Good morning. My name is Suzanne, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the AAM's Fourth Quarter and Full Year 2015 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period.

As a reminder, today's call is being recorded. I would now like to turn the call over to Mr. Jason Parsons, Director of Investor Relations. Please go ahead, Mr. Parsons..

Thank you, and good morning, everyone. Thank you for joining us today and for your interest in AAM. Earlier this morning we released our fourth quarter and full year 2015 earnings announcement. If you have not had an opportunity to review the earnings announcement, you can access it on our website, aam.com, or through the PR Newswire services.

A replay of this call will also be available beginning at 1:00 PM today through 11:59 PM Eastern Time, February 19th by calling 855-859-2056, reservation number 34605757.

Before we begin, I would like to remind everyone that the matters discussed in this call may contain comments and forward-looking statements subject to risks and uncertainties, which cannot be predicted or quantified and which may cause future activities and results of operations to differ materially from those discussed.

For additional information, we ask that you refer to our filings with the Securities and Exchange Commission. Also during this call, we may refer to certain non-GAAP financial measures. Information regarding these non-GAAP measures, as well as a reconciliation of these non-GAAP measures to GAAP financial information is available on our website.

Over the next several months we will participate in the following conferences; the JPMorgan Global High Yield & Leveraged Finance Conference in Miami, Florida on March 1st, and the Bank of America-Merrill Lynch, New York Automotive Summit on March 23rd. In addition, we are always happy to host investors at any of our facilities.

Please feel free to contact either myself or Vitalie Stelea to schedule a visit. With that, let me turn things over to AAM's Chairman and CEO, David Dauch..

quality performance, technology leadership, and operational excellence. We are confident in our ability to sustain solid profitability performance and to generate strong operating cash flow, whether the industry is in a high growth, low growth or plateaued U.S. sales environment.

Today, AAM is reaffirming the guidance and targets we shared with you at the 2016 Deutsche Bank Global Automotive Conference in Detroit on January 13, 2016. We expect it to be another record year for AAM, for both sales and profitability. We believe the trend in global automotive market conditions will continue to be positive in 2016.

For the full year 2016, we expect total U.S. light vehicle sales to range from 17.5 million units to 18 million units.

And based on these industry sales assumptions, the anticipated launch timing of our new business backlog and the estimated full year impact of lower metal market pass-through at FX, AAM is targeting full year sales in 2016 of $4 billion.

In 2016, AAM will support 17 major project and program launches that will drive profitable sales growth and further gains in our business diversification. For the full year 2016, AAM is targeting EBITDA margin in the range of 14.5% to 14.75% of sales.

And AAM is targeting positive free cash flow in the range of $120 million to $140 million for the full year 2016.

The 2016 GAAP cash flow guidance includes the impact of higher capital spending in 2016 as compared to 2015, related to the timing of investments required to successfully launch $375 million of new and incremental business backlog for the 2017 calendar year.

It also includes the impact of estimated payments in the range of $30 million to $40 million related to the settlement of transfer pricing issues with the Mexican tax authorities. The resolution of these audits represent a favorable overall outcome for AAM. Chris will provide more details on these issues in a few minutes here.

As far as future business goes, we have communicated AAM's three-year new and incremental business backlog of $725 million in the years covering 2016 through 2018 with a cadence of $225 million in 2016, $375 million in 2017, and $125 million in 2018.

We have also communicated to you that we expect to retain 75% of the content for the next generation GM full size truck program. We are still working with GM on final program timing, content, and design direction, and expect to have additional clarity on that program later this year.

We anticipate that the sales impact of this transition will begin in 2018. However, AAM will not feel the full impact of this sourcing action until the year 2020.

We have also already disclosed to you that we have booked business that will cover approximately 35% to 40% of the sales impact related to the transition of the next generation full size GM truck platform.

A small portion of this new business will launch in the 2018 backlog and we expect the remaining portion to launch in the 2019 and 2020 time period. Our opportunities to fill the remaining sales gap are very high.

The good news is that we're seeing an increase in customer quoting activity and are presently working on approximately $1.5 billion of new and incremental business opportunities, of which approximately $500 million of these opportunities will fall solely in the 2018 timeframe.

These potential awards run across our entire product portfolio such as front and rear axles, drive shafts, metal form products, and of course our latest and newest technology, EcoTrac and e-AAM. These opportunities are geographically diverse and mostly non-GM as well.

We are confident by 2020, AAM's non-GM business will be at or over 50% of total sales, and these are just our organic opportunities. We also believe we have strategic options as well. We are confident, we are motivated, and we have the right product portfolio that will lead us to success going forward. It's a very exciting time here at AAM.

We expect to and look forward to updating you on our progress and our success along the way at the appropriate time.

As we look ahead to another successful year here in 2016 and beyond, we remain very focused on advancing our technology leadership in order to capitalize on the major industry trends and drive profitable growth and business diversification like we did this past year.

As good as 2015 was for AAM, we believe the future is even brighter, and in no way, is it as good as it gets. That concludes my comments for this morning. I'd like to thank each and every one of you for your attention today. Let me now turn the call over to our Vice President and Chief Financial Officer, Chris May.

Chris?.

Thank you, David, and good morning, everyone. I will cover the financial details of our fourth quarter and full year 2015 results with you today, starting with sales. As David mentioned, AAM's sales in the fourth quarter of 2015 were $958.4 million, up 2% compared to the fourth quarter of 2014.

Sales in the fourth quarter of 2015 reflect the impact of lower metal market pass-throughs to our customers, as well as FX translation, mainly related to the weakening of the Brazilian reais against the U.S. dollar.

Metal market and FX accounted for over $40 million reduction in sales in the fourth quarter of 2015 as compared to the fourth quarter of 2014. AAM's non-GM sales for the quarter were $323.5 million, as compared to $317.2 million on a year-over-year basis, also a 2% increase.

For the full year 2015, AAM's sales increased 5.6% to $3.9 billion as compared to $3.7 billion for the full year of 2015. Non-GM sales increased to $1.3 billion in 2015, up nearly 10% on a year-over-year basis, both of these were records for AAM.

AAM's content per vehicle is measured as a dollar value of our product sale supporting our customer's North American light truck and SUV programs. In the fourth quarter of 2015, AAM's content per vehicle was $1,645, as compared to $1,697 in the fourth quarter of 2014.

The reduction is largely due to the impact of lower metal market pass-throughs to our customers that I mentioned earlier. On a sequential basis AAM's content per vehicle in the fourth quarter of 2015 was up slightly $23 as compared to the third quarter of 2015.

The primary driver of the sequential increase in content per vehicle was a favorable mix in seasonally higher four-wheel drive penetration. In the fourth quarter of 2015, four-wheel drive penetration reached 72%, up from approximately 70% in the third quarter. So let's move on to profitability.

In both the fourth quarter and full year of 2015, AAM continued to deliver strong operating profit metrics. Gross profit was $159.8 million or 16.7% of sales in the fourth quarter of 2015. This compares to $111.2 million or 11.8% in the fourth quarter of 2014.

Remember, the gross profit for the fourth quarter of 2014 included a special charge of $31.2 million for our 2014 pension payout offer. For the full year of 2015, AAM achieved record gross profit of $635.4 million or 16.3% of sales.

Excluding the impact of $841,000 of debt refinancing and redemption cost, adjusted EBITDA or earnings before interest, taxes, depreciation and amortization, was $137.5 million in the fourth quarter of 2015, or 14.3% of sales. This compares to adjusted EBITDA of $135.1 million in the fourth quarter of 2014.

For the full year 2015, AAM's adjusted EBITDA increased 11.5% on a year-over-year basis, to a record $571.1 million. Adjusted EBITDA margin for the full year 2015 was 14.6% of sales, a 70 basis point improvement compared to the adjusted full year of 2014. Now let me cover SG&A and interest.

SG&A expense, which also includes R&D, in the fourth quarter of 2015 was $72.7 million or 7.6% of sales. This compares to $72.6 million in the fourth quarter of 2014, or 7.7% of sales. SG&A in the fourth quarter of 2014 included a $4.3 million charge related to the pension payout offer.

AAM's R&D spending in the fourth quarter of 2015 was $31.3 million compared to $27.3 million in the fourth quarter of 2014. The R&D trend in the quarter is consistent with the full year that I will discuss next. For the full year 2015, SG&A expense was $277.3 million, or 7.1% of sales.

This compares to $255.2 million for the full year of 2014, or 6.9% of sales. A significant driver of increased SG&A spending in 2015 compared to 2014 was R&D spending. AAM's R&D spending for the full year 2015 was $113.9 million, compared to $103.9 million in the full year of 2014.

This increase in R&D spending is primarily related to investments in advanced technologies, such as our high-efficiency axles, next generation EcoTrac disconnecting all-wheel drive systems, and our Hybrid and Electric Driveline Systems under our e-AAM product line, such as our electric drive units.

SG&A in 2015 also reflected higher staffing levels and wage inflation. For 2016, we expect our SG&A run rate as a percent of sales to slightly increase, mainly related to continued support of our global product engineering initiatives.

This reflects AAM's continued commitment to technology leadership, our focus on delivering innovative products, our processes and systems, all aligned with today's global automotive trends. This is truly some exciting stuff. Net interest expense was $23.9 million in both the fourth quarter of 2015 and 2014.

For the full year 2015, net interest expense was $96.6 million, as compared to $97.8 million in 2014. In 2016, we would expect net interest expense to continue to decline as a result of strong operating cash flow and the benefit of the prepayment we made on our term loan at the end of 2015.

This prepayment, along with our strong full year performance, took over half a turn out of our gross leverage in 2015, and demonstrates our commitment to continue to derisk AAM's balance sheet. Before I address tax expense, let me review other income.

The two primary components of other income for AAM are foreign gains – exchange gains and losses, and earnings from our Hefei joint venture in China. Other income was $1.1 million in the fourth quarter of 2015, compared to $6.4 million in the fourth quarter of 2014.

Remember that, in the fourth quarter of 2014, we recorded significant gains related to the favorable impact of the remeasurement of the Mexican peso denominated assets and liabilities that we have. In the fourth quarter of 2015, gains and losses related to foreign exchange remeasurement netted nearly to zero.

And our other income consists mainly of earnings from our Hefei joint venture. For the full year 2015, other income was $12 million, compared to $6.9 million in the full year of 2014.

In both 2015 and 2014, AAM benefited from the net favorable impact of foreign exchange gains, primarily related to the remeasurement of the Mexican peso denominated assets and liabilities. As discussed previously, these remeasuring gains and losses can increase or decrease other income every period, based on the quarter-end exchange rate. Okay.

Now I'm going to go – cover tax accounting. AAM's effective tax rate in the fourth quarter of 2015 was approximately 1%. This rate includes the impact of a favorable adjustment to income tax expense of $11.5 million related to the resolution of transfer pricing audits in Mexico. Let me provide a little more color on this issue.

As we have previously disclosed, we're under transfer pricing audits in Mexico for the tax years 2007 through 2009.

As required under GAAP, we reported an estimated liability for the most likely outcome of these audits for the years under audit, as well as the estimated impact that this audit result would have on other tax years open to audits in the future.

In the fourth quarter of 2015, we made a favorable adjustment to our estimate of this liability based upon settlement agreements with the Mexican tax authorities, not only for the years 2007 through 2009, but all the way through 2013, and this sets the platform for 2014 and 2015 as well.

In 2016, we expect to make payments totaling $30 million to $40 million to complete this process. This is a good result for AAM. The resolution of these open transfer pricing audits brings closure to a significant contingency for AAM and reduces our future tax audit risk in a very important geographic location for us.

We continue and will continue to be subject to tax audits and tax law changes both in the U.S. and in foreign jurisdictions for, which we operate, and we will continue to manage these risks appropriately. For further information on this topic, please reference the appropriate footnotes in our Form 10-K that we will file later today.

For the full year of 2015 AAM's effective tax rate was approximately 14% compared to 19% for the full year of 2014 with a favorable tax adjustment in the fourth quarter of 2015 being the main difference between the two rates.

Excluding the impact of this adjustment, our tax rate would have been around 18% right in line with our expectations and our previous guidance to you of between 15% and 20%. We would also expect our effective tax rate in 2016 also to fall within that same range of 15% to 20%.

Taking all of these sales and cost drivers into account, GAAP net income was $62.9 million or $0.81 per share in the fourth quarter of 2015, compared to $13.2 million or $0.17 per share in the fourth quarter of 2014.

For the full year 2015, AAM's GAAP net income was $235.6 million or $3.02 per share compared to $143 million or $1.85 per share in the fourth quarter of 2014. Now, I'll move on to cash flow and the balance sheet.

AAM defines free cash flow to be net cash provided by operating activities, less CapEx net of proceeds from the sale of property, plant and equipment and government grants. Net cash provided by operating activities for the full year 2015 was $377.6 million.

CapEx net of proceeds from the sale of property, plant and equipment and government grants for the full year of 2015 was $188.1 million. Reflecting the impact of this activity, AAM generated positive free cash flow of $189.5 million for the full year of 2015, over 50% higher than 2014 and above our target of $175 million for the full year.

Using our market cap from December 31, 2015, this represents a cash flow yield of nearly 13% and even higher yield at today's stock price. Let me now address key credit metrics and our yearend liquidity position.

AAM's EBITDA leverage or the ratio of EBITDA to net debt was approximately 1.9 times at 2015 yearend, a significant decrease from just 2.5 times one year ago. AAM's EBIT coverage or the ratio of EBIT to net interest expense was 3.9 times at yearend. EBITDA leverage ratio and the EBIT interest coverage ratio were both calculated on an adjusted basis.

And as previously disclosed, AAM took steps in the fourth quarter of 2015 to reduce our gross debt by prepaying the remaining balance of over $135 million of our term loan, three years ahead of its scheduled maturity and consistent with our objectives we have shared with you. One final note on the balance sheet.

We ended 2015 with total available liquidity of approximately $844 million, consisting of available cash and borrowing capacity on AAM's global credit facilities. Our improved credit metrics and strong liquidity position allow AAM to focus on capital allocation strategies that will best serve our long-term interest.

Now before we move on to Q&A, let me close my comments with a quick note on our 2016 guidance. The key guidance targets for the full year 2016 remains unchanged from our January disclosures and they are as follows. We are targeting full year sales of $4 billion. We are targeting EBITDA margin in the range of 14.5% to 14.75% of sales.

We are targeting a cash flow in the range of $120 million to $140 million, and if you adjust for our tax settlement payments of $30 million to $40 million, we would expect our free cash flow performance to be in the range of approximately $170 million. This is a very strong cash flow yield and result for AAM.

Lastly, we estimate capital spending to be approximately 6% of sales. Remember that our 2016 cash flow guidance does include the impact of approximately 100 basis point increase in capital spending as a percent of sales.

This increase from 2015 mainly relates to the timing of investments required to successfully launch $375 million of our new and incremental business backlog in 2017. As mentioned earlier, we expect to make payments in the range of $30 million to $40 million in 2016 related to the Mexico transfer pricing issues discussed earlier.

Excluding these payments, we expect our cash tax rate for the next few years to increase from our current rate of approximately 5% to 10% of pre-tax income to a range of 10% to 15% of pre-tax income as it begins to track closer to our overall effective tax rate.

This increase in rate reflects the impact of improved profitability in our foreign locations such as China and Poland, which is ultimately a good news story for AAM. Overall, we are excited for 2016 and believe we have a great opportunity to leverage our operational excellence to continue to benefit from a solid U.S.

and global vehicle production environment. Our expectation of strong operating margins and strong operating cash flow generation should continue to create value for our stakeholders. I thank you for your time today and participation on the call. I'm going to stop here and turn the call back over to Jason so we can start the Q&A..

Thank you, Chris and David. We have reserved some time to take questions. I would ask that you please limit your questions to no more than two. So at this time please feel free to proceed with any questions you may have..

Your first question comes from the line of John Murphy of Bank of America Merrill Lynch. Your line is open..

Good morning, guys..

Hey, John..

Good morning, John..

Just to add first (26:27) question here. I mean, there's a lot of noise in the market about the strength in trucks which seems to be coming through.

Just curious, as you think about the GM truck schedule in 2016, I just wonder if you could tell us what you are seeing and what potential upside you think they could add to the schedule if the market is really hot for trucks and what you could handle to the upside..

Yeah, John, this is David. Last year GM finished around 1.235 million units, maybe a little bit higher than that. We're expecting that volume to be similar to that this year, 1.235 million units to 1.24 million units, let's say. As we've explained to you all in the past before, their straight time capacity is around the 1.2 million units.

So they got to flex capacity to go up as high as maybe 1.4 million units. We have a similar capacity in place to support that in the event the schedules go there. Right now we're seeing very strong schedules from our customer, in this case General Motors, but also from our other customers on the truck side of the business.

Clearly we're in a sweet spot with respect to trucks and SUVs and crossover vehicles right now, and it's showing in our schedules and will show in our sales going forward..

Okay. That's very helpful. And just a second question, I mean, you were alluding to non-organic options in your statements, but you have been alluding to that more recently.

I mean, as you think about those opportunities, do they include acquisitions, M&A? I mean, what are you thinking on sort of the spectrum of what you could potentially do in these non-organic options?.

Well, it's really wide open for us, but I'll just keep everybody in balance here. What we said from a capital use is that we're going to continue to focus on organic growth, which we've demonstrated a discipline to do that.

We're going to focus on debt management, which we continue to demonstrate a discipline to do that, again paying off the term loan here in the fourth quarter, based on the excess cash we had available to us.

To your point on strategic initiatives, we've identified the fact that, because of where our balance sheet is now, we're now in a position that we can take that more seriously, so we're evaluating different opportunities that are there, whether it be in our core space or technology advancements or joint ventures or strategic or technological relationships.

It's really wide open for us to evaluate right now. And that's the benefit, and the good news for us is that we have plenty of options to consider. And then obviously, the last thing is just looking at friendly shareholder activity, whether it's some sort of stock buyback or some sort of dividend type thing.

But those are the four things that we've been very disciplined in regards to managing. Clearly the market indicators, or the market adjustments, are going to make us maybe reprioritize or reevaluate some of the opportunities that we have as it relates to capital allocation.

But we clearly are looking for the appropriate strategic opportunities, if they're available..

Okay. And if I could just sneak one housekeeping issue question in. On the Mexico tax settlement, it sounds like this is a question of transfer pricing. So it sounds like you were charging too much to your Mexican operations, deflating the profits there.

So that means that, as you reverse that and come to agreement on what that should be in Mexico, that would mean sort of conversely, in another region, presumably the U.S., your profits would go down, right, because if it's a pure transfer pricing issue, that means sort of the seesaw somewhere between sort of regions.

If you could just kind of explain what's going on there, and it sounds like the profits in the U.S. would be lowered and maybe you would have a tax benefit on the other side on a cash basis.

I'm just trying to understand what's going on?.

Yeah, certainly the mechanics of what you just described, John, would be true. And as you know, we're not a tax payer today in the U.S., primarily on a federal tax basis. We will over time. But the mechanics as you described are true.

The settlement relates to transfer pricing issues with our Mexican entities and the ownership structure through our chain of different entities. So correct, you have it correct..

So the tax yield in the U.S.

is improving as a result of this, it's just not cash right now?.

Yeah, correct..

Okay. That's very helpful. Thank you..

Hey, thanks, John..

And your next question comes from the line of Ryan Brinkman of JPMorgan. Your line is open..

Hi. This is Samik here on behalf of Ryan. So firstly, I just want to touch upon the U.S. SAAR predictions that you have. I see that you've maintained them for the 17.5 million units to 18 million units range for 2016. But investors that we talked to are certainly at a different place and they expect a decline.

So maybe if you can share your thoughts about what drives that confidence in reiterating that SAAR number, and what probably investors are missing?.

Yeah. We feel very strongly in the SAAR at 17.5 million units. I mean, clearly based on where the market performed last year and how it started up this year with respect to our schedules and all, we don't see anything lightening (31:28) up in that area.

Again, the most important thing is that we've got the ability to adjust our business up or down, based on the market conditions that are there. So right now, we see a strong market in front of us, at 17.5-plus million units. We're prepared to support that, and if there's adjustments in the future up or down, we're prepared to support that as well..

Great.

My last question here, can you just help us with the size of your backlog in China for 2016, and if you're expecting any upside to that from the recent rebound we've seen in that market?.

Our Asia or China backlog represents around 30%. Yes, there are other opportunities that we're working on from a new business or incremental opportunities, and China plays, or Asia plays, a significant role in that..

Great. Thanks for taking our questions. Thank you..

Thank you..

And your next question comes from the line of Rod Lache of Deutsche Bank. Your line is open..

Good morning everybody..

Hi, Rod..

Good morning, Rod..

Couple things I wanted to know if you can comment on. Clearly, a lot of companies are doubling down on trucks right now. Ford announced four new SUVs earlier this week, and I think there's a presumption that this should be good for American Axle.

So, I was hoping you might be able to just pass along, is there any measurement that you can share with us on what the size of the bidding opportunity looks like now, versus where it had been running in the past, whether that's kind of an accurate conclusion that looks like there's a growing opportunity as a result of some of these trends..

Yeah, Rod, as I mentioned in my comments, we were quoting on about $1 billion of activity on a consistent basis. That's been elevated now to $1.5 billion covering that 2018 to 2020 period of time. A good portion of the increase is in that light truck and also in the crossover vehicle opportunity.

So, yes, we are seeing increases in our core business of trucks and SUVs and crossovers..

Okay, great. Makes sense. And another just follow-up question on M&A.

Does the view from Axle's perspective on M&A change with volatility in American Axle's valuation? Or are you basically seeing the valuations of potential targets moving kind of commensurately?.

It would be the latter versus the former. I mean, we're all in it together. Most of the companies are adjusting commensurate with what's happening to us as well. Again, we're in it for the long haul.

We're going to make decisions that are best for the company moving forward, organically, strategically, as well as looking at the appropriate shareholder activity..

Okay. Just one last one on CapEx and margins as we look out to 2017, I know you don't typically comment on something that far ahead, but just given the moves that we're seeing right now in terms of CapEx this year, and then a big year for launches next year.

Could you just give us some color on, is CapEx looking like it could decline very meaningfully as you look out to 2017 and just given the higher proportion of new business, how should we be thinking about the margin effect in a big launch year?.

Well, again, we've guided the Street and we're consistent. Our guidance is in the range that we're going to operate in going forward, is a 4% to 6% of sales range. Sometimes it may be up like it's going to be this year because of the strength of the backlog that we have in 2017. Last year it was about 5%, this year it will be 6% as we mentioned.

We've had years where we've been down around 4%, so. And at the same time, as we've talked is, there's some business or some capital equipment that will be coming available to us in the latter half of 2018 and, therefore, we're hoping as we go forward here we can moderate, but still stay within the range of CapEx that we've guided..

Right.

But does it moderate next year, just given that you're going to be looking at a lower launch here potentially in the subsequent years or does it stay elevated?.

I think it may moderate off the 6% a little bit, but not that much. We'll see more of the adjustment I think in the outer years..

Okay.

And what about the margins, is a launch year a big factor for how the EBITDA margins kind of trend?.

As we've guided the Street this year, our margins, EBITDA of 14.50% to 14.75%, so we see another strong year in front of us. Quite honestly we see other strong years the next several years.

But as we've said and guided all along, as we bring on new non-GM business and specifically, non-full size truck type platform, we're going to see a natural degradation in some of our overall margins, just because of the contribution margin and the FX (36:23), mainly after the 2017 period of time..

And Rod, this is Chris. I would point out we've had significant launch activity the last few years and we've maintained strong margins and we expect that to continue..

Right, right. Okay. Thank you..

Yeah. Thanks, Rod..

And your next question comes from the line of Brett Hoselton of KeyBanc. Your line is open..

Thank you. This is actually Irina Hodakovsky on for Brett Hoselton. Good morning..

Hi, Irina..

Hi, Irina..

I wanted to ask you guys a little bit about your backlog. This is further out 2018, what you introduced right now is a little bit short of what you've been launching in the last couple of years, and then with the GM business dropping off there's a big gap.

If you can talk a little bit in terms of opportunities with a little more detail, what kind of products are you looking at? What kind of markets? How confident are you in closing that gap of $500 million?.

Let me start first by saying we're highly confident that we can do it. At the same time as I covered with you, we're still quoting on activity that will support the backlog in 2018. Historically, we've run around $300 million a year on our backlog. So 2016, 2017 are covered that way. 2018 is a little bit light.

But like I said, there is $500 million of opportunity that we're quoting on that could favorably impact the 2018 period of time. We got another $1 billion of opportunity impacting us in the 2019, 2020 period of time. That business is right in our wheelhouse as we just talked with Rod about trucks and crossover vehicles.

It's got geographic diversification associated with it and obviously a significant customer diversification. So again, we feel highly confident that we can offset it and again, that's just from an organic standpoint. At the same time, we're producing things from a strategic standpoint and we're even more confident..

Thank you..

Thank you..

Your next question comes from the line of Matt Stover at SIG. Your line is open..

Thank you. Thank you very much. Two questions, one mechanical.

On the metal market pass-throughs and the FX, was that mostly applied against the GM sales or how should we think about that distribution for GM, non-GM?.

Yeah, no, Matt, that would pretty much go across our entire product portfolio. From an FX standpoint, the impact was primarily out of our products we ship in Brazil, which is GM and Volkswagen, as it relates to metal that impacts pretty much all customers..

Okay. And then I just want to clarify something on the backlog. If I look at your first two years of the 2016 and 2017, that's net new backlog. That $125 million as we look at 2018 is backlog that you've won, it doesn't....

No, Matt, those are gross backlog numbers..

Gross backlog.

So, if we look at that out year for 2018, you indicated that you're bidding right now on $500 million of opportunities that exist?.

Yep, correct..

How would that sort of compare to kind of a normalized level? Is that an increased level relative to where we would be out two years or how does that compare?.

I'd say it's about the same. As I said, we're starting to see some increase in our customer opportunities or our business opportunities but that's more in the 2019 and 2020 commensurate with where we're seeing greater penetration or greater needs for trucks and SUVs and crossovers in the future..

Okay. Great, thanks, guys..

Thanks, Matt..

Yeah, thanks, Matt. Have a good day..

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

And this concludes today's conference call. You may now disconnect..