This management’s discussion and analysis (MD&A) should be read in conjunction with the unaudited condensed consolidated financial statements and notes appearing elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2025.
Effective January 26, 2026, American Axle & Manufacturing Holdings, Inc. changed its name to Dauch Corporation. As used in this report, except as the context otherwise requires, references to “our Company,” “we,” “our,” “us” or “Dauch” mean Dauch Corporation and its subsidiaries and predecessors, collectively.
COMPANY OVERVIEW
Dauch Corporation is a premier Driveline and Metal Forming supplier serving the global automotive industry with a powertrain-agnostic product portfolio that supports electric, hybrid, and internal combustion vehicles. The company is headquartered in Detroit, Michigan, with operations that span 24 countries and more than 175 locations. Formed through the acquisition of Dowlais Group plc (name subsequently changed to Dowlais Group Limited) (Dowlais) and its subsidiaries - GKN Automotive and GKN Powder Metallurgy, Dauch unites deep engineering roots with global manufacturing capabilities and an entrepreneurial spirit to move mobility forward.
Major Customers
We are a primary supplier of driveline products to General Motors Company (GM) for its full-size rear-wheel drive (RWD) light trucks, sport utility vehicles (SUVs), and crossover vehicles manufactured in North America, supplying a significant portion of GM’s rear axle and four-wheel drive and all-wheel drive (4WD/AWD) axle requirements for these vehicle platforms. We also supply GM with various components from our Metal Forming segment. Sales to GM were approximately 30% of our consolidated net sales for the first six months of 2026, and 44% for both the first six months of 2025 and the full year 2025.
We also supply driveline system products to Stellantis N.V. (Stellantis) for programs including the heavy-duty Ram full-size pickup truck and its derivatives. In addition, we sell various components to Stellantis from our Metal Forming segment. Sales to Stellantis were approximately 13% of our consolidated net sales for each of the first six months of 2026, the first six months of 2025 and the full year 2025.
We are also a supplier to Ford Motor Company (Ford) for driveline system products on certain vehicle programs including the Bronco Sport, Maverick and Lincoln Nautilus, and we also sell various components to Ford from our Metal Forming segment. Sales to Ford were approximately 11% of our consolidated net sales for the first six months of 2026, and 15% for both the first six months of 2025 and the full year 2025.
No other customer represented 10% or more of consolidated net sales during these periods.
Business Combination with Dowlais Group plc
On February 3, 2026, we completed our previously announced acquisition of Dowlais whereby we acquired the entire issued share capital of Dowlais (the Business Combination). Pursuant to the Business Combination, Dowlais shareholders received for each Dowlais ordinary share: 0.0881 shares of new Dauch Corporation common stock and 43 pence per share in cash (approximately $0.59 per share as of the closing date), resulting in the issuance of approximately 117 million shares (and an increase in authorized shares from 150 million shares to 375 million shares) and a total purchase price of approximately $1.7 billion.
Uncertainty Associated with Tariffs and Trade Relations and Other Supply Chain Constraints
In 2025, the U.S. government implemented tariffs and increased certain existing tariffs on various products including assembled vehicles and automotive parts and components imported into the U.S., and there is considerable uncertainty around the extent, timing and duration of these tariffs. This has resulted in retaliatory tariffs against the U.S. by the governments of various countries, resulting in significant instability and uncertainty in U.S. trade relations with certain countries. Additionally, the expected 2026 review of the United States-Mexico-Canada Agreement (USMCA) could further contribute to this instability and uncertainty in trade relations.
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For the six months ended June 30, 2026, the net impact on earnings related to the aforementioned tariffs was approximately $30 million and we expect a continuing impact from tariffs in future periods. For the year ended December 31, 2025, the net impact on earnings related to the aforementioned tariffs was approximately $10 million. We are implementing mitigation actions and pursuing recoveries from our customers for the cost increases resulting from the tariffs but have not reached final agreement with all customers and therefore the total amount and timing of such recoveries is unknown. Further, certain of these recoveries may include government-issued credits and there is uncertainty about whether we will be able to effectively monetize such credits. For the full year 2026, we anticipate the impact on earnings of these tariffs to be approximately $10 million to $20 million after mitigation actions and estimated customer recoveries. However, due to uncertainty associated with the potential further implementation or expansion of tariffs, as well as the potential for additional retaliatory actions and other changes to existing trade agreements or changes in international trade relations, the actual impact on 2026 earnings could differ materially from this estimate.
During the first six months of 2026, geopolitical conflicts have indirectly impacted our operations and financial results primarily through supply chain disruptions. We continue to work with customers and suppliers in our effort to protect continuity of supply as we expect these challenges to continue in 2026. Due to the ongoing uncertainty associated with these supply chain constraints, the ultimate impact on our net sales, results of operations and cash flows is unknown.
UAW Work Stoppage
In June 2026, following the expiration of the existing collective bargaining agreement with the United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) we experienced a work stoppage at one of our manufacturing facilities in the United States. A new four-year collective bargaining agreement was ratified by the UAW in June 2026. During the second quarter of 2026, we incurred approximately $8 million of one-time costs related to the work stoppage.
Commercial Matters
In April 2024, one of our largest customers notified the Company that production purchase orders related to a previously announced contract to supply e-Beam axles for a future vehicle program were terminated. We believe that the termination of these purchase orders reflects, in part, the significant uncertainty currently underlying the electric vehicle environment, including volatility in estimated volumes and the timing of production.
In January of 2026, we reached a settlement agreement with the customer on this matter. As a result, we received approximately $28 million in the first quarter of 2026 for the reimbursement of the Company's capitalized engineering, design and development costs.
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RESULTS OF OPERATIONS –– THREE MONTHS ENDED JUNE 30, 2026 AS COMPARED TO THREE MONTHS ENDED JUNE 30, 2025
Net Sales
Three Months Ended June 30,
(in millions) 2026 2025 Change Percent Change
Net sales $ 2,955.6 $ 1,536.2 $ 1,419.4 92.4 %
The impact of the Business Combination on net sales in the second quarter of 2026 was approximately $1,439 million. Excluding the impact of the Business Combination, the change in net sales for the second quarter of 2026, as compared to the second quarter of 2025, primarily reflects lower production volumes on certain vehicle programs that we support and a reduction of approximately $34 million as a result of the sale of AAM India Manufacturing Corporation Pvt., Ltd., which was completed on July 1, 2025. These decreases were partially offset by an increase of approximately $35 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments.
Cost of Goods Sold
Three Months Ended June 30,
(in millions) 2026 2025 Change Percent Change
Cost of goods sold $ 2,617.4 $ 1,335.5 $ 1,281.9 96.0 %
The impact on cost of goods sold of the Business Combination was approximately $1,300 million for the second quarter of 2026. Excluding the impact of the Business Combination, the change in cost of goods sold in the second quarter of 2026, as compared to the second quarter of 2025, primarily reflects lower production volumes on certain vehicle programs that we support. For the three months ended June 30, 2026, material costs were approximately 51% of total costs of goods sold, as compared to approximately 55% for the three months ended June 30, 2025.
Gross Profit
Three Months Ended June 30,
(in millions) 2026 2025 Change Percent Change
Gross profit $ 338.2 $ 200.7 $ 137.5 68.5 %
Gross margin was 11.4% in the second quarter of 2026, as compared to 13.1% in the second quarter of 2025. Gross profit and gross margin were impacted by the factors discussed in Net Sales and Cost of Goods Sold above.
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Selling, General and Administrative Expenses (SG&A)
Three Months Ended June 30,
(in millions) 2026 2025 Change Percent Change
Selling, general & administrative expenses $ 166.9 $ 100.8 $ 66.1 65.6 %
SG&A as a percentage of net sales was 5.6% in the second quarter of 2026, as compared to 6.6% in the second quarter of 2025. Research and development (R&D) expense, net of customer engineering, design and development (ED&D) recoveries, was approximately $56.8 million in the second quarter of 2026, as compared to $36.1 million in the second quarter of 2025. In addition to the increase in R&D expense, the change in SG&A in the second quarter of 2026, as compared to the second quarter of 2025, reflects an increase of approximately $46 million associated with the Business Combination, which was partially offset by the achievement of synergies as a result of the Business Combination.
Amortization of Intangible Assets Amortization expense related to intangible assets was $21.8 million for the three months ended June 30, 2026 and $20.4 million for the three months ended June 30, 2025.
Impairment Charge In connection with the sale of AAM India Manufacturing Corporation Pvt., Ltd., we recorded an impairment charge in the three months ended June 30, 2025 of $8.0 million to reduce the carrying value of this business to fair value less costs to sell. See Note 2 - Acquisitions and Dispositions for additional detail regarding the sale of AAM India Manufacturing Corporation Pvt., Ltd.
Restructuring and Acquisition-Related Costs Restructuring and acquisition-related costs were $49.8 million in the second quarter of 2026 and $16.5 million in the second quarter of 2025.
During the three months ended June 30, 2026, we incurred approximately $3 million of acquisition-related costs and approximately $26 million of integration expenses associated with the Business Combination. Acquisition-related costs in the second quarter of 2026 primarily consisted of expenses related to compensation arrangements under the Co-operation Agreement associated with the Business Combination. Integration expenses primarily reflect costs for synergy attainment, including professional fees and severance incurred in conjunction with integration activities. See Note 12 - Restructuring and Acquisition-Related Costs for additional detail regarding our restructuring, acquisition and integration activity.
Operating Income Operating income was $99.7 million in the second quarter of 2026, as compared to $55.0 million in the second quarter of 2025. Operating margin was 3.4% in the second quarter of 2026, as compared to 3.6% in the second quarter of 2025. The changes in operating income and operating margin were primarily due to factors discussed in Net Sales, Cost of Goods Sold, SG&A and Restructuring and Acquisition-Related Costs above.
Interest Expense and Interest Income Interest expense was $89.8 million in the second quarter of 2026, as compared to $43.1 million in the second quarter of 2025. The weighted-average interest rate of our long-term debt outstanding was 7.1% in the second quarter of 2026 and 6.7% in the second quarter of 2025. The increase in interest expense in the second quarter of 2026, as compared to the second quarter of 2025, primarily reflects the issuance of new indebtedness in connection with the Business Combination.
Interest income was $7.2 million in the second quarter of 2026 and $5.6 million in the second quarter of 2025.
Debt Refinancing and Redemption Costs Debt refinancing and redemption costs were $0.9 million in the second quarter of 2026 and we incurred no such expense in the second quarter of 2025. See Note 5 - Long-Term Debt for additional detail on our debt refinancing and redemption activities.
Gain on Business Combination Derivative In the second quarter of 2025, we recognized an unrealized gain on the Business Combination Derivative of $46.3 million. See Note 6 - Derivatives for additional detail on the Business Combination Derivative.
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Income from Equity-Method Affiliates Income from equity-method affiliates represents our proportionate share of earnings from equity in unconsolidated subsidiaries. In the second quarter of 2026, we recognized income from equity-method affiliates of $17.4 million, as compared to $0.5 million in the second quarter of 2025, primarily driven by our net share of income from Shanghai GKN HUAYU Driveline Systems Co Limited (SDS). See Note 15 - Investments in Equity-Method Affiliates for more information on our investment in SDS.
Other Income (Expense), Net Other income (expense), net includes the net effect of foreign exchange gains and losses and all components of net periodic pension and postretirement benefit costs other than service cost. Other income (expense), net was expense of $16.0 million in the second quarter of 2026, as compared to income of $3.1 million in the second quarter of 2025. The change in Other income (expense), net was primarily driven by changes in foreign exchange gains and losses in the second quarter of 2026, as compared to the second quarter of 2025, as well as increased net periodic pension and postretirement benefit costs as a result of the Business Combination.
Income Tax Expense Income tax expense was $16.1 million for the three months ended June 30, 2026, as compared to $28.1 million for the three months ended June 30, 2025. Our effective income tax rate was 91.5% in the second quarter of 2026, as compared to 41.7% in the second quarter of 2025.
During the three months ended June 30, 2026, our effective income tax rate varies from the U.S. federal statutory rate primarily due to the impact of net losses in certain jurisdictions with no corresponding tax benefit due to increases in our valuation allowance and permanent adjustments associated with nondeductible transaction costs incurred in conjunction with the Business Combination, partially offset by the benefit from utilization of tax credits.
Our income tax expense and effective income tax rate for the three months ended June 30, 2026 vary from our income tax expense and effective income tax rate for the three months ended June 30, 2025 primarily as a result of the items described in the preceding paragraph, as well as the mix of earnings on a jurisdictional basis.
For the three months ended June 30, 2025, our effective income tax rate varied from the U.S. federal statutory rate primarily due to the unfavorable impact of disallowed interest expense deductions in the U.S., as well as the mix of earnings on a jurisdictional basis, and the impact of certain non-U.S. tax rates and non-U.S. withholding taxes. In addition, the impact of tax expense from valuation allowances in certain non-U.S. jurisdictions also impacted our effective tax rate, as compared to the U.S. federal statutory rate, for the three months ended June 30, 2025. These tax expenses were partially offset by the favorable impact of tax credits.
Net Income Attributable to Dauch and Earnings Per Share (EPS) Net income attributable to Dauch was $1.0 million in the second quarter of 2026, as compared to $39.3 million in the second quarter of 2025. Diluted earnings per share was $0.00 per share in the second quarter of 2026, as compared to $0.32 per share in the second quarter of 2025. Net income and EPS for the second quarters of 2026 and 2025 were primarily impacted by the factors discussed above.
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RESULTS OF OPERATIONS –– SIX MONTHS ENDED JUNE 30, 2026 AS COMPARED TO SIX MONTHS ENDED JUNE 30, 2025
Net Sales
Six Months Ended June 30,
(in millions) 2026 2025 Change Percent Change
Net sales $ 5,334.5 $ 2,947.5 $ 2,387.0 81.0 %
The impact of the Business Combination on net sales for the first six months of 2026 was approximately $2,411 million. Excluding the impact of the Business Combination, the change in net sales in the first six months of 2026, as compared to the first six months of 2025, primarily reflects lower production volumes on certain vehicle programs that we support and a reduction of approximately $69 million as a result of the sale of AAM India Manufacturing Corporation Pvt., Ltd., which was completed on July 1, 2025. These decreases were partially offset by an increase of approximately $79 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments.
Cost of Goods Sold
Six Months Ended June 30,
(in millions) 2026 2025 Change Percent Change
Cost of goods sold $ 4,770.9 $ 2,572.9 $ 2,198.0 85.4 %
The impact on cost of goods sold of the Business Combination was approximately $2,227 million for the first six months of 2026, which includes approximately $38 million for the step-up of inventory to fair value as a result of purchase accounting. Excluding the impact of the Business Combination, the change in cost of goods sold in the first six months of 2026, as compared to the first six months of 2025, primarily reflects a reduction of approximately $65 million as a result of the sale of AAM India Manufacturing Corporation Pvt., Ltd., as well as the impact of lower production volumes on certain vehicle programs that we support, partially offset by an increase of approximately $71 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments. For the six months ended June 30, 2026, material costs were approximately 52% of total cost of goods sold as compared to approximately 55% for the six months ended June 30, 2025.
Gross Profit
Six Months Ended June 30,
(in millions) 2026 2025 Change Percent Change
Gross profit $ 563.6 $ 374.6 $ 189.0 50.5 %
Gross margin was 10.6% in the first six months of 2026, as compared to 12.7% in the first six months of 2025. Gross profit and gross margin were impacted by the factors discussed in Net Sales and Cost of Goods Sold above.
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Selling, General and Administrative Expenses (SG&A)
Six Months Ended June 30,
(in millions) 2026 2025 Change Percent Change
Selling, general & administrative expenses $ 304.2 $ 191.7 $ 112.5 58.7 %
SG&A as a percentage of net sales was 5.7% in the first six months of 2026 as compared to 6.5% in the first six months of 2025. R&D expense, net of customer ED&D recoveries, was approximately $108.4 million in the first six months of 2026, as compared to $72.4 million in the first six months of 2025. In addition to the increase in R&D expense, the change in SG&A in the first six months of 2026, as compared to the first six months of 2025, reflects an increase of approximately $71 million associated with the Business Combination.
Amortization of Intangible Assets Amortization expense for the six months ended June 30, 2026 was $44.7 million, as compared to $41.0 million for the six months ended June 30, 2025.
Impairment Charge In connection with the sale of AAM India Manufacturing Corporation Pvt., Ltd., we recorded an impairment charge in the six months ended June 30, 2025 of $8.0 million to reduce the carrying value of this business to fair value less costs to sell. See Note 2 - Acquisitions and Dispositions for additional detail regarding the sale of AAM India Manufacturing Corporation Pvt., Ltd.
Restructuring and Acquisition-Related Costs Restructuring and acquisition-related costs were $148.7 million for the six months ended June 30, 2026, as compared to $36.2 million for the six months ended June 30, 2025.
During the six months ended June 30, 2026, we incurred approximately $57 million of acquisition-related costs and approximately $45 million of integration expenses associated with the Business Combination. Acquisition-related costs primarily consist of advisory, legal, accounting, valuation and certain other professional or consulting fees incurred, as well as expenses related to compensation arrangements under the Co-operation Agreement associated with the Business Combination. Integration expenses primarily reflect costs for synergy attainment, including professional fees and severance incurred in conjunction with integration activities.
In 2026, we expect to incur approximately $90 million to $120 million of total restructuring charges. In addition, we expect to incur $60 million to $70 million of acquisition-related costs and $100 million to $120 million of integration costs in 2026 associated with the Business Combination. See Note 12 - Restructuring and Acquisition-Related Costs for additional detail regarding our restructuring, acquisition and integration activity.
Operating Income Operating income was $66.0 million in the first six months of 2026 as compared to $97.7 million in the first six months of 2025. Operating margin was 1.2% in the first six months of 2026, as compared to 3.3% in the first six months of 2025. The changes in operating income and operating margin were due primarily to the factors discussed in Net Sales, Cost of Goods Sold, SG&A and Restructuring and Acquisition-Related Costs above.
Interest Expense and Interest Income Interest expense was $179.4 million in the first six months of 2026 as compared to $86.0 million in the first six months of 2025. The weighted-average interest rate of our long-term debt outstanding was 7.2% for the six months ended June 30, 2026 and 6.7% for the six months ended June 30, 2025. The increase in interest expense during the first six months of 2026, as compared to the first six months of 2025, primarily reflects the issuance of new indebtedness in connection with the Business Combination. We expect our interest expense for the full year 2026 to be approximately $340 million to $360 million.
Interest income was $19.3 million in the first six months of 2026, as compared to $11.2 million in the first six months of 2025. In connection with the 6.375% senior secured notes due 2032 (the 6.375% Notes) and 7.75% senior unsecured notes due 2033 (the 7.75% Notes, and together with the 6.375% Notes, the Notes) issued by American Axle & Manufacturing, Inc. (AAM, Inc.) on October 3, 2025, we received approximately $4.6 million of interest income in the first six months of 2026 on the proceeds from the Notes placed in segregated escrow accounts until the closing of the Business Combination on February 3, 2026. See Note 5 - Long-Term Debt for further detail on the financing for the Business Combination and the funds in escrow.
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Debt Refinancing and Redemption Costs Debt refinancing and redemption costs were $3.9 million in the first six months of 2026, as compared to $3.3 million in the first six months of 2025. See Note 5 - Long-Term Debt for additional detail on our debt refinancing and redemption activities.
Gain on Business Combination Derivative In the first six months of 2026, we recognized a realized gain on the Business Combination Derivative of $12.9 million upon the completion of the Business Combination. In the first six months of 2025, we recognized an unrealized gain on the Business Combination Derivative of $68.2 million. See Note 6 - Derivatives for additional detail on the Business Combination Derivative.
Income from Equity-Method Affiliates Income from equity-method affiliates represents our proportionate share of earnings from equity in unconsolidated subsidiaries. In the first six months of 2026, we recognized income from equity-method affiliates of $27.7 million, as compared to $0.5 million in the first six months of 2025, primarily driven by our net share of income from Shanghai GKN HUAYU Driveline Systems Co Limited (SDS). See Note 15 - Investments in Equity-Method Affiliates for more information on our investment in SDS.
Other Income (Expense), Net Other income (expense), net includes the net effect of foreign exchange gains and losses and all components of net periodic pension and postretirement benefit costs other than service cost. Other income (expense), net was expense of $44.6 million in the first six months of 2026, as compared to income of $0.2 million in the first six months of 2025. The change in Other income (expense), net was primarily driven by changes in foreign exchange gains and losses in the first six months of 2026, as compared to the first six months of 2025, as well as increased net periodic pension and postretirement benefit costs as a result of the Business Combination.
Income Tax Expense (Benefit) Income tax expense (benefit) was a benefit of $3.5 million for the six months ended June 30, 2026, as compared to expense of $42.1 million for the six months ended June 30, 2025. Our effective income tax rate was 3.4% in the first six months of 2026 as compared to 47.6% in the first six months of 2025.
For the six months ended June 30, 2026, our effective income tax rate varies from the U.S. federal statutory rate primarily due to the impact of net losses in certain jurisdictions with no corresponding tax benefit due to increases in our valuation allowance and permanent adjustments associated with nondeductible transaction costs incurred in conjunction with the Business Combination, partially offset by the benefit from utilization of tax credits. For the six months ended June 30, 2026, these tax expenses were partially offset by the release of $22.4 million of valuation allowance in a non-U.S. jurisdiction.
Our income tax expense and effective income tax rate for the six months ended June 30, 2026 vary from our income tax expense and effective income tax rate for the six months ended June 30, 2025 primarily as a result of the items described in the preceding paragraph, as well as the mix of earnings on a jurisdictional basis.
For the six months ended June 30, 2025, our effective income tax rate varied from the U.S. federal statutory rate primarily due to the unfavorable impact of disallowed interest expense deductions in the U.S., as well as the mix of earnings on a jurisdictional basis, and the impact of certain non-U.S. tax rates and non-U.S. withholding taxes. In addition, the impact of tax expense from valuation allowances in certain non-U.S. jurisdictions also impacted our effective tax rate, as compared to the U.S. federal statutory rate, for the six months ended June 30, 2025. These tax expenses were partially offset by the favorable impact of tax credits.
Net Income (Loss) Attributable to Dauch and Earnings (Loss) Per Share (EPS) Net loss attributable to Dauch was $99.3 million in the first six months of 2026, as compared to income of $46.4 million in the first six months of 2025. Diluted loss per share was $0.46 in the first six months of 2026, as compared to diluted earnings per share of $0.38 per share in the first six months of 2025. Net income (loss) attributable to Dauch and EPS for the first six months of 2026 and 2025 were primarily impacted by the factors discussed above.
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SEGMENT REPORTING
Our business is organized into two segments, Driveline and Metal Forming, with each representing a reportable segment under ASC 280 - Segment Reporting. The results of each segment are regularly reviewed by the chief operating decision maker to assess the performance of the segment and make decisions regarding the allocation of resources to the segments.
Our product offerings by segment are as follows:
•Driveline products consist primarily of front and rear axles, sideshafts, driveshafts, propshafts, differential assemblies, clutch modules, balance shaft systems, disconnecting driveline technology, and electric and hybrid driveline products and systems for light trucks, sport utility vehicles (SUVs), crossover vehicles, passenger cars and commercial vehicles; and
•Metal Forming products consist primarily of engine, transmission, driveline and safety-critical components for traditional internal combustion engine and electric vehicle architectures including light vehicles, commercial vehicles and off-highway vehicles and products for industrial markets, filters and silencers, as well as powdered metal and related additives.
On February 3, 2026, we completed the Business Combination and we began consolidating the results of Dowlais on that date, which are reported in our Driveline and Metal Forming segments for the three and six months ended June 30, 2026. Additionally, in the first quarter of 2026, we moved certain plant locations that were previously reported under our Metal Forming segment to our Driveline segment in order to better align our product and process technologies. The amounts in the tables below for the three and six months ended June 30, 2025 have been recast to reflect this reorganization.
The following table represents sales by reportable segment for the three and six months ended June 30, 2026 and 2025 (in millions):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Driveline $ 2,225.0 $ 1,107.2 $ 3,994.1 $ 2,094.2
Metal Forming 861.7 545.0 1,587.9 1,070.5
Eliminations (131.1) (116.0) (247.5) (217.2)
Net sales $ 2,955.6 $ 1,536.2 $ 5,334.5 $ 2,947.5
The increase in Driveline sales for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025, primarily reflects an increase of approximately $1,123 million associated with the impact of the Business Combination, as well as an increase associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments. These increases were partially offset by a reduction of approximately $34 million resulting from the sale of AAM India Manufacturing Corporation Pvt., Ltd., which was completed on July 1, 2025.
The increase in Driveline sales for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, primarily reflects an increase of approximately $1,891 million associated with the impact of the Business Combination, as well as an increase associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments. These increases were partially offset by a reduction of approximately $69 million resulting from the sale of AAM India Manufacturing Corporation Pvt., Ltd., which was completed on July 1, 2025.
The increase in Metal Forming sales for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025, primarily reflects an increase of approximately $316 million associated with the impact of the Business Combination. The increase in Metal Forming sales for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, primarily reflects an increase of approximately $520 million associated with the impact of the Business Combination.
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We use Segment Adjusted EBITDA as the measure of earnings to assess the performance of each segment and determine the resources to be allocated to the segments. The amounts for Segment Adjusted EBITDA for the three and six months ended June 30, 2026 and 2025 are as follows (in millions):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Driveline $ 289.7 $ 155.4 $ 528.5 $ 288.1
Metal Forming 99.9 46.7 169.6 91.7
Total segment adjusted EBITDA $ 389.6 $ 202.1 $ 698.1 $ 379.8
For the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, the increase in Segment Adjusted EBITDA for the Driveline segment reflects the impact of the Business Combination. In addition, the six months ended June 30, 2026 reflects the impact of approximately $8 million of favorability from the net effect of metal market pass-throughs to our customers and foreign exchange related to translation adjustments.
For the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, the change in Segment Adjusted EBITDA for the Metal Forming segment reflects the impact of the Business Combination, as well as improved operating performance, partially offset by the impact of lower production volumes on certain vehicle platforms that we support.
Reconciliation of Non-GAAP and GAAP Information
In addition to results reported in accordance with accounting principles generally accepted in the United States of America (GAAP) in this MD&A, we have provided certain non-GAAP financial measures such as EBITDA and Total Segment Adjusted EBITDA. Such information is reconciled to its closest GAAP measure in accordance with Securities and Exchange Commission rules below.
For the three and six months ended June 30, 2026, based in part on our recent Business Combination and to more effectively measure our global business profile, we revised our definition of Adjusted EBITDA to exclude the impact of unrealized foreign exchange gains and losses on acquired U.S. Private Placement Notes, mark-to-market on nondesignated foreign exchange derivatives assumed as part of the Business Combination with Dowlais, gains and losses on the disposal of property, plant and equipment, and amortization of the acquisition intangible asset attributable to our investment in Shanghai GKN HUAYU Driveline Systems Co Limited (SDS). We define EBITDA to be earnings before interest expense, income taxes, depreciation and amortization. As revised, Total Segment Adjusted EBITDA is defined as EBITDA for our reportable segments excluding the impact of restructuring and acquisition-related costs, debt refinancing and redemption costs, gains or losses on the derivative associated with our Business Combination with Dowlais, interest income on debt held in escrow, gains or losses on equity securities, impairment charges, unrealized foreign exchange gains and losses on acquired U.S. Private Placement Notes, mark-to-market on nondesignated foreign exchange derivatives assumed as part of the Business Combination with Dowlais, gains and losses on the disposal of property, plant and equipment, amortization of the acquisition intangible asset attributable to our investment in SDS, net of tax, and non-recurring items.
We believe that EBITDA and Total Segment Adjusted EBITDA are meaningful measures of performance as they are commonly utilized by management and investors to analyze operating performance and entity valuation. Our management, the investment community and banking institutions routinely use EBITDA and Total Segment Adjusted EBITDA, together with other measures, to measure our operating performance relative to other Tier 1 automotive suppliers and to assess the relative mix of Adjusted EBITDA by segment. We also believe that Total Segment Adjusted EBITDA is a meaningful measure as it is used for operational planning and decision-making purposes. EBITDA and Total Segment Adjusted EBITDA are also key metrics used in our calculation of incentive compensation. These non-GAAP financial measures are not and should not be considered a substitute for any GAAP measure. Additionally, non-GAAP financial measures as presented by the Company may not be comparable to similarly titled measures reported by other companies. The amounts in the table below are presented based upon our revised definition of Segment Adjusted EBITDA and amounts that were reported under the previous definition have been recast.
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Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Net income (loss) $ 1.5 $ 39.3 $ (98.5) $ 46.4
Interest expense 89.8 43.1 179.4 86.0
Income tax expense 16.1 28.1 (3.5) 42.1
Depreciation and amortization 215.4 113.5 397.2 225.7
EBITDA $ 322.8 $ 224.0 $ 474.6 $ 400.2
Restructuring and acquisition-related costs 49.8 16.5 148.7 36.2
Gain on Business Combination Derivative — (46.3) (12.9) (68.2)
Debt refinancing and redemption costs 0.9 — 3.9 3.3
Impairment charge (Note 2) — 8.0 — 8.0
Unrealized foreign exchange loss on acquired U.S. Private Placement Notes 3.5 — 14.4 —
Mark-to-market on nondesignated foreign exchange derivatives assumed as part of the Business Combination with Dowlais 4.5 — 20.1 —
Loss (gain) on disposal of property, plant and equipment 1.3 (0.1) 5.0 0.3
Interest income on debt held in escrow — — (4.6) —
Amortization of acquisition intangible asset attributable to SDS 6.8 — 11.2 —
Non-recurring items:
Acquisition-related fair value inventory adjustment — — 37.7 —
Total segment adjusted EBITDA(a) $ 389.6 $ 202.1 $ 698.1 $ 379.8
(a) The amounts in the table above are presented based on our revised definition of Total Segment Adjusted EBITDA and amounts that were reported under the previous definition have been recast. In connection with the Business Combination with Dowlais, the Company acquired long-term debt in the form of Dowlais' U.S. Private Placement Notes, as well as nondesignated foreign exchange derivatives, which result in unrealized foreign exchange gains and losses recognized in our condensed consolidated Statement of Operations. The Company adjusts for these gains and losses as they are not reflective of our core operating performance. In addition, our equity-method investment in SDS resulted in a basis difference that was attributed to an intangible asset and is amortized through equity-method income and losses. The Company adjusts for this non-cash amortization as it is not reflective of our proportionate share of earnings in SDS.
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LIQUIDITY AND CAPITAL RESOURCES
Our primary liquidity needs are to fund debt service obligations, capital expenditures, R&D spending, and working capital requirements, in addition to advancing our strategic initiatives. We believe that operating cash flow, available cash and cash equivalent balances and available borrowing capacity under our Senior Secured Credit Facilities and non-U.S. credit facilities will be sufficient to meet these needs.
At June 30, 2026, we had approximately $2.5 billion of liquidity consisting of approximately $881 million of cash and cash equivalents, approximately $1.5 billion of available borrowings under our Revolving Credit Facility and approximately $100.0 million of available borrowings under non-U.S. credit facilities. Following the redemption of the remaining portion of our 6.875% Notes due 2028 in August 2026, we have no significant debt maturities before 2029.
Operating Activities In the first six months of 2026, net cash provided by operating activities was $43.1 million as compared to $147.8 million in the first six months of 2025. The following factors impacted cash from operating activities in the first six months of 2026, as compared to the first six months of 2025:
Accounts receivable For the six months ended June 30, 2026, we experienced a decrease in cash flow from operating activities of approximately $38 million related to the change in our accounts receivable balance from December 31, 2025 to June 30, 2026, as compared to the change in our accounts receivable balance from December 31, 2024 to June 30, 2025. This change was primarily the result of timing of sales to customers in the applicable periods, as well as the timing of collections on customer receivables due, in part, to our participation in various receivable factoring programs, including an early payment program offered by our largest customer. These programs allow us to sell certain of our receivables to third parties at our discretion, and we utilize these programs from time to time.
Accounts payable and accrued expenses For the six months ended June 30, 2026, we experienced a decrease in cash flow from operating activities of approximately $53 million related to the change in our accounts payable and accrued expenses balance from December 31, 2025 to June 30, 2026, as compared to the change in our accounts payable and accrued expenses balance from December 31, 2024 to June 30, 2025. This change was primarily the result of the timing of payments to suppliers in the applicable periods.
Dividend received from equity-method affiliate In the six months ended June 30, 2026, we received a dividend of approximately $50 million from SDS, an equity-method investment acquired as part of the Business Combination. See Note 15 - Investments in Equity-Method Affiliates for additional detail regarding our investment in SDS.
Income taxes paid, net Income taxes paid, net was $80.5 million for the six months ended June 30, 2026, as compared to $27.6 million for the six months ended June 30, 2025. The increase in income taxes paid, net was primarily attributable to the Business Combination. For the full year 2026, we estimate income taxes paid, net to be in the range of $160 million to $170 million.
Restructuring and acquisition-related costs In the first six months of 2026, cash payments for restructuring activities were $76 million, while cash payments for acquisition-related costs were $147 million and cash payments for integration activities totaled $36 million. For the full year 2026, we expect restructuring payments in cash flows from operating activities to be approximately $115 million to $150 million. In addition, we expect acquisition-related payments in cash flows from operating activities to be approximately $150 million to $160 million and we expect integration payments to be approximately $95 million to $110 million in connection with the Business Combination.
Investing Activities In the first six months of 2026, net cash used in investing activities was $440.1 million as compared to $98.6 million for the six months of 2025. Capital expenditures were $201.9 million in the first six months of 2026 as compared to $126.6 million in the first six months of 2025. We expect our capital spending in 2026 to be approximately 4.5% to 5% of sales.
On February 3, 2026, we completed our acquisition of Dowlais for a total purchase price of approximately $1.7 billion, of which approximately $332 million was paid in cash, net of Dowlais cash acquired. In January 2025, in connection with the Business Combination, we entered into a foreign currency forward contract (the Business Combination Derivative). At the closing date of the acquisition, we settled the Business Combination Derivative and received net cash proceeds of approximately $66 million, which is presented separately from the cash paid to acquire Dowlais in our Condensed Consolidated Statement of Cash Flows. Additionally, in the six months ended June 30, 2026, we received approximately $21 million from the proceeds of the sale of a former Dowlais subsidiary.
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In the first six months of 2025, we exited our 50% ownership of both Hefei AAM Automotive Driveline & Chassis System Co., Ltd. and Liuzhou AAM Automotive Driveline System Co., Ltd. As a result, we collected approximately $30 million in cash, which approximated the carrying value of our investments in these joint ventures at the time of disposition.
Financing Activities In the first six months of 2026, net cash used in financing activities was $918.9 million, as compared to $30.0 million in the first six months of 2025. The following factors impacted cash from financing activities in the first six months of 2026, as compared to the first six months of 2025:
Senior Secured Credit Facilities Dauch Corporation (Dauch) and American Axle & Manufacturing, Inc. (AAM, Inc.) are parties to an amended and restated credit agreement that was entered into on March 11, 2022 and has been subsequently amended (as so amended, the Amended and Restated Credit Agreement) which provides for a term loan A facility (the Term Loan A Facility), term loan B facility (the Term Loan B Facility), incremental tranche C term facility (the Tranche C Term Facility) and a multi-currency revolving credit facility (the Revolving Credit Facility and together with the Term Loan A Facility, the Term Loan B Facility and Tranche C Term Facility, the Senior Secured Credit Facilities). The Senior Secured Credit Facilities are secured by a first priority security interest in substantially all of the assets of AAM, Inc., Dauch and Dauch's wholly owned domestic subsidiaries (including AAM, Inc.), subject to certain thresholds, exceptions and permitted liens.
On February 24, 2025, we entered into the Second Amendment to the Amended and Restated Credit Agreement and the Incremental Facility Agreement (the Second Amendment). The Second Amendment, among other things, a) increased the maximum under the Revolving Credit Facility from $925.0 million to $1,495.0 million, effective upon closing of the Business Combination, b) provided for an incremental $843.0 million Tranche C Term Facility in connection with the Business Combination, which was subsequently decreased by AAM, Inc. to $835.0 million and c) extended the maturity of the Revolving Credit Facility and Term Loan A Facility for five years from the date of the Second Amendment, resetting for another five years upon the closing of the Business Combination. In connection with the Second Amendment, we paid $11.6 million of debt issuance costs, and expensed $3.3 million of fees and a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of these borrowings. The maturity date of the Term Loan B Facility in the fourth quarter of 2029 was not changed by the Second Amendment.
At June 30, 2026, we had $1,469.7 million available under the Revolving Credit Facility. This availability reflects a reduction of $25.3 million primarily for standby letters of credit issued against the facility.
As of June 30, 2026, we have prepaid $25.7 million of the outstanding principal on our Term Loan A Facility, Term Loan B Facility and Tranche C Term Facility. These payments satisfy our obligation for principal payments under the Term Loan A Facility, Term Loan B Facility and Tranche C Term Facility through the second quarter of 2027.
The Senior Secured Credit Facilities provide back-up liquidity for our non-U.S. credit facilities. We intend to use the availability of long-term financing under the Senior Secured Credit Facilities to refinance any current maturities related to such debt agreements that are not otherwise refinanced on a long-term basis in their local markets, except where otherwise reclassified to Current portion of long-term debt on our Condensed Consolidated Balance Sheet.
Financing Related to the Business Combination, Redemption of the 6.50% Notes due 2027 and Redemption of the 6.875% Notes due 2028 On October 3, 2025, AAM, Inc. issued $850 million of 6.375% senior secured notes due 2032 (the 6.375% Notes) and $1,250 million of 7.75% senior unsecured notes due 2033 (the 7.75% Notes, and together with the 6.375% Notes, the Notes). The 6.375% Notes are governed by an indenture that contains covenants, that, among other things, restrict with certain exceptions, our ability to incur additional debt, make restricted payments, incur debt secured by liens, dispose of assets and engage in consolidations and mergers or sell or transfer all or substantially all of our assets. The 7.75% Notes are governed by an indenture that contains covenants that, among other things, restrict, with certain exceptions, our ability to engage in consolidations and mergers or sell or transfer all or substantially all of our assets, incur debt secured by liens and engage in certain sale and leaseback transactions.
In the fourth quarter of 2025, we used a portion of the proceeds from the Notes to complete a redemption of all $500 million aggregate principal amount outstanding of 6.50% Notes due 2027 and a partial redemption of $150 million principal amount of 6.875% Notes due 2028. In May and August 2026, we voluntarily redeemed all of our 6.875% Notes due 2028, as disclosed in more detail below. The remaining proceeds of the Notes, together with certain amounts of prefunded interest, were deposited into segregated escrow accounts which are presented as Restricted cash on our Condensed Consolidated Balance Sheet as of December 31, 2025.
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On February 3, 2026, upon completion of the Business Combination, $1,450 million, together with certain interest, was released from escrow, and was used, together with borrowings under our Tranche C Term Facility and cash on hand, to (a) pay the cash consideration payable in connection with the Business Combination and related fees and expenses, (b) repay in full all outstanding borrowings under the credit facilities of Dowlais and to pay related fees, expenses and premiums, after which all the credit facilities of Dowlais were terminated and (c) fund a change of control offer for certain outstanding notes of Dowlais. We intend to use the remaining proceeds of the Notes for general corporate purposes, which may include, among other things, repayment of other outstanding indebtedness. The 6.375% Notes are secured by a first priority security interest in substantially all of the assets of AAM, Inc., Dauch and Dauch's wholly owned domestic subsidiaries (other than AAM, Inc.) that guarantee the Senior Secured Credit Facilities, subject to certain thresholds, exceptions and permitted liens.
On January 29, 2025, in connection with the announcement of the Business Combination, we entered into a credit agreement (the Backstop Credit Agreement), the First Lien Bridge Credit Agreement (the First Lien Bridge Facility), and the Second Lien Bridge Credit Agreement (the Second Lien Bridge Facility and together with the First Lien Bridge Facility, the Bridge Facilities). Following our entry into the Second Amendment, the Backstop Credit Agreement was terminated. Additionally, in connection with entry into the Second Amendment on February 24, 2025, we entered into the Amended and Restated First Lien Bridge Credit Agreement (the Amended and Restated First Lien Bridge Facility), and the Amended and Restated Second Lien Bridge Credit Agreement (the Amended and Restated Second Lien Bridge Facility, and together with the Amended and Restated First Lien Bridge Facility, the Amended and Restated Bridge Facilities). Following the issuance of the Notes on October 3, 2025, the Amended and Restated Bridge Facilities were terminated.
U.S. Private Placement Notes As part of the Business Combination, Dauch assumed Dowlais' U.S. Private Placement Notes with the aggregate principal amount of $500 million (U.S. Private Placement Notes). Pursuant to the terms of the U.S. Private Placement Notes, the completion of the Business Combination resulted in a change of control, which required the Company to make an offer to redeem the U.S. Private Placement Notes at par, plus accrued and unpaid interest as of the redemption date. During the six months ended June 30, 2026, a change of control offer was made and completed, resulting in the redemption of $151 million of the U.S. Private Placement Notes. The U.S. Private Placement Notes that were not redeemed will remain outstanding, with remaining maturities ranging from 2029 to 2036. The U.S. Private Placement Notes are unsecured and subject to covenants that, among other things, limit the ability of Dowlais and certain of its subsidiaries to enter into transactions with affiliates, consolidate, merge or transfer all of their assets, create or incur liens, incur additional indebtedness, or dispose of assets, and also require compliance with certain financial maintenance covenants. The U.S. Private Placement Notes contain customary events of default.
Repayment of Dowlais Indebtedness Upon the acquisition of Dowlais, we assumed $1,876.9 million of existing Dowlais indebtedness, which we repaid following the acquisition, with the exception of $349.0 million of U.S. Private Placement Notes, as described above, which remain outstanding as of June 30, 2026.
Redemption of 6.875% Notes Due 2028 In the second quarter of 2026, we voluntarily redeemed a portion of our 6.875% Notes due 2028. This resulted in a principal payment of $125.0 million and $3.0 million in accrued interest. We also expensed approximately $0.6 million for the write-off of a portion of the unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing. In August 2026, we voluntarily redeemed all of our remaining 6.875% Notes due 2028, which resulted in a principal payment of $125.0 million and $0.8 million in accrued interest.
Non-U.S. Credit Facilities and Other We utilize local currency credit facilities to finance the operations of certain non-U.S. subsidiaries. At June 30, 2026, $4.6 million was outstanding under our non-U.S. credit facilities, as compared to $10.7 million at December 31, 2025. At June 30, 2026, an additional $100.0 million was available under our non-U.S. credit facilities.
Treasury stock Treasury stock increased by $8.2 million in the first six months of 2026 to $246.7 million as compared to $238.5 million at year-end 2025, due to the withholding and repurchase of shares of Company stock to satisfy employee tax withholding obligations due upon the vesting of stock-based compensation.
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Subsidiary Guarantees of Registered Debt Securities Our 6.875% Notes and 5.00% Notes are senior unsecured obligations of AAM, Inc. (Issuer); all of which are fully and unconditionally guaranteed, on a joint and several basis, by Dauch and substantially all of its domestic subsidiaries (other than AAM, Inc.) (Subsidiary Guarantors). Dauch has no significant assets other than its 100% ownership of its direct subsidiaries. As described above, the 6.875% Notes were fully redeemed in August 2026.
Each guarantee by Dauch and/or any of the Subsidiary Guarantors is:
•a senior obligation of the relevant Subsidiary Guarantors;
•the unsecured and unsubordinated obligation of the relevant Subsidiary Guarantors; and
•of equal rank with all other existing and future unsubordinated and unsecured indebtedness of the relevant Subsidiary Guarantors.
Each guarantee by a Subsidiary Guarantor provides by its terms that it will be automatically, fully and unconditionally released and discharged upon:
•any sale, exchange or transfer (by merger or otherwise) of the capital stock of such Subsidiary Guarantor, or the sale or disposition of all the assets of such Subsidiary Guarantor, which sale, exchange, transfer or disposition is made in compliance with the applicable provisions of the indentures;
•the exercise by the issuer of its legal defeasance option or covenant defeasance option or the discharge of the issuer’s obligations under the indentures in accordance with the terms of the indentures; or
•the election of the issuer to affect such a release following the date that such guaranteed notes have an investment grade rating from both Standard & Poor's Ratings Group, Inc., and Moody's Investors Service, Inc.
The following represents summarized financial information of Dauch, AAM, Inc. and the Subsidiary Guarantors (collectively, the Combined Entities). The information has been prepared on a combined basis and excludes any investments of Dauch, AAM, Inc., or the Subsidiary Guarantors in non-guarantor subsidiaries. Intercompany transactions and amounts between Combined Entities have been eliminated.
Statement of Operations Information (in millions)
Six Months Ended June 30, 2026 Year Ended December 31, 2025
Net sales $ 3,124.8 $ 4,176.0
Gross profit 360.4 511.5
Income from operations 65.5 6.9
Net loss (90.1) (46.8)
Balance Sheet Information (in millions)
June 30, 2026 December 31, 2025
Current assets $ 2,357.2 $ 2,875.3
Noncurrent assets 3,490.2 2,417.7
Current liabilities 661.0 564.0
Noncurrent liabilities 5,282.6 4,589.5
Redeemable preferred stock — —
Noncontrolling interest — —
At June 30, 2026 and December 31, 2025, amounts owed by the Combined Entities to non-guarantor entities totaled approximately $140 million and $20 million, respectively, and amounts owed to the Combined Entities from non-guarantor entities totaled approximately $1,180 million and $400 million, respectively.
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CYCLICALITY AND SEASONALITY
Our operations are cyclical because they are directly related to worldwide automotive production, which is itself cyclical and dependent on general economic conditions and other factors. Typically, our business is also moderately seasonal as our major OEM customers historically have an extended shutdown of operations (normally 1-2 weeks) in conjunction with their model year changeover and an approximate one-week shutdown in the month of December. Our major OEM customers also occasionally have longer shutdowns of operations for program changeovers. Accordingly, our quarterly results may reflect these trends.
LITIGATION AND ENVIRONMENTAL MATTERS
We are involved in, or potentially subject to, various legal proceedings or claims incidental to our business. These include, but are not limited to, matters arising out of product warranties, contractual matters, and environmental obligations. Although the outcome of these matters cannot be predicted with certainty, at this time we do not believe that any of these matters, individually or in the aggregate, will have a material adverse effect on our results of operations, financial condition or cash flows.
We file U.S. federal, state and local income tax returns, as well as non-U.S. income tax returns in jurisdictions throughout the world. We are also subject to examinations of these tax returns by the relevant tax authorities. Negative or unexpected outcomes of these examinations and audits, and any related litigation, could have a material adverse impact on our results of operations, financial condition and cash flows. See Note 13 - Income Taxes for additional discussion regarding examinations and audits of our tax returns and pending litigation.
We are subject to various federal, state, local and non-U.S. environmental and occupational safety and health laws, regulations and ordinances, including those regulating air emissions, water discharge, waste management and environmental cleanup. We will continue to closely monitor our environmental conditions to ensure that we are in compliance with all laws, regulations and ordinances. We have made, and anticipate continuing to make, capital and other expenditures (including recurring administrative costs) to comply with environmental requirements at our current and former facilities. Such expenditures were not significant in the second quarter of 2026.
We are subject to risks of environmental issues, including impacts of climate-related events, that could result in unforeseen disruptions or costs to our operations. We did not experience any climate-related events in the second quarter of 2026 that we believe could have a material adverse impact on our results of operations, financial condition and cash flows.
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