Good morning and welcome to the American Axle & Manufacturing Third Quarter 2022 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to David Lim, Head of Investor Relations. Please go ahead.

Thank you and good morning. I’d like to welcome everyone who is joining us on AAM’s third quarter earnings call. Earlier this morning, we released our third quarter 2022 earnings announcement. You can access this announcement on the Investor Relations page of our website, www.aam.com and through PR Newswire services. You can also find supplemental slides for this conference call on the Investor page of our website as well. To listen to a replay of this call, you can dial in 1-877-344-7529, replay access code is 525256. This replay will be available through November 11. Regarding the Investor Relations calendar, we would like investors to mark your calendars for our technology event at Brighton Drive in Las Vegas on January 4, 2023. With that said, I’d 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. Now, let me turn things over to AAM’s Chairman and CEO, David Dauch.

Thank you, David and good morning everyone. Thank you for joining us today to discuss AAM’s financial results for the third quarter of 2022. Joining me on the call today are Mike Simonte, AAM’s President; and Chris May, AAM’s Vice President and Chief Financial Officer. I’d like to begin today’s call by addressing the media activity from yesterday regarding AAM. We put out a press release earlier this morning addressing it. While it is our longstanding policy not to publicly comment on market rumors and media speculation, we feel it is important to state that we are not engaged in any discussion to sell the company and that we are not otherwise for sale. In the ordinary course of business and executing our strategic plan, we continuously monitor market conditions and assess industry developments and we regularly consider strategic opportunities that serve the best interest of the company and its shareholders. Finally, we do not intend to make any further comments or respond to any inquiries regarding these matters on this call. That said, the agenda for today’s call is as follows. I will review the highlights of our third quarter financial performance. Next, I will touch on some exciting business development news inside the quarter regarding wins with electrification and significant wins with our traditional business. Lastly, I will discuss our updated 2022 financial outlook before turning things over to Chris. After Chris covers the details of the financial results, we will open up the call for any questions that you all may have. So, let’s begin. Overall, AAM’s third quarter 2022 financial results were impacted by higher than expected production volatility and year-over-year inflation. AAM’s third quarter sales were $1.5 billion. As we exited the second quarter, we anticipated a relatively more stable operating environment in the second half of this year. However, a number of our customers continue to adjust production volumes throughout the entire quarter, mainly driven by continued semiconductor and supply chain challenges and labor availability issues. We experienced this across multiple vehicle segments, in particular, full-size trucks that we support. Most of this volatility was experienced with short lead time notification. In addition, we are closely monitoring the macroeconomic backdrop, underpinned by the rising rate environment and the inflationary pressures. That said, even though we have short-term volatility, we believe large truck demand remains resilient over time as many individuals and businesses rely upon them for work and personal preference. In addition, all-wheel drive and 4x4 mix tend to be more inelastic compared to other vehicle features, especially with the full-size truck segment. AAM’s adjusted EBITDA in the third quarter of 2022 was $198 million or 12.9% of sales. In the quarter, there were several puts and takes, including volume and mix and Chris will cover the specifics with you shortly, but we remain focused on factors that we can control, including sales conversion, investing in R&D initiatives and mitigating inflationary headwinds. Furthermore, we continue to make progress on our OEM commercial recovery discussions and we are on track with what we had told you previously. However, let me underscore supply chain challenges, including semiconductors and labor shortages, are very much with us. In our view, we believe normalization may not occur until well into 2023 and possibly beyond. AAM’s earnings per share in the third quarter of 2022 was $0.22 per share. AAM’s adjusted EPS was $0.27 per share. AAM continued to deliver positive adjusted free cash flow generation in the quarter, a hallmark of our operating model. AAM’s third quarter 2022 adjusted free cash flow was $46 million. We have a very straightforward capital allocation strategy supported by our free cash flow generation and that’s clearly to strengthen the balance sheet, invest in electrification technology and conduct smart, high-value bolt-on M&A when it makes sense such as we recently did with our Tekfor acquisition. In the third quarter, we reduced our long-term debt by an additional $50 million. Now, let’s talk about some recent and very exciting key highlights, which you can see on Slides 4 and 6 of our investment package. Let’s start with electrification. Our technical and commercial efforts in electrification continue to experience very positive traction. Having a solid technology base and growing product portfolio are opening up multiple dialogues with OEM customers. The automakers are extremely focused on future mobility and they need partners with a proven track record in technology and operational excellence. It’s the goal of AAM and this leadership team to be a key OEM partner in electrified propulsion from components to full systems. As such, we are very happy to announce our first eBeam axle award with ICA Mobility for its 2.5 ton light commercial vehicle. ICA is a leader in commercial vehicles in India, manufacturing a complete range of EVs, fuel cell EVs and alternative fuel vehicles with a focus on low total cost of ownership. In addition, we were awarded contracts to supply gears for Volvo Car’s next-generation electric drive units. Volvo is a premier global brand known for its focus on safety. With ICA and Volvo Cars, you are hearing us talk about new customers, markets and geography. This is aligned with our vision for electrification growth and emphasizes our ability to grow in electric drive units and components. As a testament to our engineering and innovation, AAM was awarded not two, but three PACE awards this year. We received a PACE award for our P3 electric drive in the Mercedes-AMG GT 63 S performance vehicle, a PACE Innovation Partnership Award for our high-level collaboration with Mercedes-AMG, and a PACE Pilot Innovation Award for our highly integrated 3-in-1 wheel and electric drive, which incorporates and integrates a motor, a gearbox and inverter into a compact, power-dense form function. This technology is applicable on multiple vehicle segments from compact cars to full eBeam axle applications on light commercial vehicles and is scheduled to launch with a customer in 2024. These three PACE awards add to the two PACE awards that AAM received in 2020 for our advanced electric drive unit and OEM collaboration. In a span of approximately two years, we have been recognized with five PACE awards related to our electrification technology. In addition to the great news in electrification, we continue to win significant new business on our conventional programs. AAM was selected as a new axle supplier for the GM Colorado and Canyon vehicles beginning in model year 2023. These are very exciting vehicles and we are proud to partner with GM on this important vehicle segment. Our wins are not limited to North America. Chery Automobile Company Limited has selected AAM to supply power transfer units and rear drive modules for its new SUV program. Although we are limited on the details of what we can share, this new SUV is well positioned to add to Chery’s success and expand our customer and revenue base in an important market. Now, let’s talk about our guidance on Slide 7. We have updated our financial outlook to reflect the best information we have available and to take into consideration the current operating environment. AAM is now targeting sales of $5.75 billion to $5.85 billion compared to what we had earlier communicated at $5.75 billion to $5.95 billion, adjusted EBITDA of approximately $745 million to $765 million compared to $790 million to $830 million previously, and adjusted free cash flow of approximately $300 million compared to $300 million to $350 million previously. From an end market perspective, in addition to normal production seasonality and fewer production days in the fourth quarter versus the third quarter, we expect the fourth quarter operating environment to be very similar to what we experienced in the third quarter, including the continuation of higher-than-previously-anticipated volatility in truck production. Already here in the fourth quarter, we have received numerous schedule adjustments as customers have reduced shifts, lowered overtime and outright canceled production relative to prior plans. That stated, during these turbulent times, AAM is very focused on the core operational values that differentiate us from other suppliers through the cycle. We will adhere to smart cost control and look to improve efficiency. We will maintain the high quality of our products, achieve on-time delivery and support the continuity of supply to our customers. At the same time, we will continue to invest in electrification and new mobility. Although no two cycles are alike, we underscore that the AAM team has deep industry experience and is confident in successfully navigating the near-term environment. In conclusion, our aim is on the future and we will continue to focus on generating strong free cash flow, strengthening our balance sheet, securing our traditional and next-generation business, advancing our electrification product portfolio and positioning AAM for profitable growth, especially in the area of electrification, while building shareholder value. 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 third quarter results for you today. I will also refer to the earnings slide deck as part of my prepared comments. So, let’s go ahead and begin with sales. In the third quarter of 2022, AAM sales were $1.54 billion compared to $1.21 billion in the third quarter of 2021. Slide 9 shows a walk of third quarter 2021 sales to third quarter 2022 sales. First, we account for the change in the year-over-year impact from semiconductors and supply chain challenges. While we continue to be significantly impacted by this issue, we did experience a year-over-year lower negative impact, which we estimate added approximately $136 million of sales in the quarter. Positive volume mix and other was $113 million and the Tekfor acquisition contributed $92 million to sales. And lastly, metal market pass-throughs and FX lowered net sales by approximately $10 million, with metal up and FX lower inside of that net number. Now, let’s move on to profitability. Gross profit was $177.4 million in the third quarter of 2022 as compared to $165.6 million in the third quarter of 2021. Adjusted EBITDA was $198.4 million in the third quarter of 2022 versus $183.2 million last year. Please refer to our adjusted EBITDA walk on Slide 10. In the quarter, the year-over-year change in semiconductor availability and volume mix and other added $43 million and $13 million respectively to adjusted EBITDA. Third quarter material, freight and utility inflation, net of customer recoveries, negatively impacted EBITDA by $12 million. This pacing is consistent with our full year estimate and continued progress of recoveries with customers. R&D was slightly higher by approximately $1 million and continues to run in the range of $35 million to $40 million per quarter. With a full quarter of Tekfor in our third quarter 2022 results, the acquisition contributed approximately $9 million of EBITDA inside the quarter. During the latter part of the quarter, we experienced a significant drop in key metal market indexes that are an input component of our products, in particular, scrap steel indexes. As we have described previously, as rates change, there is a valuation and cost timing for customers, suppliers and internal inventory to run at new levels. That is what’s happening here and understanding this detailed point is important. As a result of this rapid index drop of nearly 39% from July 1 to September 30, we experienced the opposite effect on our inventory valuations and cost of goods sold versus what we realized in the second quarter of 2021 when rates rapidly increased. You may recall that we shared with you at that time there was a $16 million positive benefit inside the second quarter of 2021 for this dynamic. Conversely, as prices rapidly declined in the quarter, we effectively expensed inventory that was purchased at a higher level through our P&L. Let me now cover SG&A. SG&A expense, including R&D, in the third quarter of 2022 was $85.7 million or 5.6% of sales. This compares to $90.5 million or 7.5% of sales in the third quarter of 2021. This is a 190 basis point improvement. AAM’s R&D spending in the third quarter of 2022 was $35.4 million compared to $34.7 million last year. We continue to control our SG&A costs while efficiently investing in R&D to advance our next-generation electric drive platforms. Let’s move on to interest and taxes. Net interest expense was $39.4 million in the third quarter of 2022 compared to $47 million in the third quarter of 2021. We continue to benefit from debt reduction and previous refinancing actions in the form of lower interest costs. In the third quarter of 2022, we recorded an income tax benefit of $5.7 million compared to a benefit of $13.6 million in the third quarter of 2021. The benefit in the quarter was a result of a mix of earnings and valuation allowances on a jurisdictional basis. For the balance of the year, we expect our effective adjusted tax rate to be approximately 10% to 15% and we would expect cash taxes to be in the range of $40 million to $45 million. Taking all of these sales and cost drivers into account, our GAAP net income was $26.5 million or $0.22 per share in the third quarter of 2022 compared to a net loss of $2.4 million or $0.02 per share in the third quarter of 2021. Adjusted earnings per share, which excludes the impacts of items noted in our earnings press release, was $0.27 per share in the third quarter of 2022 compared to $0.15 per share in the third quarter of 2021. Let’s now move on to cash flow and the balance sheet. Net cash provided by operating activities for the third quarter of 2022 was $85.2 million. Capital expenditures, net of the proceeds from the sale of property, plant and equipment for the third quarter of 2022 were $46.6 million. Cash payments for restructuring and acquisition-related activity for the third quarter of 2022 were $4.7 million and cash payments related to the Malvern fire we experienced in September of 2020, net of recoveries, was $2.5 million in the quarter. In total, we continue to expect approximately $30 million to $40 million in restructuring and acquisition-related costs in 2022. Reflecting the impact of these activities, AAM generated adjusted free cash flow of $45.8 million in the third quarter of 2022. From a debt leverage perspective, we ended the quarter with a net debt of $2.5 billion and LTM adjusted EBITDA of $754.2 million, calculating a net leverage ratio of 3.3x at September 30. This is down from a leverage ratio of 3.4x at June 30. In addition, as David mentioned earlier, we paid an additional $50 million down on our Term Loan B inside of the quarter. We expect to continue to strengthen AAM’s balance sheet by reducing our gross debt and lowering future interest payments. Year-to-date, we reduced our total debt by approximately $100 million. Before we move on to Q&A, let me close out my comments with some perspectives on our 2022 financial outlook. As you can see from our press release, we have updated our outlook to $5.75 billion to $5.8 billion of sales, $745 million to $765 million of adjusted EBITDA and an adjusted free cash flow target of approximately $300 million. We reduced our top end sales by $100 million and at the midpoint, $50 million. The sales decline is driven by greater production volatility versus our prior forecast, primarily in key light truck platforms we support. By way of figures, our current forecast estimate is approximately 50,000 to 100,000 full-size units lower in the second half of 2022 versus our previous guidance. On a sales per production day basis, we would expect the fourth quarter to be very similar or slightly lower to that of what we experienced in the third quarter. As for the new adjusted EBITDA targets, the midpoint change can be summarized as follows: loss contribution margin of approximately $30 million on lower net sales, which reflects the weighting impact of a high concentration mix of lower full-size trucks, the impact of metal costs and related Q3 inventory absorption impact of $20 million and a net amount of inefficiency of $5 million to $10 million due to this volatility. What is really important to note here, since production is more stable and predictable, these issues will most likely not be with us. In addition, with lower middle market pricing on select commodities, once we pass through this life period, this should be very good for AAM. Lastly, our cash flow conversion remains strong as evidenced by our guidance and continues to be a priority for the company. So in conclusion, we will continue to focus on what we can control, including driving optimization, successfully negotiating customer recoveries, integrating the Tekfor acquisition, developing class-leading electrification technology and positioning AAM for 2023 and executing on our capital allocation plan. Thank you for your time and participation on the call today. I’m going to stop here and turn the call back over to David so we can start the Q&A.

Thank you, Chris and David. We have reserved some time to take questions. Operator, please go ahead.

Thank you. And the first question will be from Ryan Brinkman from JPMorgan. Please go ahead.

Hey, great. Thanks for taking my question. Could you maybe give an update on the pace and progress of negotiations with customers to recover premium non-commodity costs? I think you’ve already been a little less impacted by higher commodity costs because you’ve had an above-average level of pass-through arrangements in your contracts, but there was nothing in there with regards to the non-commodity costs. Is the cost recovery pricing still negative? What do you think the outlook is for that going forward? Also, I’d love to get your take on the recent industry actions; I know you have less exposure to Ford, but they handed out $1 billion in the quarter, which allowed some other companies to beat. Might the automakers that you’re in discussions with, where you have more exposure, be taking a different cadence of reimbursement or something? How should we think about this issue?

Ryan, this is David. I’ll make some initial comments, then if Chris wants to chime in, he can. As we’ve said, and I said in my prepared remarks, we continue to make meaningful progress with all of our customers on a global basis with respect to some of the commercial and economic recoveries. We clearly have some more work to do just based on the continued level of increases that keep coming into our company. I would characterize the discussions as being very fair and balanced with our customers, some better than others. But overall, I think they are balanced and we definitely are on track with what we said we would do in this area. A big challenge that we are still facing as an organization and as an industry is, especially the energy and the utility issues, particularly in the European market. That’s a big issue that we’re going to have to continue to address as we go forward here. But overall, I’d characterize the discussions as fair and balanced, with meaningful progress made, but more work to do.

Yes. Ryan, this is Chris. I would offer a couple of other data points to align with your question. I know you made some reference to some activity here inside of the third quarter. I would refer you back to some of our previous commentary on this, where in the first quarter of this year, we were almost $30 million off from an inflation standpoint on that topic. You noticed we closed that gap pretty meaningfully inside of the second quarter with a lot of our customers, almost cutting that exposure in half, and we’ve been running at that much lower rate due to those negotiations in the first half of the year. Secondarily, you also commented on the pricing element inside of our walks. This is our annual year-over-year long-term negotiated pricing arrangements with our customers. We stepped into this year and told you it’d be around $40 million. That’s outside the scope of the economic recoveries that you’re referring to.

Okay. Great, thanks. And could you just maybe comment a bit more on the Chevrolet Colorado and GMC Canyon win? It’s an important one and a conquest. A lot of what’s been going on at AAM the last number of years has had to do in part with your relationship with GM, their decision to in-source a portion of their full-size truck platform and later with their strategy around on-the-market drive. So you’re still winning business there. What does this say about the relationship with them and how it could potentially evolve over time?

So Ryan, we have a very strong relationship with General Motors. We value the relationship that we have with them. We’ve had a strategic partnership for well over 25 years. We’re their largest driveline supplier. We’re honored to pick up this Colorado Canyon business. We conquested this from our largest competitor in this space; it’s an important vehicle segment that continues to do very well in the marketplace. So we’re excited to launch it next year. At the same time, we’ve been GM Supplier of the Year six years in a row. They look to us for solid operating experience and performance, technology leadership and outstanding quality, much like many of the other OEMs do. We expect a long-term positive relationship with General Motors going forward, including activity on electrification. That’s about all I can really say at this point in time. We’re highly confident in our technology, we feel very good about our relationship with General Motors, and we will continue to look to maintain and strengthen that relationship as we go forward.

Great, thank you.

The next question is from John Murphy from Bank of America. Please go ahead.

Hi, good morning, guys. I just wanted to follow up on the outlook here. You alluded several times in the call that the fourth quarter would be similar to the third quarter, and then you gave us some puts and takes. As you think about your key product volumes in the fourth quarter versus the third quarter, are you saying they are going to be relatively similar? Also, Chris, you said there were some negatives on the contribution margin side of $30 million, $20 million on metals and then $5 million to $10 million on volatility, which would indicate, all else equal, that you’re looking for sort of $60 million lower on EBITDA versus the third quarter, right? The fourth quarter implied EBITDA is $155 million to $175 million, so that would take us down to around $140 million, yet you’re applying $155 million to $175 million. So are there some positives occurring in there? Can you help walk through the sequential third quarter to fourth quarter on the top line and the EBITDA line?

Yes, John. Let me recalibrate. When I articulated the guidance walk of the volume and mix, the inventory and a little bit of efficiency, that was for the full year. That was not just the fourth quarter. I was articulating the elements that were going on inside of our third quarter and fourth quarter combined walk into our previous guidance to our current guidance from a full year perspective, not just the fourth quarter. If you think about going from Q3 into Q4, our commentary on a production day basis is important. The fourth quarter has three or four fewer production days than the third quarter, so we would expect our revenues on a production day basis or our volumes to be similar to the third quarter, but holistically for the quarter would be less because of fewer production days. So as we walk from Q3 to Q4, the key negative driver is lower volume and mix due to fewer production days. We should see some benefit with the absence of that inventory absorption issue somewhat behind us. We will experience a little bit more of that if metal continues to come down in the fourth quarter, but that would then start to be behind us. You take those elements and then you have puts and takes around the horn that get you to the midpoint of our range.

Okay. That’s helpful. And then on the 50,000 to 100,000 trucks that you think are going to be out of the schedule in the second half because of supply chain disruptions, do you think that will be made up quickly in early 2023, or are those production runs put off indeterminately?

On the 50,000 to 100,000 truck reference that you made, that was for the entire back half of the year versus our previous thought 90 days ago. We experienced some of that decline in the third quarter, and we are projecting a little bit of that decline versus our previous estimate inside the fourth quarter. As David mentioned in his prepared remarks, we continue to expect demand for those full-size vehicles and how their production schedules come into next year. It’s a little too early to call, but we are still holistically bullish on those platforms across multiple customers as we think of 2023 and beyond.

But you understand that’s pure supply chain disruption, not dealers building inventory or vehicles in transit, correct?

Yes. John, the three big things impacting the industry right now are semiconductors, broader supply chain issues and labor availability. The supply chain challenges are being driven in large part by labor availability issues. I do expect there is still pent-up demand for these products. OEMs will continue to balance desired inventory levels to benefit from transaction pricing and lower incentives, but they need to replenish shortages. That’s why I think pent-up demand will continue. The big issue is getting stability back in the supply chain so OEMs can consistently run their facilities on a normal basis versus the volatility we are experiencing and short-notice shutdowns, which create many problems for the supply base, including AAM.

Very helpful. Thank you, guys.

The next question is from Rod Lache with Wolfe Research. Please go ahead.

Good morning everybody. David, I am not asking you to comment on any specific company, but I wanted to get your thoughts on how you are thinking about the market strategically. Do you think broader consolidation is worth exploring? Do you think it happens over time, because the last time a combination of driveline suppliers was proposed the synergies were pretty big. How are you thinking about the market and how things could play out in the space?

Rod, as I have said before, I believe there will be consolidation in the auto space, from an OEM standpoint and within the supply base. You are already starting to see select partnerships because everyone can’t afford to do everything on their own and manage both ICE business and the transition to electrification and mobility. I think you will see further consolidation within the supply base and it will be healthy for the industry. As we have said, we want to be a consolidator, but we will manage our priorities based on capital allocation. Our focus right now is supporting organic growth and strengthening our balance sheet. You have seen us take strategic inorganic actions within our capital structure with the Tekfor acquisition and previous steps. Again, I do think there will be consolidation in the space and it should be healthy when it plays out.

Okay. I appreciate that. I wanted to clarify that I am seeing in Q4 year-over-year revenue growth from $1.2 billion last year to $1.4 billion this year, and it looks like a similar or slightly lower revenue in the fourth quarter versus the third quarter, but you also had that $20 million inventory charge in the third quarter. So I’m curious what I’m missing that drives the sequential decline in EBITDA?

If you think about the sequential Q3 to Q4, at the midpoint, our revenues are implied to be down from the third quarter by over $100 million, so that is a sizable volume and mix negative driver in the sequential walk between Q3 and Q4. You do get a benefit from the absence of the inventory absorption issue being behind us. We will experience a little bit more inventory absorption if metal continues to come down into the fourth quarter, and then that will be behind us. You take those two elements and then you have small puts and takes around the horn that are embedded in the midpoint of our guidance. If you think about Q4 of last year into Q4 of this year, volume and mix is up, but remember we have net inflationary factors that we have been running, approximately $10 million to $15 million a quarter since the second quarter of this year. FX and metal, while declining, are up from last year. Also, in the fourth quarter of last year, our R&D expense was very low due to some favorable customer reimbursements that we are not expecting here in the fourth quarter of this year. You also get some favorable productivity that helps year-over-year. That’s how I would think about last fourth quarter to this fourth quarter.

Okay. Thank you.

Thanks Rod.

The next question is from James Picariello from BNP Paribas. Please go ahead.

Hey. Good morning guys. Can you confirm what the full-year commodities impact is now with the additional $20 million you set within the guidance?

Yes. We disclose this as a standalone item inside of our year-over-year loss from combined FX and metals in terms of productivity. Through the first nine months, the sales impact was $56 million and profit was down $26 million, excluding the $20 million inventory item. That inventory item would be on top of that. Some metal indexes are starting to trend down into the fourth quarter, like scrap steel. But others, like aluminum and magnesium, have been more stable. Those are key inputs for us. We have not disclosed the specific amount for the fourth quarter, but that’s where we have been trending; they have been trending down a bit holistically for us.

Understood. On the inventory absorption timing of the $20 million, regardless of commodities pricing next year, will this impact get unwound in 2023, or will it still be dependent on market dynamics?

No. The effect effectively unwinds itself. Once we step into a lower run rate with metal prices, we will start to realize that benefit of the lower metal costs running through our P&L. You’ll probably see another quarter, meaning the fourth quarter, as we step down further. But this should be positive for AAM going forward, assuming metals remain lower. As you know, they change every 30 days and can move quickly in either direction, as we experienced in the third quarter.

Right. On the Tekfor acquisition, the $9 million positive contribution — is that trending ahead of expectations? It seems like a decent contribution right from the start.

That’s effectively a 10% EBITDA margin on the Tekfor business. We acquired them on June 1 and that was close to our expectation. We thought it would be high-single digits and we are pretty much on track for that. Our synergy potential and expectations would be for that to step up more into 2023. It’s pretty much in line with what we thought, below our average, but we expect it to improve. This is a meaningful deal from a synergy perspective for us.

Great. Thank you.

The next question is from Joe Spak from RBC Capital Markets. Please go ahead.

Good morning everyone. Thanks.

Good morning Joe.

I think Chris may have answered part of this, but just to be clear on the inventory adjustment: is there still an impact in the fourth quarter, and going forward from there, should you start to benefit if prices stay lower, or is that impact mostly done for now on a year-over-year basis?

This dynamic is an inventory valuation accounting effect which runs through our P&L as inventory purchased at higher prices is expensed when used. If metal indexes drop further in the fourth quarter, you could see a little more impact, but once pricing is at a lower run rate, you start to benefit from lower metal costs holistically. Think of it as unwinding over the course of the last 12-plus months as metals have come down.

And David, on a related note, I know past speculation about transactions has been frustrating and sometimes valuation has been an issue. Could you comment on the Board and management perspective when you see market reactions to these news items and how you think about that going forward?

The news articles are a distraction to the management team. We put out a public statement to be clear we are not for sale. It’s disappointing that we have to redirect management time to address speculation. At the same time, we have a job to do: grow organically and consider sensible inorganic opportunities. We will continue to assess market conditions and opportunities that present themselves to strengthen the company, support the balance sheet and show growth while delivering profitable results. We will continue to evaluate options with proper governance, but again, to be clear, we are not for sale.

Thank you very much.

Thank you.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to David Lim for any concluding remarks.

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

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.