Fitch: Special Attrition Program Viewed As Positive For American Axle.

CHICAGO -- American Axle's (AXL) announced special attrition program has no effect on the company's credit ratings, and despite a possible modest increase in debt, could actually be a longer term positive for cash flow and debt service, according to Fitch Ratings. The company's current ratings are as follows:

Fitch currently rates AXL as follows:

--Issuer Default Rating (IDR) 'BB';

--Senior unsecured 'BB';

--Rating Outlook Negative.

AXL announced today that it is offering a range of early retirement incentives, buy-outs and educational assistance to all UAW workers, which will include:

--A $50,000 incentive to retirement eligible employees;

--A monthly incentive for eligible employees to grow into retirement within four years;

--A $70,000 buy-out incentive for employees with less than 10 years seniority;

--A $100,000 buy-out incentive for employees with greater than or equal to 10 years seniority;

--A $30,000 buy-out incentive to certain associates of the Cheektowaga facility and the axle operations at the Three Rivers facility; or

--An educational buy-out program providing benefits of two or four years for tuition and living expenses.

Those employees who opt to retire retain all vested pension and postretirement benefits while those who opt for a buy-out retain vested pension benefits but forfeit other postretirement benefits. In addition, AXL will initiate incremental restructuring actions in 2006 to realign its production capacity and cost structure, including salaried workforce reductions as well as adjustments to its manufacturing footprint.

Fitch believes that AXL could fund a significant portion of the buy-outs with cash flow as the fourth quarter usually provides a seasonal positive inflow of working capital cash, e.g. change in working capital for the fourth quarter of 2005 was positive $140 million. Longer-term, the savings derived from a reduced fixed-cost base should bolster cash flow.

Fitch's ratings reflect the risks associated with AXL's substantial dependence on General Motors (GM; IDR rated 'B' and on Rating Watch Negative by Fitch), which accounted for 78% of AXL's 2005 revenue. Fitch believes that lower production levels and elevated risks associated with GM production over the next several years as GM enters a critical restructuring period, has the potential to pressure revenues and margins at AXL. Although AXL continues to add non-GM business at a solid pace, consolidated financial results will remain dependent on GM production levels.

The rating also reflects Fitch's view that in any long-term scenario, GM would continue to manufacture passenger trucks in volume due to the comparative profitability of these product lines. AXL is a critical supplier for these products, being the complete driveline integrator for the GMT900 platform, which includes all of GM's large pickups and full-size sport utility vehicles (SUV). Fitch's Negative Outlook incorporates the expectation that GM will continue to experience revenue pressure, production uncertainties, and a financially stressed base of suppliers other than AXL.

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