One Dauch Drive

Detroit, Michigan 48211-1198

www.aam.com

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

April 24, 2008

 

American Axle & Manufacturing Holdings, Inc. (AAM)

 

 

 

By Order of the Board of Directors,

 

Patrick S. Lancaster

Vice President, Chief Administrative Officer & Secretary

March 24, 2008

 

2008 ANNUAL MEETING OF STOCKHOLDERS

 

PROXY STATEMENT

 

TABLE OF CONTENTS

 

PROXY STATEMENT

Annual Meeting of Stockholders
To Be Held April 24, 2008

QUESTIONS AND ANSWERS ABOUT VOTING AND THE ANNUAL MEETING

 

Why am I receiving this proxy statement?

 

The Board of Directors of American Axle & Manufacturing Holdings, Inc. (AAM or the Company) is soliciting proxies for the 2008 annual meeting of stockholders. You are receiving a proxy statement because you owned shares of AAM common stock on February 29, 2008 (record date), which entitles you to vote at the meeting. By use of a proxy, you can vote whether or not you attend the meeting. This proxy statement describes the matters on which we would like you to vote and provides related information so that you can make an informed decision.

 

The notice of annual meeting, proxy statement, proxy card and 2007 annual report to stockholders are being mailed to stockholders on or about March 24, 2008.

 

What if I receive more than one proxy card?

 

Each proxy card represents shares held on the record date. You will receive multiple proxy cards if you hold your shares in different ways (e.g. trusts, AAM 401(k) plans, custodial accounts, joint tenancy) or in multiple accounts. If your shares are held in street name by a broker, bank, trustee or other custodian, follow the instructions on the proxy card(s) they provide. Vote the shares represented by each proxy card you receive.

 

What is the difference between holder of record and street name holder?

 

These terms describe how your shares are held. You are a holder of record if your shares are held directly in your name with AAM’s transfer agent, Computershare Trust Company, N.A. If your shares are held in the name of a broker, bank, trustee or other record holder, or through one of the AAM 401(k) plans, you are a street name holder.

 

How do I vote my shares?

 

If you are a holder of record, you may vote in person at the annual meeting or by proxy:

 

By mail.  Complete, sign, date and return your proxy card in the envelope provided

By telephone.  Call the toll free number shown on the enclosed proxy card.

 

If you hold shares in street name, refer to the instructions provided by your broker, bank, trustee or other record holder for voting your shares by proxy. To vote these shares in person at the annual meeting, you must obtain a proxy from your broker, bank, trustee or other record holder.

How many shares may vote at the meeting?

 

As of February 29, 2008, we had 53,502,317 shares of common stock outstanding and entitled to vote. A holder of common stock on the record date is entitled to one vote per share owned. Under AAM’s by-laws, a majority of these shares must be present in person or by proxy to hold the annual meeting and take any action during the meeting.

 

Can I change my vote?

 

You may change your vote at any time before the annual meeting by:

 

 

What are the Board’s recommendations on how I should vote my shares?

 

The Board recommends that you vote your shares as follows:

 

 

What are my choices when voting?

 

 

What vote is required to approve each proposal?

 

 

Votes withheld and abstentions will be counted as present for purposes of determining whether a majority of shares is present to hold the annual meeting. Abstentions will not be counted in the tally of votes FOR or AGAINST a proposal. A WITHHELD vote has the same effect as an abstention.

Who will count the votes be counted?

 

Representatives of Computershare Trust Company, N.A., AAM’s transfer agent, will count the votes and serve as our inspector of election. The inspector of election will attend the annual meeting.

 

What if I do not vote and do not attend the annual meeting?

 

If you are a holder of record and you do not vote your shares, your shares will not be voted. If you sign your proxy card without giving specific instructions, your shares will be voted as the Board recommends.

 

If you hold shares in street name and you do not give your broker, bank, trustee or other record holder specific voting instructions, the rules of the New York Stock Exchange (NYSE) permit your record holder to vote your shares on the election of directors and on the ratification of the appointment of the independent registered public accounting firm.

 

If you do not give your record holder specific voting instructions and your record holder does not vote, the votes will be broker non-votes. Broker non-votes will have no effect on the outcome of the election of directors and the other proposals. Broker non-votes will be counted as present for purposes of determining whether enough votes are present to hold the annual meeting.

 

 

 

AAM’s Board is divided into three classes with three of the directors standing for election each year. The term for directors elected this year will expire at the annual meeting of stockholders in 2011. Each of the nominees below has agreed to serve that term. If any nominee becomes unavailable prior to the annual meeting to serve as a director, the Board may select a replacement nominee or reduce the number of directors to be elected.

 

The Board proposes that nominees Richard E. Dauch, William P. Miller II and Larry K. Switzer be elected to the Board for terms expiring in 2011. The Board unanimously approved these nominations based on the outstanding achievements, special competencies and integrity of each nominee. A biographical summary of the principal occupation, professional background and experience of each nominee and returning director is provided.

 

Your Board unanimously recommends a vote FOR each of the nominees.

 

 

Directors — to hold office until 2009 Annual Meeting of Stockholders

 

Directors — to hold office until 2010 Annual Meeting of Stockholders

 

 

Corporate Governance Guidelines

 

The Board has adopted Corporate Governance Guidelines that meet or exceed the requirements of the NYSE listing standards. AAM’s Corporate Governance Guidelines are available on our website at http://investor.aam.com/index.cfm.

 

Board Structure and Self-Evaluation

 

The Board has nine members and is equally divided into three classes. Directors serve for staggered three-year terms. The Board believes that the staggered election of directors helps to maintain continuity and ensures that a majority of directors at any given time will have in-depth knowledge of the Company. The Board and the Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee each conduct an annual self-evaluation in order to monitor and continuously improve the effectiveness of the Board and its committees.

 

Director Independence

 

AAM’s Corporate Governance Guidelines provide that at least a majority of the members of the Board and each member of the Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee meet the independence criteria of the NYSE listing standards. In addition, the Board has established Director Independence Guidelines to assist in determining the independence of our directors. No director qualifies as independent unless the Board determines that the director has no direct or indirect material relationship with the Company. The Board considers all relevant facts and circumstances of which it is aware in making an independence determination. The Director Independence Guidelines are included in AAM’s Corporate Governance Guidelines, which are available on our website at http://investor.aam.com/index.cfm.

 

Based on the independence criteria of the NYSE listing standards and our Director Independence Guidelines, the Board affirmatively determined that each of the following directors are independent: John A. Casesa, Elizabeth A. (Beth) Chappell, Forest J. Farmer, Richard C. Lappin, William P. Miller II, Larry K. Switzer, Thomas K. Walker and Dr. Henry T. Yang. The Co-Founder, Chairman of the Board & CEO, Richard E. Dauch, is related to an AAM executive officer and is not independent under the criteria of the NYSE listing standards and our Director Independence Guidelines.

 

None of the directors who qualify as independent has a business, financial, family or other type of relationship with AAM (other than as a director and stockholder of AAM), except for one relationship that is immaterial under the independence standards. The director has a relationship with an entity that was reviewed by the Board under the Company’s categorical independence standard and the NYSE listing standard covering payments for properties or services exceeding the greater of $1 million or two percent of the annual consolidated gross revenues of the outside entity. In this instance, the director is an officer of a non-profit organization that received sponsorship fees from AAM that were significantly less than the NYSE listing standard or AAM categorical standard. The Board determined that the relationship was immaterial and does not impair the director’s independence.

 

If all nominees are elected by our stockholders at the 2008 annual meeting, AAM’s nine-member Board will have eight independent directors.

 

Executive Sessions of Non-Management and Independent Directors

 

Non-management directors, all of whom are independent, meet in executive session without AAM management present at the end of each scheduled Board meeting. Thomas K. Walker, an independent director, has been selected by the Board to preside at each executive session.

Stockholder Communication with the Board

 

Stockholders or other interested parties may communicate with the Board through the Secretary of AAM by mail at One Dauch Drive, Detroit, Michigan 48211-1198 or by e-mail at AAMBoardofDirectors@aam.com.

 

The Board has instructed the Secretary to review all such communications and to exercise his discretion not to forward correspondence to the Board that is inappropriate, such as business solicitations, frivolous communications and advertising, routine business matters and personal grievances. However, any director may at any time request the Secretary to forward any communication received by the Secretary but not forwarded to the directors.

 

Code of Business Conduct

 

AAM has adopted a Code of Business Conduct that is designed to assist all AAM associates, executive officers and members of the Board in conducting AAM’s business with the highest standards of ethics and integrity. AAM has also adopted a Code of Ethics for our CEO, CAO, CFO and other Senior Financial Officers. The Board annually reviews the Code of Business Conduct and updates the Code as appropriate. AAM’s Code of Business Conduct and Code of Ethics for our CEO, CAO, CFO and other Senior Financial Officers are available on our website at http://investor.aam.com/index.cfm. A written copy also may be obtained by any stockholder without charge upon request to the AAM Investor Relations Department.

 

Related Person Transactions Policy

 

In October 2006, the Board adopted a policy and procedures for the review, approval and ratification of transactions involving AAM and “related persons” as defined in the policy. This policy supplements AAM’s other conflict of interest policies as set forth in AAM’s Code of Business Conduct. The Board has delegated to the Audit Committee the responsibility for reviewing, approving and ratifying all related person transactions in accordance with the policy.

 

Transactions covered by the policy include any financial transaction, arrangement or relationship or series of similar transactions, arrangements or relationships in which:

 

 

A transaction between AAM and a related person is not subject to this policy if the transaction:

 

 

A related person includes directors and executive officers and their immediate family members, stockholders owning more than five percent of the Company’s outstanding common stock as of the last completed fiscal year, and any entity owned or controlled by any one of these persons.

 

A related person transaction will be permitted only if the transaction is approved by the Audit Committee and is on terms comparable to those available to unrelated third parties. Any related person transaction involving a member of the Audit Committee must be presented to disinterested members of the full Board for review.

In considering a transaction, the Audit Committee and/or the Board may consider the following factors, as applicable:

 

 

Every director and executive officer is required to report any existing or contemplated related person transaction to AAM’s Vice President, Chief Administrative Officer & Secretary. In addition, AAM’s directors and executive officers complete annual questionnaires designed to elicit information about potential related person transactions. As of the date of this Proxy Statement, no existing or contemplated related person transaction has been brought to the attention of the Secretary, the Audit Committee or the Board.

 

Board Committee Composition

 

The Board held four regularly scheduled meetings during 2007. Directors are expected to attend all Board meetings, meetings of the committees on which they serve and stockholder meetings. During 2007, all directors attended 100 percent of the meetings of the Board and the committees on which they served. All directors attended the 2007 annual meeting of stockholders. The following table shows the membership of the Board’s committees during 2007 and the number of committee meetings held during 2007.

 

COMMITTEE MEMBERSHIP IN 2007

 

Audit Committee

 

The Audit Committee provides assistance to the Board with respect to: the quality and integrity of our financial statements, our compliance with legal and regulatory requirements, our independent auditor’s qualifications and independence, and the performance of our internal audit function and independent auditors. The Audit Committee operates under a written charter that is available on AAM’s website at http://investor.aam.com/index.cfm.

 

The Board has determined that all Audit Committee members serving during 2007 are independent and financially literate under applicable NYSE listing standards. Mr. Miller and Mr. Switzer also qualify as audit committee financial experts as defined by SEC rules.

 

Compensation Committee

 

The Compensation Committee is responsible for the following:

 

 

The Compensation Committee operates under a written charter that is available on our website at http://investor.aam.com/index.cfm. In accordance with our Corporate Governance Guidelines, the Compensation Committee is also responsible for recommending non-employee director compensation and benefits for approval by the Board.

 

Role of Executive Officers.  Our CEO reviews the performance and compensation of our other executive officers, with input from the Vice President — Human Resources, and recommends to the Compensation Committee the compensation for this group. The Compensation Committee reviews and considers the CEO’s recommendations in its approval of annual salary, annual incentive payments and long-term incentive awards. Our Vice President — Human Resources is responsible for the implementation and day-to-day operation of our executive compensation programs, as approved by and subject to oversight of the Compensation Committee. Our Group Vice President — Finance & CFO is responsible for evaluating and presenting to the Compensation Committee the financial, accounting and tax aspects of compensation decisions.

 

Role of Compensation Consultant.  In performing its duties, the Compensation Committee from time to time directly engages Towers Perrin, an independent executive compensation consultant. Towers Perrin provides competitive market data and other information on current compensation practices and trends. Towers Perrin also makes objective recommendations to the Compensation Committee as to the design of AAM’s long-term incentive program, including the form and mix of award vehicles and the nature and level of potential performance criteria and targets. Management has also retained Towers Perrin to provide consulting and actuarial services regarding compensation, healthcare, welfare, pension and retiree medical benefits. The Compensation Committee does not believe that this affects the independence of the advice that Towers Perrin provides to the Committee.

In 2007, the Compensation Committee engaged Towers Perrin to review the competitiveness of AAM’s executive officer compensation (excluding the CEO) and the structure of our long-term incentive program for executive officers. Towers Perrin was instructed to compare our executive officers’ base salaries, target annual incentives and long-term incentive award levels against those for similar positions at companies in a comparison group. The comparison group was selected with input from management and is described in Compensation Discussion & Analysis below. Towers Perrin also interviewed senior management in its review of our long-term incentive program for input concerning plan design, performance measures, share utilization levels, and for an understanding of AAM’s business objectives, among other matters.

 

Towers Perrin also provides the Compensation Committee with information on market practices and trends relating to non-employee director compensation and makes recommendations on the appropriate mix of cash and equity compensation for this group. In 2007, Towers Perrin completed a study to assess the competitiveness and design of our director compensation program, as described in 2007 Compensation of Non-Employee Directors below.

 

Nominating/Corporate Governance Committee

 

The Nominating/Corporate Governance Committee’s primary responsibilities are to:

 

 

The Nominating/Corporate Governance Committee operates under a written charter that is available on our website at http://investor.aam.com/index.cfm.

 

Selection Process for Director Nominees.  In consultation with the Chairman of the Board, the Nominating/Corporate Governance Committee identifies, evaluates and recommends potential candidates for membership on the Board. The Nominating/Corporate Governance Committee conducts all necessary and appropriate inquiries into the backgrounds and qualifications of the candidates, and considers questions of independence and possible conflicts of interest. Based on the Nominating/Corporate Governance Committee’s evaluation, candidates who meet the Board’s criteria may receive further consideration, which may include interviews with the Nominating/Corporate Governance Committee and other directors. The Nominating/Corporate Governance Committee then submits its recommendations for nominees for the Board’s approval.

 

Before the Board nominates an incumbent director for re-election by our stockholders, the incumbent director may be evaluated by the Nominating/Corporate Governance Committee and/or the Board. This evaluation is based on, among other things, the incumbent director’s meeting attendance record and contributions to the activities of the Board.

 

The Nominating/Corporate Governance Committee considers recommendations of potential candidates from the current directors of our Board, our CEO and our stockholders.

 

Director Qualifications.  AAM’s Corporate Governance Guidelines provide the qualifications for Board membership. Candidates for director nominees to the AAM Board are reviewed in consideration of the current composition of the Board, the operating requirements of the Company and the interests of stockholders. Although specific qualifications may vary from time to time, desired qualities and characteristics include:

 

 

For director candidates recommended by stockholders, the Nominating/Corporate Governance Committee follows the procedures described below in Other Matters, Stockholder Proposals for 2009 Annual Meeting. The Nominating/Corporate Governance Committee will evaluate candidates recommended by stockholders using substantially the same criteria as it uses in evaluating director candidates recommended by our Board members or CEO.

 

Executive Committee

 

The Executive Committee exercises the authority of the Board during the intervals between Board meetings and does not meet on a regular basis. Its members are identified in the Committee Membership in 2007 table.

 

Technology Committee

 

The Technology Committee oversees and provides advice to AAM regarding AAM’s product, process and systems technology. Its members are identified in the Committee Membership in 2007 table.

 

On January 31, 2008, the Board adopted the American Axle & Manufacturing 2008 Long-Term Incentive Plan (the “LTIP”), subject to the approval of stockholders at the annual meeting. The LTIP was adopted for two reasons. First, the LTIP will provide eligible individuals with opportunities to obtain a proprietary interest in AAM through the grant of equity-based awards, which will provide participants with incentives to contribute to AAM’s long-term growth and profitability. Second, the LTIP will assist AAM in attracting, retaining, and motivating highly qualified individuals who are in a position to make significant contributions to AAM.

 

We believe that the approval of the LTIP is essential to AAM’s continued success and that the awards provided under the LTIP are vital to our ability to attract and retain the highly skilled individuals who work for AAM and serve on the Board. The LTIP is intended to replace AAM’s current 1999 American Axle & Manufacturing Holdings, Inc. Stock Incentive Plan (as amended and restated) (the “Prior Plan”). Upon approval of the LTIP, no further awards will be granted under the Prior Plan. As described in greater detail below, a maximum of 5,000,000 shares will be available for issuance under the LTIP, plus any shares that are available (or become available) for issuance under the Prior Plan.

 

The following description is qualified by and should be read in conjunction with the full text of the LTIP. The text of the LTIP appears at the end of this Proxy Statement as Appendix A. On March 18, 2008, the closing market price of our common stock was $22.11 per share.

Summary of the 2008 LTIP

 

New Plan Benefits

 

The number of options, restricted shares or other awards that an individual may receive under the LTIP is in the discretion of the Compensation Committee and cannot be determined in advance. As of the date of this Proxy Statement, no awards have been granted under the LTIP. The following table shows the awards granted under the Prior Plan during the 2007 fiscal year to the named executive officers, all current executive officers as a group, all current directors who are not executive officers as a group, and all other employees who are not executive officers:

 

 

U.S. Federal Income Tax Consequences

 

Nonqualified Stock Options and Stock Appreciation Rights.  The grant of a nonqualified stock option or stock appreciation right will not result in taxable income to the participant or a deduction to the Company. Upon exercise, the participant will recognize ordinary income equal to the amount by which the fair market value of the shares on the exercise date exceeds the exercise or grant price, and the Company will generally be entitled to a deduction in that amount. Upon subsequent sale of the acquired shares, any additional gain or loss will be capital gain or loss (either long-term or short-term, depending on the holding period of the shares).

 

Incentive Stock Options.  A participant will not recognize taxable income, and the Company will not be entitled to a deduction, when an incentive stock option is granted or exercised. However, the excess of the fair market value of the covered shares over the exercise price on the date of exercise is an item of tax preference for alternative minimum tax purposes. If the participant holds the shares acquired on exercise for more than two years following the date of grant and more than one year after the date of exercise of the option, the difference between the sale price and exercise price will be taxed to the participant as long-term capital gain or loss and no deduction will be allowed to the Company. If the participant sells the acquired shares before the end of the holding period, he or she will generally recognize ordinary income at the time of sale equal to the fair market value of the shares on the exercise date minus the exercise price of the option, and a corresponding deduction will be allowed to the Company.

 

Restricted Stock, Restricted Stock Units, Performance Stock, Performance Stock Units and Performance Awards.  Except as described below, a participant will not recognize taxable income, and the Company will not be entitled to a deduction, when a grant of restricted stock, restricted stock units, performance stock, performance stock units, or performance awards is made. Instead, the participant will recognize ordinary income at the time of vesting equal to the fair market value of the shares (or cash) received minus any amounts the participant paid for the award, and the Company will receive a deduction in that amount. If the participant receives shares under the award, any subsequent gain or loss will be capital gain or loss (either long-term or short-term, depending on the holding period of the shares). For restricted stock and performance stock, the participant may elect to be taxed at the time of grant and the long-term capital gains holding period will begin on the date of grant.

 

Section 162(m).  AAM generally will receive a deduction for any ordinary income recognized by a participant with respect to an award. However, special rules limit the deductibility of compensation paid to named executive officers and, under Section 162(m) of the Code, the annual compensation paid to named executive officers may not be deductible to the extent it exceeds $1,000,000. AAM may preserve the deductibility of compensation over $1,000,000 if certain conditions are met. These conditions include stockholder approval of the LTIP, setting limits on the number of shares that may be issued pursuant to awards, and, for awards other than options and stock appreciation rights, establishing performance criteria that must be met before the award will be paid or vest. As described above, the LTIP has been designed to permit the Compensation Committee to grant awards that qualify as “performance-based compensation” for purposes of Section 162(m) and to exclude the value of these awards from the $1,000,000 calculation.

 

The foregoing is not to be considered as tax advice to any person who may be a participant, and any such persons are advised to consult their own tax counsel. The foregoing is intended to be a general discussion and does not cover all aspects of an individual’s unique tax situation, such as the tax consequences of deferred compensation or state and local taxes.

The following table summarizes information as of December 31, 2007 relating to our equity compensation plans pursuant to which grants of stock options, restricted stock, restricted stock units and other rights to acquire shares of our common stock may be made from time to time.

 

Equity Compensation Plan Information

 

 

Your Board unanimously recommends that you vote FOR approval of the 2008 American Axle & Manufacturing Long-Term Incentive Plan.

 

Executive Summary

 

Our executives showed proactive leadership in returning AAM to profitability in 2007 as AAM continued to resize, restructure and recover from the rapid and unprecedented structural transformation of the highly competitive U.S. domestic automotive industry. Among AAM’s accomplishments in 2007, we significantly improved cash flow, reduced net debt levels, rationalized installed production capacity, accelerated growth in our foreign operations, expanded our customer base, enhanced our product portfolio and continued improvement in measurable quality, warranty, delivery and launch performance for our customers.

 

Global competition, combined with increased manufacturing costs and other factors, have put significant financial pressure on the U.S. domestic automotive industry. In this context, many automotive suppliers filed for bankruptcy protection over the past few years. Like many of our competitors and other automotive suppliers in the U.S., we have undertaken wide-scale restructuring actions to reduce costs. Our strong executive leadership is critical to our progress relating to these restructuring efforts in the U.S. and to the continued execution of our operational and strategic objectives in coming years.

 

Our restructuring efforts in the U.S. are focused on establishing a market competitive cost structure. AAM and the United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) are currently negotiating a labor agreement that will cover approximately 3,650 associates at five facilities in the U.S. Due to the significance of these negotiations to AAM, we have postponed many of the regular compensation actions relating to our executive officers, pending the conclusion of our current contract negotiations with the UAW. Specifically, we have postponed consideration of the 2007 annual bonus payments for our executive officers. As a result, in determining the amounts of the payments, we will be able to take into account the results of our negotiations with the UAW, as well as factors relating to performance for 2007. We have also postponed consideration of long-term incentive awards and annual salary adjustments for our executive officers for 2008.

 

Executive Compensation Objectives

 

Our executive compensation programs reflect our results-oriented corporate culture that rewards achievement of aggressive goals. Our compensation program for executive officers is designed to attract, retain, motivate and reward talented executives who will advance our strategic, operational and financial objectives and thereby enhance stockholder value.

 

The following principles are considered in setting compensation programs and pay levels:

 

 

Competitive Compensation

 

Among other factors, we generally consider the competitive market in which we compete for executive officer talent in determining compensation. In July 2007, the Compensation Committee engaged Towers Perrin to review the competitiveness of compensation levels of 13 AAM executive officer positions (including our named executive officers other than the CEO). Towers Perrin’s review included an analysis of base salary, annual cash incentives and long-term incentives (total direct compensation) and perquisites offered by companies in a designated comparison group. The purpose of Towers Perrin’s review was to provide information that we may use in making compensation decisions for these executive officers in future years and in paying compensation to these executive officers that is competitive with market rates.

 

With input from management, Towers Perrin identified a comparison group of 35 broad industrial manufacturing companies, including seven automotive suppliers, from Tower Perrin’s 2007 Executive Compensation Database, for consideration by the Compensation Committee. The comparison group was selected to be representative of a broad industrial sector in which AAM competes for executive talent. The following companies were included:

 

Towers Perrin’s review indicated that AAM’s executive officers (other than the CEO) had total direct compensation in 2007 (consisting of base salary, target annual incentive and grant value of long-term incentive awards) that was, on average, significantly below the median of the comparison group. In addition, Towers Perrin found that base salaries for a number of our executive officers were not competitive with salaries paid for comparable positions at companies in the comparison group. Taking this into account, the Compensation Committee increased base salaries for Mr. Simonte, Mr. Rahangdale and Mr. D.C. Dauch by 12.3, 7.4 and 9.9 percent, respectively, in 2007.

 

Performance Considerations

 

A substantial amount of total direct compensation for our executive officers is at-risk, linking compensation to Company performance and stockholder returns. This design feature creates strong incentives for high levels of performance and for our executives to make a significant contribution to AAM.

 

As described below, we pay annual cash incentives to our named executive officers (other than the CEO) that are contingent on AAM’s achievement of net income as a percentage of sales, after-tax return on invested capital (ROIC) and net operating cash flow. Target performance levels under these measures are set by reference to the Company’s annual budget or are based on a review of the performance of the companies in our competitor peer group in prior years. In addition, the Compensation Committee intends to consider the results of our contract negotiations with the UAW, as described above, among the other performance factors to be taken into account in determining annual bonus payments for 2007.

 

Beginning in 2008, performance under long-term cash performance awards for our executive officers will be based on our relative total stockholder return, determined by reference to the total stockholder return for the companies in our competitor peer group during the performance period.

 

The following companies are included in our competitor peer group:

 

 

In addition, evaluations of individual performance, among other factors, affect the amount of the annual bonus payments approved under our Incentive Compensation Plan for Executive Officers. These factors are also taken into account each year when considering adjustments to base salaries and in determining the total grant value of long-term incentive awards. The Compensation Committee considers the CEO’s recommendation in approving these items and gives considerable weight to the CEO’s evaluation of executive officers due to his direct knowledge of each executive officer’s performance and contributions. Generally, the factors considered by the CEO include the individual’s job responsibilities and experience, time in position and potential for development, as well as the financial and operational performance of activities under the executive officer’s control and the financial performance of the Company. To a significant extent, the CEO’s recommendations reflect his discretion and judgment. No formal weightings are assigned to the particular factors that he considers in evaluating the executive officers in any year.

 

Elements of Compensation

 

The principal elements of compensation for our executive officers are:

 

There is no particular target proportion among these elements. Although all executive officers are eligible to participate in essentially the same compensation and benefit programs offered by AAM, our CEO’s compensation is generally governed by his employment agreement. The terms of Mr. R.E. Dauch’s employment agreement are described in Compensation of Co-Founder, Chairman & CEO and in the Narrative to Summary Compensation Table and Grants of Plan-Based Awards table below.

 

Compensation of Named Executive Officers other than the CEO

 

The discussion below of the elements of compensation applies to our named executive officers, other than Mr. R.E. Dauch, our Co-Founder, Chairman & CEO. Mr. R.E. Dauch’s compensation is discussed separately in Compensation of Co-Founder, Chairman & CEO below.

 

Base Salary.  Base salary is a fixed element of cash compensation for executive officers. The Compensation Committee reviews and adjusts executive officers’ base salaries through AAM’s annual merit program, in conjunction with the annual review process, changes in responsibilities or changes in competitive market trends. Salary increases for executive officers are included in the budget for the annual merit program for all U.S. salaried associates.

 

Under the annual merit program, the Compensation Committee establishes an average merit percentage for base salary in the fourth quarter of each year to pay merit salary increases for U.S. salaried associates in the following year. In determining the average merit percentage for the upcoming year, the Compensation Committee considers compensation surveys by recognized independent consultants and professional organizations that project salary budget increases for salaried employees at comparable companies, including members of AAM’s competitor peer group and other automotive suppliers with operations in the U.S. The average merit percentage serves as a framework for determining the individual base salary adjustment to be applied to each associate’s base salary in the relevant year. In October 2007, to remain competitive with industry pay averages, the Compensation Committee approved an average merit percentage equivalent to a 3.5 percent base salary increase for all U.S. salaried associates in 2008.

 

Individual base salary adjustments for the named executive officers are approved by the Compensation Committee following review and consideration of the recommendations presented by the CEO. We intend to consider base salary increases for our named executive officers for 2008 following the conclusion of our contract negotiations with the UAW, as discussed above.

 

Annual Cash Incentive.  Annual incentive compensation is designed to align executive officer pay with AAM’s annual performance, measured by our achievement of financial targets established under our Incentive Compensation Plan for Executive Officers. All executive officers, other than the CEO, participate in this plan. Under this plan, cash incentive awards for the named executives are permitted to the extent the Company meets or exceeds performance goals set annually by the Compensation Committee. Individual awards may be adjusted by the Compensation Committee, based on the CEO’s recommendation and taking into account the performance factors described above.

 

The performance factors used to measure performance and calculate bonus awards are (1) net income as a percentage of sales, (2) after-tax return on invested capital (ROIC) and (3) net operating cash flow. As discussed below, reliance on these performance factors in determining annual cash incentive compensation awards for executive officers support the overall performance goals and long-term strategic direction of the Company and align the interests of management and our stockholders. The calculations based on our audited financial information of 2007 ROIC and net operating cash flow, both of which are non-GAAP financial measures, are set forth in Supplemental Financial Data below.

 

Net income as a percentage of sales is a key indicator of the Company’s financial and operational performance. ROIC is an important performance measure for us because it reflects how efficiently and effectively we deploy our capital, which is particularly important given the cost competitive, capital intensive nature of our industry. We believe that sustained returns on invested capital in excess of our Company’s cost of capital create value for our stockholders over the long-term. Net

operating cash flow is also a relevant performance measure for us because it is commonly used by management and investors to assess our ability to generate cash flow from business operations to repay debt and return capital to our stockholders and is a general measure of financial health.

 

In the fourth quarter of each year, the Compensation Committee determines the weighting and award levels for each of the performance factors for the upcoming year in conjunction with the approval by the Board of the annual budget for the upcoming year. For each of the performance factors, the Compensation Committee establishes target and threshold levels of performance and then designs a formula scaled to performance that can be more or less than target. Performance above the target level may result in a higher payout, with a maximum payout for net operating cash flow of 120 percent. There is no established maximum for net income as a percentage of sales and ROIC.

 

Target and threshold performance levels for net income as a percentage of sales and ROIC are established based on a review of our competitor peer group benchmarks for the three most recently completed years. The target performance level for net income as a percentage of sales is established to meet the performance of the top one-third of our competitor peer group for the three most recently completed fiscal years. The target level of performance for ROIC is set with the objective of being at least 200 basis points higher than our competitor peer group average for the same period. The target level of performance for net operating cash flow is based on the Board approved annual budget for the upcoming year.

 

Our competitor peer group serves as the benchmark for setting the threshold and target performance levels for net income as a percentage of sales and ROIC, as we compete with these companies for capital and operate under similar business conditions. In determining threshold and target performance levels for the 2007 performance year, peers in bankruptcy and Dura Automotive Systems, Inc. were excluded from the competitor peer group averages. The Compensation Committee determined that the distressed financial performance of these companies during this time period skewed the benchmarking results. Excluding these companies from the competitor peer group averages resulted in an increase in the threshold and target performance levels.

 

The threshold, target and maximum levels of performance set by the Compensation Committee for the 2007 performance period are shown in the following table:

 

 

 

In the first quarter of each year, the Compensation Committee meets to review the Company’s financial results for the previous year and determines the degree to which financial performance targets have been achieved. Our Incentive Compensation Plan for Executive Officers gives the Compensation Committee discretion to adjust the method of calculating the attainment of performance goals in recognition of (1) unanticipated special charges or gains, (2) unanticipated industry-wide factors affecting Company performance or (3) unanticipated customer decisions affecting Company performance. The Compensation Committee also has discretion to adjust any award (upward or downward) to reflect individual performance or special achievements.

In January 2008, the Compensation Committee reviewed 2007 Company performance for purposes of our Incentive Compensation Plan for Executive Officers and approved an adjustment for the following unanticipated special charges recorded in our 2007 consolidated financial statements:

 

 

With this adjustment taken into account, the achievement of ROIC and net operating cash flow goals were above target, net income as a percentage of sales was below target, and overall achievement based on our financial performance in 2007 was 104% of target. The Compensation Committee did not, however, approve the payment of annual bonuses on this basis and, as described above, postponed the consideration of the 2007 annual bonus payments for our executive officers, including the named executive officers. In determining the amount to be paid, the Compensation Committee intends to take into account the results of our contract negotiations with the UAW, together with the relevant performance considerations for 2007, as described above.

 

Long-Term Incentives.  Long-term incentive compensation is designed to:

 

 

In July 2007, the Compensation Committee engaged Towers Perrin to review AAM’s long-term incentive program for executive officers (excluding the CEO) and to recommend a strategy consistent with AAM’s compensation philosophies and objectives. As part of this review, Towers Perrin analyzed historical and current market long-term incentive grant practices and trends based on Towers Perrin’s 2002 and 2007 Long-Term Incentive Plan Reports and their analysis of Fortune 500 long-term incentive practices and trends. In addition, based on data from Towers Perrin’s 2007 Executive Compensation Database, Towers Perrin found that target long-term incentive award opportunities for our executive officers, on average, were not competitive with market rates. Taking into account input from senior management concerning the Company’s business objectives and plan design, Towers Perrin recommended a long-term incentive grant strategy based on a value and mix of award vehicles, including potential performance criteria and targets, that is consistent with market practices and trends.

 

The Compensation Committee considered the results of Towers Perrin’s analysis and the recommendations of Towers Perrin and senior management in approving a long-term incentive grant strategy for implementation in 2008. Under the approach approved by the Committee, executive officers would receive annually a combination of restricted stock, performance awards and stock options with a total award value to be established prior to the time of grant. Each component of the annual award is discussed in greater detail below.

 

Restricted stock.  Fifty-percent of the total award value generally would be in the form of restricted stock vesting in full on the third anniversary of the date of grant. Emphasizing retention, these awards require continued service with AAM during the vesting period. Restricted stock has value tied to share price at the time of vesting aligning the interests of our executives with those of our

stockholders. Restricted stock also facilitates stock ownership and consists of issued and outstanding shares of common stock, with dividend and voting rights from the date of grant. Executives age 60 and over at the time of grant would receive additional restricted stock in lieu of a grant of performance awards described below. Restricted stock awarded to this group would vest in three approximately equal installments on the first, second and third anniversaries of the grant date.

 

Performance Awards.  Twenty-five percent of the executive’s award value would generally be in the form of performance awards, representing the right to a payment in cash based on our total shareholder return (TSR), relative to our competitor peer group, over a three-year performance period. Performance awards are designed to tie long-term incentive pay of executive officers more directly with long-term Company performance. We chose relative TSR as the measure of Company performance in order to motivate our executive officers to build long-term value for our stockholders above that of our competitor peer group. In addition, these awards emphasize retention, as they require continued service with AAM during the three-year performance period. Performance awards also are payable in cash rather than shares minimizing the dilution of stockholder interests. Executives age 60 and over at the time of grant would receive, in lieu of a grant of performance awards, an equivalent value in restricted stock.

 

The actual value realized under performance awards is equal to a percentage of the target payout based on relative TSR during the performance period. Following are the threshold, target and maximum levels of performance attainment and the related target level payouts:

 

 

Payout levels are linearly interpolated between percentiles. No performance awards may be earned unless relative TSR is at or above the threshold level of performance. If the Company’s TSR is negative over the three-year performance period, the maximum earned award would be 100% of the target award. TSR is measured for the Company and for each of the competitor peer group companies over the performance period and is defined as the cumulative appreciation (assuming reinvestment of dividends) of an investment in common stock.

 

Stock options.  Twenty-five percent of the total award value for each executive officer would be in the form of stock options vesting in three approximately equal installments on the first, second and third anniversaries of the grant date, Stock options align the interests of our executive officers and our stockholders as stock options only have value to the extent the price of our common stock on the exercise date exceeds the option grant price. We believe that stock options continue to provide motivation for our executive officers to focus on long-term stockholder value.

 

Each year, the Compensation Committee establishes guidelines for the target grant value of the long-term incentive awards to be made to executive officers other than the CEO and approves a total grant value for each executive officer based on the CEO’s recommendation for the year. In making his recommendations, the CEO considers, among other things, the executives’ level of responsibility and performance, market practices and trends, and the shares available under our Stock Incentive Plan. As discussed above, consideration of the actual long-term incentive awards to be made to our executive officers, including our named executive officers, for 2008 was postponed pending the conclusion of our contract negotiations with the UAW.

 

Equity Grant Practices.  AAM generally makes grants to its executive officers and other executives on an annual basis, subject to the approval of the Compensation Committee. Historically, grants have been made in the first quarter of each year to coincide with the communication to executive officers of their annual cash incentive awards for the previous year’s performance. This timing increases the impact of the awards by strengthening the link between pay and performance. AAM does not and

has never permitted backdating, spring loading or other timing of option grants with the release of material, non-public information.

 

Benefits.  Our executive officers participate in the full range of benefits and retirement plans provided to U.S. salaried associates generally. We target our overall benefits package to be competitive with that of our competitor peer group and other companies with which we compete for associates.

 

The most senior executives of AAM, a group of approximately 50 individuals (including executive officers), participate in a program of supplemental benefits specific to this group. We provide these senior executives with supplemental life, supplemental disability, umbrella liability and travel accident insurance benefits. The benefits provided in this program are designed, in the aggregate, to be competitive with those provided to executives in comparable positions at companies in our competitor peer group.

 

Executive officers are eligible to participate in AAM’s qualified and nonqualified defined benefit pension plans and defined contribution plan. They are also eligible to participate in a nonqualified deferred compensation plan that permits deferrals of a portion of base salary and/or annual cash incentive compensation on a pre-tax basis. These plans are described in the Pension Benefits and Nonqualified Deferred Compensation sections below.

 

Perquisites.  AAM provides a limited number of perquisites for senior executives, including executive officers, which are described in the footnotes to the Summary Compensation Table. The most significant perquisite we provide is the use of a Company-provided vehicle that has substantial AAM content. This perquisite is common among automotive suppliers.

 

In connection with the review of executive officer compensation levels in 2007, Towers Perrin compared AAM’s perquisite offerings for executive officers against the companies in the comparison group for which current information was available. Towers Perrin reported that AAM’s perquisite offerings, while competitive, are on the lower end of the range at companies in the comparison group and recommended continuance of the current offerings. Taking into account Towers Perrin’s analysis, the Compensation Committee did not make any changes in 2007 to the perquisites offered by AAM.

 

AAM has never owned corporate aircraft and does not provide leased aircraft for personal use.

 

AAM does not pay for country club memberships.

 

Compensation of Co-Founder, Chairman & CEO

 

Mr. R.E. Dauch’s compensation is governed by an employment agreement that is described in the Narrative to Summary Compensation and Grants of Plan-Based Awards table below. The CEO’s compensation arrangements are structured in consideration of the breadth of responsibilities for the entire Company, his experience in the automotive industry and his extraordinary value of leadership and service to AAM since he co-founded the Company in 1994. As discussed above, consideration of Mr. R.E. Dauch’s 2007 bonus and salary adjustment for 2008 was postponed pending the resolution of our contract negotiations with the UAW. We also postponed the annual grant of equity awards under his employment agreement for 2008.

 

The primary elements of the CEO’s compensation are: (1) base salary; (2) annual cash bonus; (3) long-term equity-based incentives; and (4) benefits and perquisites.

 

Base Salary.  Base salary is determined by the Compensation Committee as part of our annual compensation review process. Annual adjustments to base salary are made at the discretion of the Compensation Committee in consideration of Company performance and Mr. R.E. Dauch’s achievements as CEO. The specific factors considered may differ from year to year. Base salary for 2007 and 2006 is shown in the Summary Compensation Table.

 

Annual Cash Bonus.  Mr. R.E. Dauch is eligible for an annual cash bonus as described in his employment agreement. See Narrative to Summary Compensation Table and Grants of Plan-Based

Awards table below. As described in his employment agreement, the annual cash bonus is based on the Compensation Committee’s assessment of Company performance as compared to that of our competitor peer group. The Compensation Committee may use discretion and consider other factors in determining Mr. R.E. Dauch’s annual cash award. The specific factors may differ from year to year. The annual cash bonus earned in 2007 and 2006 is shown in the Summary Compensation Table.

 

Long-Term Incentives.  Mr. R.E. Dauch’s employment agreement was amended in 2008 to change the form of the annual equity award to be granted to Mr. R.E. Dauch from stock options to a mix of stock options and restricted stock. Under his amended employment agreement, Mr. R.E. Dauch is entitled to receive, each year, an award of 150,000 stock options and an award of restricted shares equal to the value of the option award. The terms of these awards are the same as those granted to other executive officers as described in Long-Term Incentives above. From 2005 through 2007, the Compensation Committee granted Mr. R.E. Dauch an annual combined award of stock options, PARS and RSUs. The terms of these awards are described in the Narrative to Summary Compensation Table and Grants of Plan-Based Awards table.

 

Benefits and Perquisites.  Mr. R.E. Dauch participates in the same benefit programs provided for other senior executives, including executive officers. In addition, under his employment agreement, AAM provides Mr. R.E. Dauch with the use of an additional Company vehicle and reimburses him for premiums under a $5,000,000 life insurance policy. The Company will also provide him postretirement health care benefits upon expiration of his employment agreement on December 31, 2009. Perquisites provided to the CEO in 2007 and 2006 are reported in the Summary Compensation Table.

 

Management’s Stock Ownership Requirements

 

The Compensation Committee established stock ownership requirements for executive officers in October 2004. Based on the market value of our common stock, ownership requirements are determined as a multiple of each executive officer’s base salary.

 

 

Stock ownership levels must be attained within five years from October 2004 or, for new appointments of executive officers, within five years from the date of becoming an officer or assuming a new officer position. If compliance is not achieved in five years, 50 percent of an executive officer’s annual cash incentive award will be awarded as restricted stock until the applicable level is attained. Ownership requirements must be maintained until retirement. Shares owned directly (including restricted stock) or through AAM’s Salaried Savings Plan are considered in determining stock ownership levels. Unexercised stock options and RSUs are not considered in determining stock ownership levels for executive officers.

 

Our Co-Founder, Chairman & CEO’s stock ownership exceeds the requirements for his position.

 

All other executive officers have met or are on target to meet the stock ownership requirements for their positions.

Federal Income Tax Considerations

 

Deductibility of Executive Compensation.  In general, the compensation awarded to our named executive officers will be taxable to the executive and will give rise to a corresponding corporate deduction at the time the compensation is paid. Section 162(m) of the Internal Revenue Code (Code) denies a federal income tax deduction for certain compensation in excess of $1 million per year paid to the CEO or to any of the other named executive officers other than the CFO. The portion of the compensation in excess $1 million that we paid to our CEO in 2007 was not deductible for federal income tax purposes. Section 162(m) did not affect our ability to take a tax deduction for compensation paid to any of our other named executive officers in 2007.

 

We design our stock options and our cash performance awards so that the amount realized by the executive on exercise or payment will not be subject to the $1 million limitation under Section 162(m). Although deductibility of compensation is preferred, tax deductibility is not a primary objective of our compensation programs. We believe that achieving our compensation objectives set forth above is more important than the benefit of tax deductibility. We reserve the right to maintain flexibility in how we compensate our executive officers, which may result in limiting the deductibility of amounts of compensation from time to time.

 

Section 280G.  Under our continuity agreements with named executive officers, discussed below, they are entitled to a gross-up payment for excise tax resulting from a change in control under Section 4999 of the Code. This is to ensure that the named executive officer receives the same net after-tax payment that he would have received had no excise tax been imposed, subject to certain limitations. If a named executive officer’s change in control benefits exceed the safe harbor amount (i.e., three times the historical five-year Form W-2 average) by greater than 10 percent, he will be entitled to a gross-up payment for the additional excise tax. If, however, the change in control benefits are less than or equal to 10 percent of the safe harbor amount, then the named executive officer’s benefit will be reduced until the sum of the payments equals the maximum amount that may be paid to him without the imposition of the excise tax.

 

Change-In-Control Payments and Benefits

 

Primarily as a protection for our senior management, and in order that they may remain focused on the management of the Company’s business in the event of a pending change in control, we have entered into continuity agreements with executive officers, including the named executive officers. These continuity agreements are described in Potential Payments Upon Termination or Change in Control below. Generally, the agreements provide enhanced severance benefits for executives if they terminate employment in specified circumstances following a change in control. Additionally, stock options and other equity awards granted to our executive officers vest upon the occurrence of a change in control, further aligning executives with shareholders.

 

Annually, the Compensation Committee reviews “tally sheets” for the named executive officers for purposes of reviewing total compensation and considering potential payments to executive officers upon termination of employment or a change in control. The elements and calculations reviewed are substantially similar to the information provided in the tabular disclosure for each named executive officer in Potential Payments Upon Termination or Change in Control below. The Compensation Committee did not recommend or approve changes to our named executive officers’ compensation based on its review of this information in October 2007 and continues to believe that the amounts payable in the event of a change in control are appropriate.

SUPPLEMENTAL FINANCIAL DATA

 

The following supplemental financial data presented for the years ended December 31, 2007 and 2006 are the unadjusted calculations for two of the three performance factors (ROIC and net operating cash flow) under our Incentive Compensation Plan for Executive Officers. These performance factors are non-GAAP (generally accepted accounting principles) financial measures, which are intended to facilitate analysis of our business and operating performance. This information is not and should not be viewed as a substitute for financial measures determined under GAAP. Other companies may calculate these non-GAAP financial measures differently.

 

After-Tax Return on Invested Capital (ROIC)

 

 

 

 

 

 

Net Operating Cash Flow

 

 

The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

 

Compensation Committee of the Board of Directors

 

Forest J. Farmer, Chairman

John A. Casesa

Elizabeth A. Chappell

Thomas K. Walker

 

The following table summarizes the compensation of our named executive officers (Richard E. Dauch, Co-Founder, Chairman of the Board & Chief Executive Officer, Michael K. Simonte, Group Vice President — Finance & Chief Financial Officer, Yogendra N. Rahangdale, Vice Chairman & Chief Technology Officer, David C. Dauch, Executive Vice President & Chief Operating Officer and Patrick S. Lancaster, Vice President, Chief Administrative Officer & Secretary) for the fiscal years ended December 31, 2007 and December 31, 2006.

 

 

 

Long-term incentive awards granted in 2007 to the named executive officers are shown in the following table. The long-term incentive compensation programs are described in Compensation Discussion and Analysis and following the table below.

 

 

 

Narrative to Summary Compensation Table and Grants of Plan-Based Awards table

 

CEO Employment Agreement

 

Our employment agreement with Mr. R.E. Dauch, as amended, provides for the following compensation and benefits during the term of the agreement:

 

 

The current term continues through December 31, 2009 and may be automatically extended for successive one-year terms, unless either party gives notice of termination at least 60 days prior to the end of the applicable term. The potential payments and benefits upon termination of Mr. R.E. Dauch’s employment are described in Potential Payments Upon Termination or Change in Control.

 

Equity Awards

 

We granted nonqualified stock options, PARS and RSUs to each named executive officer in 2007 under our Stock Incentive Plan.

 

Stock Options.  Options vest in three approximately equal installments on the first, second and third anniversaries of the grant date. Generally, vesting may accelerate upon termination of employment due to death, disability, retirement or upon a change of control. The award is forfeited if employment is terminated for any other reason prior to vesting. Vested options expire ten years after the grant date and may be exercised any time before the earliest of: (1) the expiration of the grant, (2) five years following termination of employment (one year following termination for options granted before 2002) due to death, disability, retirement or a change of control, (3) 90 days following termination of employment without cause and (4) termination of employment for cause.

 

Performance Accelerated Restricted Stock and Restricted Stock Units.  PARS and RSUs vest on the fifth anniversary of the grant date unless vesting is accelerated on the third or fourth anniversaries of the grant date based on our total shareholder return. Vesting may also accelerate upon termination of employment due to death, disability or upon a change in control. If the named executive officer’s employment is terminated for any other reason, he will forfeit his unvested PARS and RSUs.

 

Vesting is accelerated on the third anniversary of the grant date if AAM’s total shareholder return for the preceding three-year period meets or exceeds the 66th percentile of our competitor peer group. If vesting is not accelerated on the third anniversary, then vesting is accelerated on the fourth anniversary of the grant date if shareholder return exceeds the 66th percentile of our competitor peer group for the preceding four years. Total shareholder return is defined as the cumulative appreciation (assuming reinvestment of dividends) of an investment in common stock. Vesting will not accelerate unless AAM has positive total stockholder return.

 

PARS consist of issued and outstanding shares of AAM common stock, subject to forfeiture and transfer restrictions prior to vesting of the awards, and carry voting and dividend rights from the date of grant. RSUs consist of the right to receive, upon vesting of the award, an amount in cash equal to the fair market value of the number of shares of common stock covered by the award. RSUs carry the right to receive dividend equivalent payments from the date of grant, payable in the calendar quarter when dividends are paid on our common stock.

 

Salaried Savings Plan

 

Employer Matching Contributions.  The Salaried Savings Plan, our tax-qualified defined contribution retirement plan, provides a long-term savings vehicle that allows for pre-tax and post-tax contributions by eligible U.S. salaried associates, including our named executive officers, and tax-deferred earnings. The maximum employer match under the Salaried Savings Plan is 50 percent of the employee’s contributions, up to 10 percent of base salary, for the year. All named executive officers participate in this plan and are fully vested in Company matching contributions.

 

Employer Retirement Contributions.  Participants in the Salaried Savings Plan whose benefits were frozen under the Salaried Retirement Program (as described following the Pension Benefits table), receive employer retirement contributions under the Salaried Savings Plan equal to between three and five percent of annual salary, depending on years of service. Mr. Simonte and Mr. D.C. Dauch received employer retirement contributions in 2007.

 

 

 

 

The following table shows the value of the benefits accumulated by the named executive officers and their years of credited service under AAM’s Salaried Retirement Program and the SERP. The years of credited service are through December 31, 2007, AAM’s fiscal year-end measurement date used for financial statement reporting purposes. The values shown are based on unreduced benefits deferred to the earliest age at which unreduced benefits are payable. The assumptions used to calculate the actuarial present value of accumulated benefits are the same assumptions used in our audited consolidated financial statements for the fiscal year ended December 31, 2007, except that the values in the table do not reflect assumptions for future compensation increases and assume continued employment until retirement age is attained.