial results are affected by fluctuations in the global financial markets, including interest rates and currency exchange rates. Failure to respond timely to these fluctuations, or failure to effectively hedge these risks when possible, could lead to a material adverse impact on our results of operations and financial condition. Future business operations and opportunities, including the Business Combination with Dowlais and potential further expansion of our business outside North America, may further increase the risk that cash flows resulting from these global operations may be adversely affected by changes in interest rates or currency exchange rates.

We have significant pension and other postretirement benefit obligations to certain of our associates and retirees. In addition, Dowlais also has significant pension and other postretirement benefit obligations that are now obligations of the combined company after the completion of the Business Combination. Our ability to satisfy the funding requirements associated with these obligations will depend on our cash flow from operations and our ability to access credit and the capital markets. The funding requirements of these benefit plans, and the related expense reflected in our financial statements, are affected by several factors that are subject to an inherent degree of uncertainty and volatility, including governmental regulation. Key assumptions used to value these benefit obligations and the cost of providing such benefits, funding requirements and expense recognition include the discount rate, the expected long-term rate of return on pension assets, mortality rates and the health care cost trend rate. If the actual trends in these factors are less favorable than our assumptions, this could have an adverse effect on our results of operations and financial condition.

We have business and technical offices and manufacturing facilities in multiple countries outside the U.S. InternationalOur international operations are subject to certain risks inherent in conducting business outside the U.S., suchand asincreased complexity exists for global companies due to potential changes in: currency exchange rates,rates; corporate tax laws,codes or international tax law treaties; price and currency exchange controls,controls; tariffs or import restrictions,restrictions; compliance with customs regulations,regulations; nationalization,nationalization; immigration policies,policies; expropriation; and other governmental action. Our global operations also may be adversely affected by political events, violations of anti-bribery or corruption laws, government sanctions, domestic or international terrorist events and hostilities, geopolitical conflicts, natural disasters and significant weather events, disruptions in the global financial markets, or public health crises, such as pandemic or epidemic illness.

IncreasedIf complexitywe existsare for global companies dueunable to proposedpass changessuch costs on to corporateour taxcustomers, codes,or potentialare revisionsotherwise unable to internationalmitigate taxcost lawincreases treatiesthrough andcontinued renegotiatedtechnology tradeimprovements, agreements,cost includingreductions theor Unitedother States-Mexico-Canadaproductivity tradeinitiatives, agreement. These uncertainties, as well as the potential impacts of these agreements,this could have a material adverse effect on our business and our results of operations and financial condition. Our future success will depend, in part, on our ability to anticipate and effectively manage these and other risks.risks associated with operating internationally.

Our business could be adversely impacted by global climate change or an inability to meet the expectations of our stakeholders related to environmental,environmental social and governance (ESG)sustainability objectives.

Further, various stakeholders, including customers, suppliers, providers of debt and equity capital, regulators and those in the workforce, are increasing their expectations of companies to do their part to combat global climate change and its impact, and to conduct their operations in an environmentally sustainable and socially responsible manner with appropriate oversight by senior leadership. We have made public commitments to reduce emissions,emissions and conserve resources at our various facilities and further develop a diverse, equitable and inclusive culture.facilities. A failure to respond to the expectations and initiatives of our stakeholders or achieve the commitments we have made,made could result in damage to our reputation and relationships with various stakeholders. We could also experience adverse impacts to our financial condition due to volatility in the cost or availability of capital, difficultly obtaining new business or entering into new supplier relationships, a possible loss of market share on our current product portfolio, fines and penalties, litigation, increased cost and complexity of complying with new and expanding regulatory requirements,requirements suchthat asdiffer theacross Corporatevarious Sustainability Reporting Directive (CSRD),regions, or difficulty attracting and retaining a skilled workforce.

As a result of our international operations, we are exposed to foreign currency risks that arise from our normal business operations, including risks associated with transactions that are denominated in currencies other than our local functional currencies. Gains and losses resulting from the remeasurement of assets and liabilities in a currency other than the functional currency of our non-U.S. subsidiaries are reported in current period income. In the future, unfavorable changes in exchange rate relationships between the functional currencies of our subsidiaries and their non-functional currency denominated assets and liabilities could have an adverse impact on our results of operations and financial condition. While we use, from time to time, foreign currency derivative contracts to help mitigate certain of these risks and reduce the effects of fluctuations in exchange rates, our efforts to manage these risks may not be successful.

The Organisation for Economic Co-operation and Development (OECD), alongside the Group of Twenty (G-20), established the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (the Framework) which agreed to a Two-Pillar solution to address tax challenges arising from digitalization of the global economy. Under OECD Pillar Two, the Framework provides for a global minimum corporate tax rate of 15%, calculated on a country-by-country basis. Countries may implement the OECD Pillar Two model rules as issued, in a modified form or not at all. ManyAdditional countries have passed legislation enacting certain parts of the Framework effective in 2024.2025. As a result of the uncertainty, OECD Pillar Two could have a material impact on our effective tax rate and result in higher cash tax liabilities depending on which countries enact minimum tax legislation and in what manner. Future legislative actions taken by governmental authorities resulting in domestic or international tax reform could increase uncertainty and may adversely affect our tax rate, results of operations and cash flows in future years. Additionally, the introduction of new laws or regulations, or changes in existing laws or regulations, or the interpretation thereof, could increase the costs of doing business for us, our customers or suppliers and adversely affect our results of operations and financial condition.

Risks Related to Our Strategy and the Pending Business Combination with Dowlais (Business Combination)

We may failbe unable to consummate and successfully integrate acquisitions and joint ventures, including integrating the recently acquired business of Dowlais, and we may not realize the anticipated benefits and operating synergies expected from the Business Combination.

TheEngaging Businessin Combinationacquisitions and joint ventures involves potential risks, including financial risks, risks related to our operations and capacity, risks related to integrating enterprise resource planning systems, and failure to successfully integrate and fully realize the integrationexpected benefits of twosuch businessesacquisitions and joint ventures. Integrating acquired operations is a significant challenge and there is no assurance that previously operated independently. If the parties complete the Business Combination, it is expected that our Chairman and CEO will lead the combined company, two directors of Dowlais are expected to join the board of directors and certain senior Dowlais executiveswe will be invitedable to joinmanage theintegrations senior executive management team of the combined company, in roles to be confirmed.successfully. The complexity and magnitude of the integration effort associated with the Business Combination are substantial and require that we fund significant capital and operating expenses to support the integration of the combined operations. Such expenses have included significant transaction, consulting and third-party service fees. Further, the anticipated costs of the integration effort are subject to change.change and many of the expenses that are expected to be incurred, by their nature, are difficult to estimate accurately at this time. We have incurredincurred, and expect to continue to incurincur, additional operating expenses as we build upenhance internal resources or engage third-party providers while we integrate the combined company following the Business Combination.

Additionally, the process of integrating operations could cause an interruption of, or loss of momentum in, the core operating activities of one or both of us and Dowlais. The diversion of management’s attention and any delays or difficulties encountered in connection with the integration of the operations, or the failure to successfully integrate the two businesses and leadership team,operations could have a material adverse effect on our business, financial condition and results of operations.

We are also a supplier to Ford Motor Company (Ford) for driveline system products on certain vehicle programs including the Bronco Sport, Maverick, Edge, Escape and Lincoln Nautilus, and we also sell various products to Ford from our Metal Forming segment. Sales to Ford were approximately 13%15% of our consolidated net sales in 2025, 13% in 2024, and 12% in 2023 and 2022.2023.

PendingAcquisition Combination withof Dowlais Group plc

Pending SaleDisposition of AAM India Manufacturing Corporation Pvt., Ltd.

InDuring October 2024,2025, we enteredcompleted intothe asale definitive agreement to sellof our commercial vehicle axle business and related assets in India (AAM India Manufacturing Corporation Pvt., Ltd.) to Bharat Forge Limited (BFL) for a sales price ofapproximately $65 million, subjectnet toof certain customaryclosing adjustments at closing (the India Sale Agreement). TheFor salethe isyears expectedended December 31, 2025 and 2024, we recorded impairment charges of $8 million and $12 million, respectively, to close inreduce the firstcarrying halfvalue of 2025,this subjectbusiness to customaryfair closingvalue conditions,less includingcosts theto receipt of regulatory approvals.sell.

In April 2024, one of our largest customers notified AAMthe Company that production purchase orders related to a previously announced contract to supply e-Beam axles for a future vehicle program were terminated. We believe that the termination of these purchase orders reflects, in part, the significant uncertainty currently underlying the electric vehicle environment, including volatility in estimated volumes and the timing of production. We have submitted a cancellation claim to recover certain costs incurred in connection with the terminated purchase orders. As of December 31, 2024, we have approximately $70 million of assets in our Consolidated Balance Sheet associated with this program, consisting of capitalized engineering, design and development costs and other commercial amounts. As of the date of this report, we believe we are entitled to claim and recover the full amount. However, due to the nature of the cancellation claim process, and the need to reach final resolution with the customer, the ultimate amount to be recovered is not determinable and could differ materially from the amount included in our Consolidated Balance Sheet.

There are a number of significant trends affecting the markets in which we compete. Intense competition, volatility in the price and availability of raw materials, certain labor shortagesshortages, andparticularly those associated with skilled trades, increased labor costs, fluctuations in exchange rates and interest rates, and significant pricing pressures remain. At the same time, there is a focus on investing in future products that will incorporate the latest technology and meet evolving customer demands. The ability to respond timely to the continued advancement of technology and product innovation, as well as the ability to enhance cost reduction initiatives and continue to source programs and maintain a resilient supply chain on a global basis, are critical to attracting and retaining business in our global markets.

INDUSTRY UNCERTAINTY REGARDING ADOPTION OF ELECTRIC VEHICLES The automotive industry has experienced lower than anticipated adoption of electric vehicles. Various barriers to end-user acceptance exist, such as higher vehicle cost, limited offerings, safety concerns, regulatory uncertainty, battery range and vehicle performance anxiety and a lack of necessary charging infrastructure. As a result, there is significant uncertainty currently underlying the electric vehicle environment, including volatility in estimated volumes and the timing of program launches and production of electric vehicles. This uncertainty has caused industry participants to reassess capital allocation plans, and has resulted in the extension of certain internal combustion engine (ICE) and hybrid programs.

GLOBAL CONSUMER PREFERENCE AND OEM PRODUCTION FAVORING LIGHT TRUCKS, SPORT UTILITY VEHICLES (SUVs) AND CROSSOVER VEHICLES (CUVs) There has been ongoing demand for light trucks, SUVs and CUVs in certain markets, while demand for passenger cars has decreased. This increase in demand for light trucks, SUVs and CUVs has been driven by changes in consumer preference as technology advancements have made these vehicles lighter and more efficient. Certain OEMs are responding to this change in consumer preference by shifting their focus to developing and manufacturing these types of vehicles, resulting in a significant reduction of passenger car vehicle programs, especially in North America. We have benefited from this trend as a significant portion of our business supports light truck, SUV and CUV programs in North America.

GLOBAL AUTOMOTIVE PRODUCTION AND INCREASED INDUSTRY CONSOLIDATION Our customers continue to design their products to meet demand in global markets and therefore require global support from their suppliers. For this reason, it is critical that suppliers maintain a global presence in these markets in order to compete for new contracts. We have business and engineering offices around the world to support our global locations and provide technical solutions to our customers on a regional basis, including in North America, which represents the largest portion of our core business, as well as in China and Europe where consumer acceptance of electric vehicles has been stronger.

The cyclical nature of the automotive industry, volatile commodity prices, the shifting demands of consumer preference, regulatory requirements and trade agreements require OEMs and suppliers to remain agile with regard to product development and global capability. A critical objective for OEMs and suppliers is the ability to meet these global demands while effectively managing costs and capital investment. Some OEMs and suppliers may be preparing for these challenges through merger and acquisition activity, restructuring actions, development of strategic partnerships and reduction of vehicle platform complexity. In order to effectively drive technology development, recognize cost synergies, optimize capacity utilization, and increaseefficiently serve global footprint,markets, the industry may continue to see consolidation in the supply base as companies recognize and respond to the need for scalability.

In addition to AAM'sthe Company's technology development relationships and organic growth in technology and processes, AAM's pendingour acquisition of Dowlais provides a significant opportunity for AAMus to leverage complementary technologies, expand our product portfolio, diversify our global customer base, and strengthen our long-term financial profile through greater scale. The synergies anticipated synergies offrom this acquisition are expected to enhance AAM'sour ability to compete in today's technological environment, while remaining cost competitive through increased scale and integration.

The increasechange in net sales in 2024,2025, as compared to 2023,2024, primarily reflects increasedlower production volumes on certain vehicle programs that we support as 2023 sales were negatively impacted by an estimated $99 million associated with the UAW work stoppage that occurred in the second half of 2023. This increase was partially offset byand a reduction of approximately $50$57 million as a result of the sale of AAM India Manufacturing Corporation Pvt., Ltd., which was completed on July 1, 2025. These decreases were partially offset by an increase of approximately $47 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments.

Gross margin was 12.1% in 2024both as2025 comparedand to 10.3% in 2023.2024. Gross profit and gross margin were impacted by the factors discussed in Net salesSales and Cost of goodsGoods soldSold above.

SG&A as a percentage of net sales was 6.3%6.7% in 20242025 as compared to 6.0%6.3% in 2023.2024. R&D expense, net of engineering, design and development (ED&D) recoveries, was $159.0approximately $147.0 million in 2024,2025, as compared to $155.4$159.0 million in 2023.2024. In addition to the increase in net R&D expense, theThe change in SG&A in 2025, as compared to 2024, was primarily reflectsattributable higherto increased incentive compensation expenseexpense, andwhich professionalwas feessubstantially relatedoffset toby ourthe ongoing tax litigation as further describeddecrease in NoteR&D 13 - Income Taxes.expense.

AMORTIZATION OF INTANGIBLE ASSETS Amortization expense forrelated theto yearintangible ended December 31, 2024assets was $82.9 million as compared to $85.6$81.8 million for the year ended December 31, 2023.2025 as compared to $82.9 million for the year ended December 31, 2024.

OPERATING INCOME Operating income was $241.4$112.3 million in 20242025 as compared to $146.6$241.4 million in 2023.2024. Operating margin was 3.9%1.9% in 20242025 as compared to 2.4%3.9% in 2023.2024. The changes in operating income and operating margin in 2024,2025, as compared to 2023,2024, were primarily due to the factors discussed in Net sales,Sales, Cost of goodsGoods soldSold and SG&ARestructuring and Acquisition-Related Costs above.

INTEREST EXPENSE Interest expense was $201.1 million in 2025 and $186.0 million in 2024 and $201.7 million in 2023.2024. The decreaseincrease in interest expense in 2024,2025, as compared to 2023,2024, was primarily due to lowerthe outstanding borrowings as a resultissuance of ournew debtindebtedness reductionin initiatives.the fourth quarter of 2025 in connection to the Business Combination. The weighted-average interest rate of our total debt outstanding was 6.6% in 2024both 2025 and 6.8% in 2023.2024. We expect our interest expense in 20252026 to be approximatelyin $170the range of $340 million to $180$360 million.

In 2024, we amended our existing Amended and Restated Credit Agreement and established a New Term Loan B Facility. As a result, we incurred approximately $0.2 million of debt refinancing and redemption costs during 2024. In addition, in 2024, we voluntarily redeemed the remaining $127.6 million of our then outstanding 6.25% Notes due 2026. This resulted in expense of approximately $0.4 million for the write-off of the remaining unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing.

Loss on equity securities We had previously invested in the equity securities of REE Automotive, which were measured at fair value each reporting period with changes in fair value reported as a gain or loss within Other income (expense), net in our Consolidated Statement of Operations. During 2024, we sold all of our remaining equity securities of REE Automotive, resulting in a loss of $0.1 million. We recognized an unrealized loss on our investment in REE shares of $1.1 million for the year ended December 31, 2023.

We are a primary supplier of driveline products 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 components from our Metal Forming segment. Sales to GM were approximately 31%30% of our consolidated net sales for the first threesix months of 2026, and 44% for both the first threesix months of 2025 and the full year 2025.

We also supply driveline system products to Stellantis N.V. (Stellantis) for programs including the heavy-duty Ram full-size pickup truck and its derivatives. In addition, we sell various components to Stellantis from our Metal Forming segment. Sales to Stellantis were approximately 13% of our consolidated net sales for each of the first threesix months of 2026, 11% for the first threesix months of 2025 and 13% for the full year 2025.

We are also a supplier to Ford Motor Company (Ford) for driveline system products on certain vehicle programs including the Bronco Sport, Maverick, EscapeMaverick and Lincoln Nautilus, and we also sell various components to Ford from our Metal Forming segment. Sales to Ford were approximately 11% of our consolidated net sales for the first threesix months of 20262026, and 15% for both the first threesix months of 2025 and the full year 2025.

On February 3, 2026, we completed our previously announced acquisition of Dowlais whereby we acquired the entire issued share capital of Dowlais (the Business Combination). Pursuant to the Business Combination, Dowlais shareholders received for each Dowlais ordinary share: 0.0881 shares of new Dauch Corporation common stock and 43 pence per share in cash (approximately $0.59 per share as of the closing date), resulting in the issuance of approximately 117 million shares (and an increase in authorized shares from 150 million shares to 375 million shares) and a total purchase price of approximately $1.7 billion. Following the close of the transaction, the combined company is headquartered in Detroit, Michigan and led by the Company's Chairman and CEO.

For the threesix months ended MarchJune 31,30, 2026, the net impact on earnings related to the aforementioned tariffs was approximately $30 million and we expect a continuing impact from tariffs in future periods. For the year ended December 31, 2025, the net impact on earnings related to the aforementioned tariffs was approximately $10 million. We are implementing mitigation actions and pursuing recoveries from our customers for the cost increases resulting from the tariffs but have not reached final agreement with all customers and therefore the total amount and timing of such recoveries is unknown. Further, certain of these recoveries may include government-issued credits and there is uncertainty about whether we will be able to effectively monetize such credits. For the full year 2026, we anticipate the impact on earnings of these tariffs to be approximately $10 million to $20 million after mitigation actions and estimated customer recoveries. However, due to uncertainty associated with the potential further implementation or expansion of tariffs, as well as the potential for additional retaliatory actions and other changes to existing trade agreements or changes in international trade relations, the actual impact on 2026 earnings could differ materially from this estimate.

During the first threesix months of 2026, geopolitical conflicts have indirectly impacted our operations and financial results primarily through supply chain disruptions. We continue to work with customers and suppliers in our effort to protect continuity of supply as we expect these challenges to continue in 2026. Due to the ongoing uncertainty associated with these supply chain constraints, the ultimate impact on our net sales, results of operations and cash flows is unknown.

In January of 2026, we reached a settlement agreement with the customer on this matter (the Electric Vehicle Cancellation Settlement).matter. As a result, we received approximately $28 million in the first quarter of 2026 for the reimbursement of the Company's capitalized engineering, design and development costs.

RESULTS OF OPERATIONS –– THREE MONTHS ENDED MARCHJUNE 31,30, 2026 AS COMPARED TO THREE MONTHS ENDED MARCHJUNE 31,30, 2025

The impact of the Business Combination on net sales forin the firstsecond three monthsquarter of 2026 was approximately $972$1,439 million. Excluding the impact of the Business Combination, the change in net sales infor the firstsecond three monthsquarter of 2026, as compared to the firstsecond three monthsquarter of 2025, primarily reflects lower production volumes on certain vehicle programs that we support and a reduction of approximately $35$34 million as a result of the sale of AAM India Manufacturing Corporation Pvt., Ltd., which was completed on July 1, 2025. These decreases were partially offset by an increase of approximately $44$35 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments.

The impact on cost of goods sold of the Business Combination was approximately $927$1,300 million for the firstsecond three monthsquarter of 2026, which includes approximately $38 million for the step-up of inventory to fair value as a result of purchase accounting.2026. Excluding the impact of the Business Combination, the change in cost of goods sold in the firstsecond three monthsquarter of 2026, as compared to the firstsecond three monthsquarter of 2025, primarily reflects anlower increaseproduction ofvolumes approximatelyon $39certain millionvehicle associatedprograms withthat thewe effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments, partially offset by a reduction of approximately $33 million as a result of the sale of AAM India Manufacturing Corporation Pvt., Ltd., as well as the impact of improved operating performance.support. For the three months ended MarchJune 31,30, 2026, material costs were approximately 52%51% of total costcosts of goods soldsold, as compared to approximately 55% for the three months ended MarchJune 31,30, 2025.

Gross margin was 9.5%11.4% in the firstsecond three monthsquarter of 2026, as compared to 12.3%13.1% in the firstsecond three monthsquarter of 2025. Gross profit and gross margin were impacted by the factors discussed in Net Sales and Cost of Goods Sold above.

SG&A as a percentage of net sales was 5.8%5.6% in the firstsecond three months of 2026 as compared to 6.4% in the first three months of 2025. R&D expense, net of customer ED&D recoveries, was approximately $51.6 million in the first three monthsquarter of 2026, as compared to $36.36.6% in the second quarter of 2025. Research and development (R&D) expense, net of customer engineering, design and development (ED&D) recoveries, was approximately $56.8 million in the firstsecond threequarter monthsof 2026, as compared to $36.1 million in the second quarter of 2025. TheIn addition to the increase in R&D expense, the change in SG&A in the firstsecond three monthsquarter of 2026, as compared to the firstsecond three monthsquarter of 2025, reflects an increase of approximately $39$46 million associated with the Business Combination. SG&A expense also reflects an increase in R&D spending in the first three months of 2026, as compared to the first three months of 2025,Combination, which was partially offset by the achievement of synergies as a result of the Business Combination.

RestructuringAmortization andof Acquisition-RelatedIntangible CostsAssets RestructuringAmortization andexpense acquisition-relatedrelated coststo wereintangible $98.9assets was $21.8 million for the three months ended MarchJune 31,30, 2026,2026 asand compared to $19.7$20.4 million for the three months ended MarchJune 31,30, 2025.

Debt RefinancingRestructuring and RedemptionAcquisition-Related Costs Debt refinancingRestructuring and redemptionacquisition-related costs were $3.0$49.8 million in the firstsecond three monthsquarter of 2026 asand compared to $3.3$16.5 million in the firstsecond three monthsquarter of 2025.

NetOperating Income (Loss)Operating Attributable to Dauch and Earnings (Loss) Per Share (EPS) Net loss attributable to Dauchincome was $100.3$99.7 million in the firstsecond three monthsquarter of 2026, as compared to income of $7.1$55.0 million in the firstsecond three monthsquarter of 2025. DilutedOperating loss per sharemargin was $0.523.4% in the firstsecond three monthsquarter of 2026, as compared to diluted earnings per share of $0.06 per share3.6% in the firstsecond three monthsquarter of 2025. NetThe changes in operating income (loss) attributable to Dauch and EPSoperating for the first three months of 2026 and 2025margin were primarily impacteddue by theto factors discussed in Net Sales, Cost of Goods Sold, SG&A and Restructuring and Acquisition-Related Costs above.