AMERICAN AXLE & MANUFACTURING HOLDINGS INC
10-Qs and 10-Ks
PROXIES
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
| Filed by the Registrant þ | |
| Filed by a Party other than the Registrant o | |
| Check the appropriate box: |
| o Preliminary Proxy Statement | |
| o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| þ Definitive Proxy Statement | |
| o Definitive Additional Materials | |
| o Soliciting Material Pursuant to §240.14a-12 |
American Axle & Manufacturing Holdings, Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
| þ No fee required. | |
| o Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
| 1) Title of each class of securities to which transaction applies: |
| 2) Aggregate number of securities to which transaction applies: |
| 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| 4) Proposed maximum aggregate value of transaction: |
| 5) Total fee paid: |
| o Fee paid previously with preliminary materials. |
| o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| 1) Amount Previously Paid: |
| 2) Form, Schedule or Registration Statement No.: |
| 3) Filing Party: |
| 4) Date Filed: |
| SEC 1913 (02-02) | Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. |
Table of Contents
One Dauch Drive
Detroit, Michigan
48211-1198
www.aam.com
NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS
April 28, 2011
American Axle &
Manufacturing Holdings, Inc. (AAM)
| Time and Place | 3:00 p.m., local time, on Thursday, April 28, 2011 | |
| AAM World Headquarters Auditorium, One Dauch Drive, Detroit, Michigan | ||
| Items of Business |
(1) Elect four members of the Board of Directors to serve
until the Annual Meeting of Stockholders in 2014;
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(2) Cast a non-binding advisory vote on executive
compensation
(“say-on-pay”);
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(3) Cast a non-binding advisory vote on the frequency of
say-on-pay
votes;
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(4) Ratify the appointment of Deloitte & Touche
LLP as AAM’s independent registered public accounting firm
for the year ending December 31, 2011; and
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(5) Attend to other business properly presented at the
meeting.
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| Record Date | You may vote if you were an AAM stockholder at the close of business on March 3, 2011. | |
| Meeting Admission | Admission may be limited to AAM stockholders as of the record date and holders of valid proxies. Please be prepared to present identification for admittance. Stockholders holding stock in brokerage accounts will need to bring a copy of a brokerage statement reflecting stock ownership as of the record date. Cameras and recording devices will not be permitted. | |
| Proxy Materials | We have elected to furnish materials for the 2011 Annual Meeting of Stockholders via the Internet. We believe the use of the Securities and Exchange Commission (SEC) e-proxy rule will expedite stockholders’ receipt of the Proxy Statement, 2010 Annual Report and Form 10-K (proxy materials) and lower the costs of our annual meeting. On March 18, 2011, we mailed a notice of Internet availability (notice) to most stockholders containing instructions on how to access the proxy materials on the Internet instead of receiving paper copies in the mail. | |
| Important Notice Regarding Internet Availability of Proxy Materials for the April 28, 2011 Stockholder Meeting. The Proxy Statement and 2010 Annual Report and Form 10-K are available at www.envisionreports.com/AX. |
By Order of the Board of Directors,
Steven R. Keyes
Executive Director, Administration & Legal and
Secretary
March 18, 2011
2011 ANNUAL
MEETING OF STOCKHOLDERS
PROXY STATEMENT
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Table of Contents
PROXY
STATEMENT
Annual Meeting of
Stockholders
To Be Held
April 28, 2011
INTERNET
AVAILABILITY OF PROXY MATERIALS
American Axle & Manufacturing Holdings, Inc. (AAM or
the Company) is providing proxy materials electronically via the
Internet, instead of mailing printed copies of those materials
to each stockholder. On March 18, 2011, we mailed to our
stockholders (other than those who previously requested
e-mail or
paper delivery) a Notice of Availability of Proxy Materials
containing instructions on how to access our proxy materials,
including our proxy statement and 2010 Annual Report on
Form 10-K.
The Notice of Availability of Proxy Materials provides
instructions on how you may submit your proxy over the Internet
or by telephone.
This electronic delivery process is designed to expedite
stockholder receipt of proxy materials, lower the cost of the
Annual Meeting of Stockholders (annual meeting), and conserve
natural resources. However, if you would prefer to receive
printed proxy materials, please follow the instructions included
in the Notice of Availability of Proxy Materials. If you have
previously elected to receive our proxy materials
electronically, you will continue to receive these materials by
e-mail
unless you elect otherwise. If you received a printed copy of
proxy materials by mail and would like to view future proxy
materials over the Internet, you can do so by accessing the
Internet at www.envisionreports.com/AXL.
QUESTIONS AND
ANSWERS ABOUT VOTING AND THE ANNUAL MEETING
Why am I
receiving this proxy statement?
You received these proxy materials because you owned shares of
AAM common stock on March 3, 2011 (record date). AAM’s
Board of Directors (Board) is soliciting your proxy to vote your
shares at the annual meeting. By use of a proxy, you can vote
whether or not you attend the meeting. This proxy statement
includes information that we are required to provide to you and
is designed to assist you in voting your shares.
Who is entitled
to vote?
Holders of AAM common stock on the record date are entitled to
one vote per share. You are a holder of record if your shares
are held directly in your name with AAM’s transfer agent,
Computershare Trust Company, N.A. If your shares are held
in the name of a broker, bank, trustee or other record holder,
you are a street name holder. If you hold shares in more than
one account, each notice, proxy
and/or
voting instruction card you receive that has a unique control
number must be voted so that all your shares are voted.
How do I
vote?
You may vote by any of the following methods:
| • | In person — attending the annual meeting and casting a ballot. | |
| • | By mail — using the proxy and/or voting instruction card provided. | |
| • | By telephone or via the Internet — following the instructions on your notice card, proxy and/or voting instruction card. |
If you vote by telephone or via the Internet, have your notice
card or proxy
and/or
voting instruction card available. The control number on your
card is necessary to process your vote. A telephone or Internet
vote authorizes the named proxies to vote in the same manner as
if you marked, signed and returned the card by mail. If you hold
shares in street name, refer to the voting instructions provided
by your broker, bank, trustee or other record holder.
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How many shares
may vote at the meeting?
As of March 3, 2011, we had 75,301,263 shares of
common stock outstanding and entitled to vote. Under AAM’s
by-laws, a majority of these shares must be present in person or
by proxy to hold the annual meeting and take any action during
the meeting.
Can I change my
vote?
You may change your vote at any time before the annual meeting
by:
| • | revoking it by written notice to AAM’s Secretary at the address on the cover of this proxy statement; | |
| • | voting in person at the annual meeting; or | |
| • | delivering a later-dated proxy vote by mail, telephone or the Internet. |
What are the
Board’s recommendations on how I should vote my
shares?
The Board recommends that you vote your shares as follows:
| Proposal 1 — | FOR the election of the four nominees with terms expiring at the 2014 annual meeting. |
| Proposal 2 — | FOR approval, on an advisory basis, of the compensation of AAM’s named executive officers as described in the Compensation Discussion and Analysis, tables and related narrative (the say-on-pay proposal). |
| Proposal 3 — | FOR approval, on an advisory basis, of a one year frequency for future advisory votes on say-on-pay. |
| Proposal 4 — | FOR ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2011. |
What are my
choices when voting?
Proposal 1 — You may vote for or withhold your
vote on one or more of the nominees.
| Proposal 2 — | You may vote for or against the say on pay proposal, or you may abstain from voting your shares. |
| Proposal 3 — | You may vote for a one year, two year, or three year frequency of say on pay proposals, or you may abstain from voting your shares. |
| Proposal 4 — | You may vote for or against the proposal to ratify the appointment of the Company’s independent registered public accounting firm, or you may abstain from voting your shares. |
What vote is
required to approve each proposal?
| Proposal 1 — | A plurality of the votes cast to elect a director, which means that nominees with the most affirmative votes will be elected to fill the available seats. |
| Proposal 2 — | An affirmative vote of a majority of the shares voted in person or by proxy must be cast in favor of the advisory vote to approve the say-on-pay proposal. |
| Proposal 3 — | The advisory vote on the frequency of say-on-pay proposals (every one, two, or three years) is a plurality vote. The Company will consider stockholders to have expressed a non-binding preference for the frequency option that receives the most favorable votes. |
| Proposal 4 — | An affirmative vote of a majority of the shares voted in person or by proxy must be cast in favor of the ratification of the appointment of the Company’s independent registered public accounting firm. |
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Proposals 2 and 3 are advisory votes only and, as discussed
in more detail in each proposal, the voting results are not
binding on AAM. However, the Board will consider the outcome of
the votes in making future determinations concerning the
compensation of our named executive officers and the frequency
of the
say-on-pay
vote.
Who will count
the votes?
Representatives of Computershare Trust Company, N.A.,
AAM’s transfer agent, will count the votes and serve as our
inspector of election. The inspector of election will attend the
annual meeting.
What if I
“withhold” my vote or “abstain”?
Votes withheld and abstentions will be counted as present for
purposes of determining whether a majority of shares is present
to establish a quorum and hold the annual meeting. Abstentions
will not be counted in the tally of votes for or against any
proposal. A withheld vote has the same effect as an abstention.
What if I do not
vote and do not attend the annual meeting?
If you are a holder of record and you do not vote your shares at
the annual meeting or by proxy, your shares will not be voted.
If you sign and return your proxy card without specific voting
instructions, your shares will be voted as recommended by the
Board.
Under New York Stock Exchange (NYSE) rules, brokers have
discretionary power to vote your shares only on
“routine” matters. Brokers do not have discretionary
power to vote your shares on “non-routine” matters. If
you hold shares in street name, and you do not give your bank,
broker, or other holder of record specific voting instructions
for your shares, your record holder can only vote your shares on
the ratification of the Company’s independent registered
public accounting firm (proposal 4), a “routine”
matter.
Without your specific instructions, your record holder cannot
vote your shares on the election of directors, the advisory vote
on executive compensation
(say-on-pay),
and the advisory vote on the frequency of
say-on-pay
proposals. For each of these matters, if you do not instruct
your record holder how to vote, the record holder may not vote
your shares. Shares not voted will be broker non-votes and will
not be counted in determining the outcome of the vote for
proposals 1, 2 and 3. Broker non-votes will have no impact
on the outcome of these proposals. We urge you to give your
record holder voting instructions on each proposal being
presented at the annual meeting.
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PROPOSAL 1:
ELECTION OF DIRECTORS
The Board proposes that the four directors standing for
re-election as Class III directors, Richard E. Dauch, James
A. McCaslin, William P. Miller II, and Larry K. Switzer, be
elected to the Board for terms expiring at the annual meeting in
2014.
The Board is divided into three classes. Directors serve for
staggered three-year terms. Class I and Class III each
consists of four positions and Class II consists of three
positions. The Board believes that the staggered election of
directors helps to maintain continuity and ensures that a
majority of directors at any given time will have in-depth
knowledge of the Company.
The Board unanimously approved the nominations of our
Class III directors based on their outstanding
achievements, special competencies and integrity. Each nominee
brings a strong and unique background and set of skills to the
Board. Collectively, the Board has high levels of competence and
experience in a variety of areas, including manufacturing,
engineering, finance, international business, management,
restructuring, risk management and the global automotive
industry. A summary of the principal occupation, professional
background and specific qualifications
and/or
skills of each nominee is provided in the following pages of
this proxy statement.
The Board
unanimously recommends a vote FOR each of the
nominees.
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Nominees for
Director
Class III —
Director to hold office until the 2014 Annual Meeting of
Stockholders
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RICHARD E. DAUCH Age 68 Richard E. Dauch is Co-Founder, Chairman of the Board & Chief Executive Officer of AAM, and is also Chairman of the Executive Committee of the Board. He has been Chief Executive Officer and a member of the Board since AAM began operations in March 1994. In October 1997, he was named Chairman of the Board of Directors. He was also President of AAM from March 1994 through December 2000. Prior to March 1994, he spent 12 years at Chrysler Corporation, where he established the just-in-time materials management system and the three-shift manufacturing vehicle assembly process. He is a retired officer from the Chrysler Corporation. Mr. Dauch’s last position at Chrysler, in 1991, was Executive Vice President of Worldwide Manufacturing. Mr. Dauch also served as Group Vice President of Volkswagen of America, where he established the manufacturing facilities and organization for the successful launch of the first major automotive transplant in the United States. Mr. Dauch has more than 46 years of experience in the automotive industry. Mr. Dauch was the 2006 recipient of the Shien-Ming Wu Foundation Manufacturing Leadership Award. In 2005, he received the CEO Legend Award from Automation Alley. In 2003, he received the Harvard Business School of Michigan Business Statesman Award, the Ernst & Young Entrepreneur of the Year Award, and the Northwood University Outstanding Business Leader Award. In 1999, he was named the Michiganian of the Year by The Detroit News and he was named the 1997 Manufacturer of the Year by the Michigan Manufacturers’ Association. In 1996, he was named Worldwide Automotive Industry Leader of the Year by the Automotive Hall of Fame. Mr. Dauch currently serves on the Board of Directors of the National Association of Manufacturers (N.A.M.), where he previously served as Chairman. He has lectured extensively on the subject of manufacturing and authored the book, Passion for Manufacturing, which is distributed in colleges and universities globally and in several languages. The Board considers Mr. Dauch’s continuing leadership and the services he provides to AAM as critical to the achievement of the Company’s strategic goals. Mr. Dauch’s leadership and extensive expertise in the global automotive industry and manufacturing operations address the Company’s need to maintain and reinforce AAM’s unique operating culture as AAM expands internationally. |
Director since 1994 |
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JAMES A. McCASLIN Age 62 Mr. McCaslin retired from Harley Davidson, Inc. in April 2010. Mr. McCaslin joined Harley Davidson in 1992 and held various senior executive leadership positions, including President and Chief Operating Officer of Harley-Davidson Motor Company, from 2001 to 2009. From 1989 to 1992, he held manufacturing and engineering positions with JI Case, a manufacturer of agricultural equipment. Previously, he held executive positions in manufacturing and quality with Chrysler Corporation, Volkswagen of America and General Motors Corporation, where he began his 40-year career in manufacturing. From 2003 to 2006, he served on the Board of Directors of Maytag Corporation. Mr. McCaslin has served on a number of civic boards, including Boys and Girls Clubs of Greater Milwaukee, Manufacturing Skill Standards Council and Kettering University. Mr. McCaslin’s extensive operational expertise in multiple manufacturing industries in the original equipment and aftermarket product markets provides the Board with a valued resource in geographic and product diversification, one of AAM’s key strategic objectives. |
Director since February 2011 | ||
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WILLIAM P. MILLER II, CFA Age 55 Mr. Miller, Chartered Financial Analyst, is the Senior Managing Director & Chief Financial Officer of Financial Marketing International, Inc., an international law and economics consulting firm. Since 2003, Mr. Miller has been a member of the Board of Directors of the Chicago Mercantile Exchange, serving on the Audit Committee, Finance Committee and Market Regulation Oversight Committee. From 2005 to 2011, he was employed by the Ohio Public Employees Retirement System, where he served as Deputy Chief Investment Officer. Previously, he served as Senior Risk Manager for the Abu Dhabi Investment Authority and as an Independent Risk Oversight Officer and Chief Compliance Officer for Commonfund Group, an investment management firm for educational institutions. Mr. Miller also served as Director, Trading Operations and Asset Mix Management, with General Motors Investment Management Corp. and as a financial analyst with the U.S. Department of Transportation. Mr. Miller also was a member of the Public Company Accounting Oversight Board’s Standing Advisory Group and a member of the Board of Directors of the Dubai International Financial Exchange. Mr. Miller’s expertise in finance, investments, risk management, compliance, international business, audit and accounting provides the Board with valuable guidance in assessing and managing risks and in fulfilling the Board’s financial oversight role. |
Director since 2005 |
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LARRY K. SWITZER Age 67 Larry K. Switzer retired as Chief Executive Officer of DANKA PLC, London, England, a global independent distributor of office equipment, in 2000. From 1994 to 1998, Mr. Switzer was Senior Executive Vice President and Chief Financial Officer of Fruit of the Loom, Inc. Previously, he served as Executive Vice President and Chief Financial Officer for Alco Standard Corporation and, from 1989 to 1992, Senior Vice President and Chief Financial Officer for S.C. Johnson & Son, Inc. Mr. Switzer has also held senior executive positions at Bendix Corp., White Motor Corp. and Gencorp. As a former chief financial officer, Mr. Switzer serves as a valued resource to the Board in finance, accounting and tax matters and provides significant expertise and insight in addressing the Company’s capital structure, liquidity needs and strategic business development. |
Director since 2005 |
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Returning
Directors
Class I —
Directors to hold office until the 2012 Annual Meeting of
Stockholders
|
DAVID C. DAUCH Age 46 David C. Dauch is President & Chief Operating Officer of AAM, a position he has held since June 2008. Previously, he served as Executive Vice President & COO. Mr. D.C. Dauch joined AAM in July 1995 and has served in positions of increasing responsibility. Prior to joining AAM, Mr. D.C. Dauch served in several positions at Collins & Aikman Products Company, where he received the President’s Award for leadership and innovation. Mr. D.C. Dauch also served on the Collins & Aikman Board of Directors from 2002 to 2007. Presently, he is a Board member of Business Leaders for Michigan and serves on the Miami University Business Advisory Council and the Board of Directors of the Boys & Girls Club of Southeast Michigan. Mr. D.C. Dauch’s day to day leadership as President & COO provides him with intimate knowledge of and responsibility for developing and implementing the Company’s operating and strategic objectives. Mr. D.C. Dauch was instrumental in leading AAM through the successful completion of its comprehensive multi-year restructuring plan and returning AAM to profitability in 2009 and fiscal year 2010. Mr. D.C. Dauch’s leadership of AAM’s global business and operations provides the Board with strategic vision and insight regarding AAM’s strategic plans for the future. |
Director since 2009 | ||
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FOREST J. FARMER Age 70 Forest J. Farmer has served as Chairman of the Board, Chief Executive Officer & President of The Farmer Group, a holding company for four technology and manufacturing corporations, since 1998. Mr. Farmer is the President of Trillium Teamologies, an IT solutions provider located in Royal Oak, Michigan. Mr. Farmer serves on the Boards of Directors of The Lubrizol Corporation and Saturn Electronics Corporation. In 1994, he retired from Chrysler Corporation after 26 years of service, which included six years as President of its Acustar automotive parts subsidiary. Through his senior management-level experience and his service on the Board and Compensation Committee of another public company, Mr. Farmer brings strong leadership skills, extensive U.S. automotive and manufacturing experience, and public company experience to our Board. |
Director since 1999 |
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RICHARD C. LAPPIN Age 66 Richard C. Lappin is Executive Chairman of VOKAL Interactive, a maker of mobile applications for business. From 2007 to 2010, he served as Chairman of the Board & Chief Executive Officer of Clear Sky Power, an alternative energy company. Mr. Lappin retired in 2004 as Chairman of the Board of Haynes International, Inc. Previously, Mr. Lappin served as Senior Managing Director of The Blackstone Group L.P., where he was a member of the Private Equity Group from 1998 to 2002. He also helped monitor the operations of Blackstone Capital Partners portfolio companies and evaluated business strategy options. From 1989 to 1998, Mr. Lappin served as President of Farley Industries, which included West Point-Pepperell, Inc., Acme Boot Company, Inc., Tool and Engineering, Inc., Magnus Metals, Inc. and Fruit of the Loom, Inc. He also served as President & Chief Executive Officer of Doehler-Jarvis and Southern Fastening Systems, and he has held senior executive positions with Champion Spark Plug Company and RTE Corporation. Mr. Lappin’s experience as a CEO and his financial expertise provides the Board with an important perspective in the areas of business strategy and organizational development, as well as the Company’s investment criteria, capital structure and liquidity needs. |
Director since 1999 | ||
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THOMAS K. WALKER Age 70 Thomas K. Walker is Chairman of the Board & Chief Executive Officer of Lackawanna Acquisition Corporation and is the former President of Amcast Automotive, where from 1995 to 1999 he directed all activities for the $300 million automotive group. Previously, he held senior executive positions with ITT Automotive and Allied-Signal Automotive Catalyst Co. He also served in various manufacturing and engineering leadership positions with Volkswagen of America and with General Motors Corporation, where he began his 40-year career in the automotive industry. Mr. Walker serves on the National Advisory Board for Michigan Technological University. Mr. Walker’s business acumen and extensive leadership experience in the automotive industry enables him to provide our Board with expertise related to engineering, manufacturing operations and strategic business development. Mr. Walker’s service on all Board committees makes him an effective lead independent director for the Board. |
Director since 1999 |
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Class II —
Director to hold office until the 2013 Annual Meeting of
Stockholders
|
SALVATORE J. BONANNO, SR. Age 70 Salvatore J. Bonanno, Sr. served as Chairman and Chief Executive Officer of Bonanno Enterprises L.L.C. from 2000 until 2007. The company provided discretionary capital, interim or transition management, and executive consulting services for industrial operations. While serving as President and Chief Executive Officer of Xymox Technologies, Inc. from 2003 to 2008, Mr. Bonanno led the company’s successful restructuring efforts. Mr. Bonanno served as the Chairman and Chief Executive Officer of Grove Worldwide L.L.C., the President and Chief Operating Officer of Foamex International, and held many senior executive positions in his 30 year tenure with Chrysler Corporation. Mr. Bonanno currently serves on the Board of Directors of Xymox Technologies, Inc. and Waukesha Tool & Stamping L.L.C. and has served on the boards of numerous manufacturing and engineering companies. Mr. Bonanno’s leadership experience in international automotive business and expertise in engineering and automotive technology is aligned with AAM’s strategic objectives and is important to the Board’s oversight of these areas. |
Director since 2009 | ||
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ELIZABETH A. CHAPPELL Age 53 Elizabeth A. (Beth) Chappell has served as President and Chief Executive Officer of the Detroit Economic Club since 2002. Previously, she served as Executive Vice President, Corporate Communications & Investor Relations for Compuware Corporation. From 1995 to 2000, Ms. Chappell was President and Chief Executive Officer of a consulting firm she founded, The Chappell Group, Inc. For 16 years, Ms. Chappell held executive positions at AT&T. From 1999 to 2009, Ms. Chappell served on the Board of Directors of the Handleman Company. She also serves on a number of civic boards, including Brother Rice High School, Citizens Research Council, Detroit Regional Chamber, Airport Authority-Citizen’s Review Council, United Way Tocqueville Committee and Michigan Economic Development Corporation. Ms. Chappell is a former board member of the Karmanos Cancer Institute, Michigan Economic Growth Authority and Hospice of Michigan. In 2009, Ms. Chappell was instrumental in convening The National Summit in Detroit, Michigan, a cross sector gathering of business, government, labor and academic leaders to develop and promote America’s competitiveness in a global economy. Ms. Chappell’s demonstrated leadership skills, entrepreneurial business experience and service on various Boards of Directors enhance her contributions to the Board on matters of significance to AAM’s strategic business development. |
Director since 2004 |
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DR. HENRY T. YANG Age 70 Dr. Henry T. Yang is the Chancellor at the University of California, Santa Barbara, where he also serves as professor of mechanical engineering. Formerly the Dean of Engineering and Neil Armstrong Distinguished Professor in Aerospace Engineering at Purdue University, Dr. Yang is a nationally recognized expert in automotive and aerospace engineering. He holds a Ph.D. degree in engineering from Cornell University as well as five honorary doctorates and is a member of the National Academy of Engineering. He is Chairman of the Executive Committee of the American Association of Universities, Chairman of the Association of Pacific Rim Universities, Chairman of the Board of Thirty Meter Telescope, and a director of the Board of Kavli Foundation. Dr. Yang’s distinguished academic career and extensive knowledge and leadership in advanced technology provides the Board with a valuable perspective relative to AAM’s global business growth. Dr. Yang’s in-depth knowledge and expertise in engineering, science and technology and his leadership as Chairman of the Technology Committee provides the Board with a critical resource related to the Company’s advancements in technology. |
Director since 2004 |
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CORPORATE
GOVERNANCE
Corporate
Governance Guidelines
The Board has adopted Corporate Governance Guidelines that meet
or exceed the requirements of the NYSE listing standards.
AAM’s Corporate Governance Guidelines are available on our
website at
http://www.aam.com/investors/corporategovernance.
Director
Independence
AAM’s Corporate Governance Guidelines provide that at least
a majority of the members of the Board and each member of the
Audit Committee, Compensation Committee and Nominating/Corporate
Governance Committee meet the independence criteria of the NYSE
listing standards. In addition, the Board has established
Director Independence Guidelines to assist in determining the
independence of our directors for purposes of the NYSE
independence standards. The Director Independence Guidelines are
included in AAM’s Corporate Governance Guidelines, which
are available on our website at
http://www.aam.com/investors/corporategovernance.
The Board reviews and determines, on the recommendation of the
Nominating/Corporate Governance Committee, whether any director
has a material relationship with the Company that would
interfere with the exercise of independent judgment in carrying
out the responsibilities of a director. When assessing
materiality, the Board considers relevant facts and
circumstances of which it is aware. No director qualifies as
independent unless the Board determines that the director has no
direct or indirect material relationship with the Company.
The Board has affirmatively determined that the following nine
directors are independent: Salvatore J. Bonanno, Sr.,
Elizabeth A. Chappell, Forest J. Farmer, Richard C. Lappin,
James A. McCaslin, William P. Miller II, Larry K. Switzer,
Thomas K. Walker and Dr. Henry T. Yang. Richard E. Dauch,
Co-Founder,
Chairman of the Board & CEO, and David C. Dauch,
President & COO, are not independent due to their
employment with AAM. Mr. D.C. Dauch is the son of
Mr. R.E. Dauch.
In making these director independence determinations, the Board
considered certain business relationships that were found to be
immaterial under applicable independence standards.
Mr. Bonanno serves on the Board of and has a minority
interest in a supplier that receives payments for sales made to
AAM. Ms. Chappell is an officer of a non-profit
organization that receives sponsorship fees from AAM. Prior to
his election to AAM’s Board, Mr. McCaslin was an
officer of Harley-Davidson, Inc., an AAM customer. He retired
from Harley-Davidson in April 2010.
Each of these relationships arose in the ordinary course of
business and existed before Mr. Bonanno, Ms. Chappell
and Mr. McCaslin joined the Board. In addition, the annual
amounts paid or received by AAM in connection with these
relationships were below the threshold amount established under
the NYSE independence standards and our Director Independence
Guidelines. The applicable threshold is the greater of two
percent of the annual gross revenues of the outside entity or
$1 million. Accordingly, the Board determined that each
relationship is immaterial and does not impair the independence
of these directors.
Board Leadership
Structure
The Board believes that as AAM’s co-founder, Richard E.
Dauch, is uniquely qualified to serve as Chairman of the Board
while holding the position of CEO. Mr. R.E. Dauch has been
CEO since he co-founded AAM in 1994 and has served as Chairman
since 1997. The Board benefits from this structure through
Mr. R.E. Dauch’s contributions as a strong leader with
extensive knowledge of the global automotive industry and a
unique commitment to the success of the Company he co-founded.
This Board leadership structure is further enhanced by
independent director oversight. The Board is comprised of nine
independent directors, including a lead director. Independent
directors and management have different perspectives and roles
in strategy development. One of the key responsibilities
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of the Board is to develop strategic direction while holding
management accountable for execution of its business plans. Our
leadership structure provides the appropriate balance necessary
to accomplish this objective and is the most effective
leadership structure for the Board at this time.
The Board recognizes that no single leadership model is
appropriate for a Board at all times. Accordingly, the Board may
consider a different leadership structure, including a
separation of the roles of CEO and Chairman, as appropriate, as
the Company’s business and leadership continue to evolve.
Lead Director and
Executive Sessions
Thomas K. Walker was selected by the Board to serve as the lead
director for all meetings of non-management directors held in
executive session. Mr. Walker is an independent director
and serves on every Board committee. The lead director’s
responsibilities include presiding at executive sessions of the
Board’s non-management directors and acting as a liaison
between the Chairman and the independent directors.
Non-management directors, all of whom are independent, meet in
executive session without AAM management present at the end of
each scheduled Board meeting.
Board Oversight
of Risk
The Board as a whole and also at the committee level oversees
management of the Company’s risks. The Board regularly
reviews information provided by senior management regarding the
Company’s strategic, operational, financial and compliance
risks. In addition, the chairs of the Audit, Compensation,
Nominating/Corporate Governance and Technology Committees
regularly report to the Board the activities of their respective
Committees, including matters related to risk.
The Audit Committee oversees management of financial risks and
receives an annual report from management on the Company’s
overall risk management structure and process. The
Nominating/Corporate Governance Committee manages risks
associated with corporate governance and management succession
planning. The Compensation Committee oversees risks related to
AAM’s compensation programs. The Technology Committee
oversees risks related to AAM’s product, process and
systems technology. Additional review or reporting of specific
risks is conducted as necessary or as requested by the Board or
a Committee.
Stockholder
Communication with the Board
Stockholders or other interested parties may communicate with
the Board through the Secretary of AAM by mail at One Dauch
Drive, Detroit, Michigan
48211-1198
or by e-mail
at AAMBoardofDirectors@aam.com.
The Board has instructed the Secretary to review all such
communications and to exercise his discretion not to forward
correspondence to the Board that is inappropriate, such as
advertising and business solicitations, routine business matters
and personal grievances. However, any director may at any time
request the Secretary to forward any communication received by
the Secretary on behalf of the Board.
Code of Business
Conduct
AAM has adopted a Code of Business Conduct that is designed to
assist all AAM associates, executive officers and members of the
Board in conducting AAM’s business with the highest
standards of ethics and integrity. AAM has also adopted a Code
of Ethics for our CEO, COO, CAO, CFO and other Senior Financial
Officers (Code of Ethics). The Board annually reviews the Code
of Business Conduct and updates the Code as appropriate.
AAM’s Code of Business Conduct and Code of Ethics are
available on our website at
http://www.aam.com/investors/corporategovernance.
A written copy also may be obtained by any stockholder
without charge upon request to the AAM
14
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Investor Relations Department by mail at One Dauch Drive,
Detroit, Michigan
48211-1198
or by email at investorrelations@aam.com.
Related Person
Transactions Policy
The Board has adopted a policy and procedure for the review,
approval and ratification of transactions involving AAM and
“related persons” as defined in the policy. This
policy supplements AAM’s other conflict of interest
policies as set forth in AAM’s Code of Business Conduct.
The Board has delegated to the Audit Committee the
responsibility for reviewing, approving and ratifying all
related person transactions in accordance with the policy.
For purposes of this policy, a related person transaction
includes any financial transaction, arrangement or relationship
or series of similar transactions, arrangements or relationships
in which:
| • | AAM is or is expected to be a participant; | |
| • | the amount involved exceeds $100,000; and | |
| • | a related person has or will have a direct or indirect material interest. |
However, a transaction between AAM and a related person is not
subject to this policy if the transaction:
| • | is available to all employees generally; | |
| • | involves less than $5,000 when aggregated with all similar transactions; or | |
| • | involves compensation of an executive officer that is approved by the Compensation Committee. |
A related person includes directors and executive officers and
their immediate family members, stockholders owning more than
five percent of the Company’s outstanding common stock as
of the last completed fiscal year, and any entity owned or
controlled by any one of these persons.
A related person transaction meeting the above criteria will be
permitted only if the transaction is approved by the Audit
Committee and is on terms comparable to those available to
unrelated third parties. Any related person transaction
involving a member of the Audit Committee must be presented to
disinterested members of the full Board for review.
In considering a transaction, the Audit Committee
and/or the
Board may consider the following factors, as applicable:
| • | the Company’s business reasons for entering into the transaction; | |
| • | the alternatives to entering into a related person transaction; | |
| • | the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or apparent conflict; | |
| • | the extent of the related person’s interest in the transaction; and | |
| • | whether the transaction is in the best interests of AAM. |
Every director and executive officer is required to report any
existing or contemplated related person transaction to
AAM’s Executive Director, Administration & Legal,
who also serves as the Company’s Secretary. In addition,
AAM’s directors and executive officers complete annual
questionnaires designed to elicit information about potential
related person transactions. The Company did not engage in any
reportable related person transactions during fiscal year 2010.
As of the date of this proxy statement, no reportable related
person transaction has been brought to the attention of the
Secretary, the Audit Committee or the Board.
Board Committee
Composition
Directors are expected to attend all Board meetings, meetings of
the committees on which they serve and stockholder meetings.
During 2010, all directors attended 100 percent of the
meetings of the Board and the committees on which they served
and the annual meeting of stockholders.
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The Board held four regularly scheduled meetings during 2010.
The following table shows the membership of the Board’s
committees during 2010 and the number of committee meetings held
during 2010.
COMMITTEE
MEMBERSHIP IN 2010
|
Nominating/ |
|||||||||||||||
|
Corporate |
|||||||||||||||
|
Audit |
Compensation |
Governance |
Executive |
Technology |
|||||||||||
| Name of Director | Committee | Committee | Committee | Committee | Committee | ||||||||||
|
Richard E. Dauch
|
Chairman | ||||||||||||||
|
Salvatore J. Bonanno, Sr.
|
X | ||||||||||||||
|
Elizabeth A. Chappell
|
X | ||||||||||||||
|
David C.
Dauch(1)
|
|||||||||||||||
|
Forest J. Farmer
|
Chairman | X | X | ||||||||||||
|
Richard C. Lappin
|
X | X | |||||||||||||
|
James A.
McCaslin(2)
|
|||||||||||||||
|
William P. Miller II
|
Chairman | X | |||||||||||||
|
Larry K. Switzer
|
X | X | |||||||||||||
|
Thomas K. Walker
|
X | X | Chairman | X | X | ||||||||||
|
Dr. Henry T. Yang
|
Chairman | ||||||||||||||
|
No. of Meetings in 2010
|
4 | 6 | 4 | 1 | 3 | ||||||||||
| (1) | Mr. D. C. Dauch was appointed to the Executive Committee effective February 8, 2011. | |
| (2) | Mr. McCaslin joined the Board and was appointed to the Technology Committee effective February 8, 2011. |
Audit
Committee
The Audit Committee provides assistance to the Board with
respect to: the quality and integrity of our financial
statements; our compliance with legal and regulatory
requirements; our independent auditors’ qualifications and
independence; and the performance of our internal audit function
and independent auditors. The Audit Committee operates under a
written charter that is available on AAM’s website at
http://www.aam.com/investors/corporategovernance.
The Board has determined that all Audit Committee members
serving during 2010 are independent and financially literate
under applicable NYSE listing standards. Mr. Miller and
Mr. Switzer also qualify as audit committee financial
experts as defined by SEC rules.
Compensation
Committee
The Compensation Committee is responsible for the following:
| • | Establishing and reviewing AAM’s compensation philosophy and programs with respect to our executive officers; | |
| • | Approving executive officer compensation with a view to support AAM’s business strategies and objectives; |
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| • | Approving corporate goals and objectives for executive officer compensation and evaluating executive officer performance in light of these criteria, in consultation with the CEO (in the case of our other executive officers) and with input from other independent directors (in the case of the CEO); | |
| • | Recommending to the Board the approval, amendment and termination of incentive compensation and equity-based plans and certain other compensation matters; | |
| • | Overseeing the preparation of the Compensation Discussion and Analysis for inclusion in our annual proxy statement; and | |
| • | Producing the Compensation Committee Report for inclusion in our annual proxy statement. |
The Compensation Committee operates under a written charter that
is available on our website at
http://www.aam.com/investors
/corporategovernance. In accordance with our Corporate
Governance Guidelines, the Compensation Committee is also
responsible for recommending non-employee director compensation
and benefits for approval by the Board.
Risk Assessment
of Compensation Policies and Practices
In 2011, AAM management conducted a risk assessment of the
Company’s compensation policies and practices relating to
AAM’s compensation programs for executive officers and
other associates on a global basis. The process used by
management to conduct the risk assessment was approved by the
Compensation Committee. The risk assessment considered, among
other things, AAM’s annual and long-term incentive programs
and pay mix, performance measures used to calculate payouts, and
pay philosophy and governance. Based on this risk assessment and
other factors, management concluded that the Company’s
compensation policies and practices do not create risks that are
reasonably likely to have a material adverse effect on the
Company. The Compensation Committee agreed with
management’s conclusion.
Role of
Management in Compensation Decisions
The Compensation Committee is responsible for making
compensation decisions relative to executive officers. However,
in making its decisions, the Committee seeks and considers input
from senior management. Since management has direct involvement
with and an in-depth knowledge of the business strategy, goals
and performance of the Company, certain executive officers play
an important role in the executive compensation decision-making
process. Senior management participates in the Committee’s
activities in the following specific respects:
| • | The CEO reports to the Committee with respect to his evaluation of the performance of the Company’s executive officers, including the other named executive officers (NEOs). Together with the President & COO and the Human Resources department head, the CEO makes compensation recommendations for these individuals, including base salary levels and the amount and mix of incentive awards. | |
| • | The CEO, the President & COO, the CFO and the Human Resources department head develop recommended performance objectives and targets for AAM’s incentive compensation programs. The Human Resources Department also assists the Chairman of the Committee in developing meeting agendas and manages the preparation and distribution of pre-meeting informational materials on the matters to be considered. | |
| • | The CEO, the President & COO, the CFO and the Human Resources department head regularly attend Committee meetings. Management generally does not attend the executive session of the Committee. However, there are times when the Committee requests that certain members of management, including the CEO, the President & COO and the Human Resources department head, be present for all or a portion of an executive session. | |
| • | The CEO, President & COO, the CFO and the Human Resources department head recommend long-term incentive grants for executive officers, other than the CEO, for approval by the Committee. |
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Role of
Compensation Consultant
The Compensation Committee has retained Meridian Compensation
Partners, LLC (Meridian) as its independent compensation
consultant. Meridian provides independent advice and ongoing
recommendations on compensation matters related to the CEO,
other executive officers and non-employee directors, including:
| • | Provide independent input for the Committee’s decision-making with respect to executive compensation; | |
| • | Provide independent input related to non-employee director compensation; | |
| • | Prepare competitive market data, including current compensation trends, as a reference for the Committee to consider in evaluating compensation for executive officers. |
In the course of fulfilling its responsibilities, Meridian may
communicate directly with the Chairman of the Compensation
Committee. Meridian also meets with management to gather
information, prepare materials, and review proposals to be made
to the Committee.
During 2010, the Compensation Committee engaged Meridian to
conduct a market study of non-employee director compensation to
determine the competitiveness of AAM’s total compensation
program for non-employee directors. Meridian was instructed to
compare AAM’s non-employee director pay levels and design
practices against that of the peer group established by the
Compensation Committee for evaluating the competitiveness of
AAM’s executive compensation programs. This peer group is
shown in the Market Analysis and Benchmarking section of
the CD&A. Based on the results of Meridian’s analysis,
the Compensation Committee and the Board approved changes to
non-employee director compensation for 2011 as described in
2011 Non-employee Director Compensation below.
Nominating/Corporate
Governance Committee
The Nominating/Corporate Governance Committee’s primary
responsibilities are to:
| • | Identify qualified individuals to serve on the Board and committees; | |
| • | Review our Corporate Governance Guidelines and Code of Business Conduct and recommend changes as appropriate; and | |
| • | Oversee and approve the process for succession planning for the CEO and other executive officers. |
The Nominating/Corporate Governance Committee operates under a
written charter that is available on our website at
http://www.aam.com/investors/corporategovernance.
Selection Process for Director Nominees. In
consultation with the Chairman of the Board, the
Nominating/Corporate Governance Committee identifies, evaluates
and recommends potential candidates for membership on the Board.
The Nominating/Corporate Governance Committee conducts necessary
and appropriate inquiries into the backgrounds and
qualifications of the candidates and considers questions of
independence and possible conflicts of interest. Based on the
Committee’s evaluation, candidates who meet the
Board’s criteria may receive further consideration, which
may include interviews with the Nominating/Corporate Governance
Committee and other directors. The Committee then submits its
recommendations for nominees to the Board for approval. Pursuant
to AAM’s bylaws, the Board may establish the size of the
Board by resolution, provided there is a minimum of three
members.
Before the Board nominates an incumbent director for re-election
by our stockholders, the incumbent director is evaluated by the
Nominating/Corporate Governance Committee
and/or the
Board. This evaluation is based on, among other things, the
incumbent director’s meeting attendance record and
contributions to the activities of the Board.
The Nominating/Corporate Governance Committee considers
recommendations of potential candidates from current directors
of our Board, our CEO and our stockholders. Mr. R.E. Dauch
referred current
18
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director nominee, James A. McCaslin, for consideration by the
Nominating/Corporate Governance Committee and the Board based
upon Mr. McCaslin’s extensive operational experience
in multiple manufacturing industries in the original equipment
and aftermarket product markets. After consideration of
Mr. McCaslin’s qualifications, and based on the
recommendation of the Nominating/Corporate Governance Committee,
the Board added Mr. McCaslin to the Board effective
February 8, 2011 to fill a new Class III position.
Director Qualifications. AAM’s Corporate
Governance Guidelines provide the qualifications for Board
membership. Candidates for director nominees to the AAM Board
are reviewed in consideration of the current composition of the
Board, the operating requirements of the Company and the
interests of stockholders. Although specific qualifications may
vary from time to time, desired qualities and characteristics
include:
| • | High ethical character and shared values with AAM; | |
| • | Loyalty to AAM and concern for its success and welfare; | |
| • | High-level leadership experience and achievement at a policy-making level in business or in educational or professional activities; | |
| • | Knowledge of issues affecting AAM; | |
| • | The ability to contribute special competencies to Board activities, such as financial, technical, international business or other expertise, or industry knowledge; | |
| • | Willingness to apply sound, independent business judgment; | |
| • | Awareness of a director’s vital role in AAM’s good corporate citizenship and corporate image; and | |
| • | Sufficient time and availability to effectively carry out a director’s duties. |
The Board as a whole should reflect the appropriate balance of
knowledge, experience, skills, expertise and diversity that,
when taken together, will enhance the quality of the
Board’s deliberations and decisions. Although the Board has
no formal policy regarding diversity, the Board believes that
diversity is an essential element of Board effectiveness. In
this context, diversity is defined broadly to include
differences in background, skills, education, experience,
gender, race, national origin and culture.
For director candidates recommended by stockholders, the
Nominating/Corporate Governance Committee follows the procedures
described in Other Matters, Stockholder Proposals for 2012
Annual Meeting. The Nominating/Corporate Governance
Committee will evaluate candidates recommended by stockholders
using substantially the same criteria as it considers in
evaluating director candidates recommended by our Board members
or CEO.
Executive
Committee
The Executive Committee exercises the authority of the Board
during the intervals between Board meetings and does not meet on
a regular basis. Its members are identified in the Committee
Membership in 2010 table.
Technology
Committee
The Technology Committee oversees and provides advice to AAM
regarding AAM’s product, process and systems technology.
Its members are identified in the Committee Membership in
2010 table.
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Table of Contents
COMPENSATION OF
EXECUTIVE OFFICERS
Compensation
Discussion and Analysis
Executive
Summary
In 2010, general economic conditions began to stabilize, credit
markets improved and U.S. domestic automotive production
levels increased. The U.S. Seasonally Adjusted Annual Rate
(SAAR) of sales increased in 2010 for the first time in three
years to 11.6 million units as the U.S. domestic
automotive industry began to recover from the severe downturn it
had suffered. Over the past several years, AAM’s senior
management team implemented a restructuring plan that resulted
in a cost structure aligned with current and projected levels of
customer demand and market requirements. This plan has proven
successful, yielding significant, permanent structural cost
reductions, which has driven down our operating breakeven level.
These actions positioned AAM to significantly improve
profitability and free cash flow in 2010.
Our executive compensation program reflects an externally
competitive compensation structure based on a comprehensive
market study of executive compensation programs in AAM’s
peer group. The program includes a mix of base salaries, target
annual incentive opportunities and long-term incentives for
executive officers. In 2010, our annual incentives were based
exclusively on achievement of net operating cash flow goals. Our
current long-term incentive program for executive officers is a
cash-based program as a result of AAM not having an equity plan
available for new equity-based awards. We use total shareholder
return (TSR) and earnings before interest, taxes, depreciation
and amortization (EBITDA) as the performance measures for
long-term incentive awards.
Executive
Compensation Philosophy and Objectives
The Committee is responsible for establishing and reviewing the
overall compensation philosophy of the Company. The Committee
believes that the compensation paid to executives should be
structured to provide AAM executives with meaningful rewards,
while maintaining alignment with stockholder interests,
corporate values and management initiatives. In addition, the
annual compensation limit of $3 million for any executive
officer and other restrictions contained in the 2009 Settlement
and Commercial Agreement we entered into with GM (2009
Settlement and Commercial Agreement) will be considered by the
Committee in order to ensure compliance with the agreement as
long as it remains in effect.
The Committee believes that AAM’s executive compensation
program should consist of a mix of base salary, annual incentive
compensation, long-term incentive compensation, perquisites and
other personal benefits. One of the key objectives of
establishing a mix of base salaries, annual incentive and
long-term incentive compensation is to have a significant
portion of total compensation be performance based and
contingent upon the achievement of stated Company performance
goals.
In an effort to more closely align the objectives of the
philosophy to market competitive practices, the Committee
approved stated target percentile goals for each component of
pay. The following pay percentile goals are used as a guide to
help set compensation levels for the NEOs, excluding the CEO
(whose compensation is determined under his employment
agreement, as described below). In addition to these goals, the
Committee considers other factors in setting compensation levels
for the NEOs, including individual performance and the specific
needs of the position for the Company.
|
Pay Component
|
Target Percentile
Goal
|
|
|
Base Salary
|
50th Percentile | |
|
Target Annual Incentive
|
Between 50th and 75th Percentiles | |
|
Long-Term Incentives
|
Between 50th and 75th Percentiles |
These percentile goals were established based on the
Committee’s objective that base salaries should be
consistent with market salaries at the
50th
percentile. The percentile goals for annual
20
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incentives and long-term incentives were set between the
50th
percentile and the
75th
percentile to enable the Company to reward executive performance
at a rate slightly above average in order to compete for
executive talent. These pay percentile goals were implemented
over a two-year period that concluded in 2010.
Compensation Objectives. The following
fundamental objectives are considered in determining
compensation programs and pay levels.
| • | Compensation and benefit programs should appropriately reflect the size and financial resources of our Company in order to maintain long-term viability. These programs should be increasingly market-based (rather than legacy) to be competitive relative to the compensation paid to similarly situated executives in our peer group. | |
| • | Compensation and benefit programs should attract, motivate and retain experienced executives who are vital to our short-term and long-term success, profitability and growth. AAM makes an effort to remain competitive by targeting competitive pay levels based on the Company’s Compensation Philosophy with consideration of the specific business environment and other market influences. | |
| • | Compensation and benefit programs should reward Company and individual performance. Our programs should strive to deliver competitive compensation for exceptional individual and Company performance as compared to companies in our peer group. As associates progress to higher levels in the Company and assume key leadership positions, a greater portion of their compensation should be linked to Company performance and stockholder returns. Company performance is measured against financial and operational objectives and stockholder return. | |
| • | Compensation and benefit programs should foster the long-term focus required for success in the global automotive industry. We believe that long-term incentive compensation will motivate executive officers to deliver long-term value to our stockholders. Executives at higher levels should have a greater proportion of their compensation tied to longer-term performance because they are in a better position to influence longer-term results. | |
| • | Executive officers should be AAM stockholders. Stock ownership aligns our executive officers’ interests with those of stockholders and reinforces the importance of making sound long-term decisions. AAM’s executive officers are required to maintain a certain level of stock ownership based on their position. | |
| • | The objectives of rewarding performance and retention should be balanced. In periods of downturns in Company performance, particularly when driven by industry events or customer decisions, our compensation programs should continue to ensure that high-achieving, marketable executives remain motivated and committed to AAM. This principle is essential to our effort to encourage our strongest leaders to remain with AAM for long and productive careers. | |
| • | Compensation and benefit programs should be fair in consideration of each executive’s level of responsibility and contribution to AAM. While the overall structure of compensation and benefit programs should be broadly similar across the Company, individual pay levels and benefit packages will necessarily reflect differences in job responsibilities, geography and marketplace considerations. |
Market Analysis
and Benchmarking
A peer group of 38 broad industrial manufacturing companies,
including 10 automotive suppliers, were identified by the
Committee’s independent compensation consultant database,
for consideration by the Committee to help assess competitive
pay levels and to provide data for 2010 and 2011 pay decisions.
The peer group was selected to be representative of a broad
industrial sector in which
21
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AAM competes for executive talent. The criteria used to assess
the market and to select the peer group included:
| • | Operating/Industry Competitors — Companies with which we compete for the sale of products and services; | |
| • | Labor Market Competitors — Companies with which we compete for executive talent; | |
| • | Competitors for Capital — Companies with which we compete for investment dollars and against which investment performance is evaluated; and | |
| • | Revenue Size — Companies with revenues within a relevant range. |
Based on the foregoing criteria, the Committee approved the
following peer group to be used for 2010 and 2011 pay decisions:
|
A. O. Smith Corporation
|
Joy Global Inc. | |
|
ArvinMeritor Inc.
|
Kennametal Inc. | |
|
Ball Corporation
|
Lear Corporation | |
|
BorgWarner Inc.
|
Navistar International | |
|
Brady Corporation
|
Owens-Illinois, Inc. | |
|
Cameron International Corporation
|
PACCAR Inc. | |
|
Cummins Inc.
|
Polaris Industries Inc. | |
|
Dana Corporation
|
Rockwell Automation | |
|
Donaldson Company, Inc.
|
Sauer-Danfoss Inc. | |
|
Dover Corporation
|
Sonoco Products Company | |
|
Eaton Corporation
|
Terex Corporation | |
|
Federal Signal Corporation
|
Thomas & Betts Corporation | |
|
Federal-Mogul Corporation
|
The Timken Company | |
|
Fleetwood Enterprises, Inc.
|
Trinity Industries, Inc. | |
|
Flowserve Corporation
|
TRW Automotive Holdings Corp. | |
|
FMC Technologies
|
USG Corporation | |
|
Genuine Parts Company
|
Valmont Industries, Inc. | |
|
Harley-Davidson Motor Company
|
Visteon Corporation | |
|
Ingersoll-Rand Company
|
Woodward Governor Company |
The market data analysis used in determining executive officer
compensation levels was revenue size adjusted using regressed
market values for each relevant position.
Tally
Sheets
Annually, the Committee reviews compensation tally sheets for
each executive officer, including the NEOs. The tally sheets,
which are prepared by management, provide a summary of the
current amounts of each component of pay, including a historical
review of prior long-term incentive grants. The tally sheets
also provide a summary of the potential payouts and benefits
upon various termination events. The elements and calculations
reviewed are substantially similar to the information provided
for each NEO in Potential Payments Upon Termination or Change
in Control below. The Committee did not change the
NEOs’ compensation based on its review of this information.
The Committee expects to review updated tally sheets on an
annual basis.
Components of the
AAM Compensation Program
The primary components of AAM’s executive compensation
program are base salary, annual incentives, long-term
incentives, and benefits and perquisites. The discussion below
of the elements of compensation applies to the NEOs, other than
Mr. R. E. Dauch, our CEO. Mr. R. E. Dauch’s
compensation is discussed separately in Compensation of Chief
Executive Officer below.
Base Salary. Base salaries provide fixed
compensation to the executive for services rendered during the
year. To more closely align its compensation programs with
market competitive practices,
22
Table of Contents
the Company implemented market-based changes in compensation
levels over a two-year period that concluded in 2010. The
Committee based its salary determinations for the NEOs (other
than the CEO) by reference to the 50th percentile of our
peer group. The recommendations of the CEO and
President & COO were also considered for other
NEOs’ salaries. Those recommendations were based on
experience, time in position, professional development,
contribution to the Company, individual performance and other
factors. The Committee approved the following base salaries for
2011:
| Base Salary | ||||
|
Richard. E. Dauch
|
$ | 2,702,300 | ||
|
Michael K. Simonte
|
$ | 515,000 | ||
|
David C. Dauch (effective November 1, 2010)
|
$ | 650,000 | ||
|
John J. Bellanti
|
$ | 473,800 | ||
|
John E. Jerge
|
$ | 303,000 | ||
Mr. D.C. Dauch’s base salary was increased effective
November 1, 2010 in connection with the additional
responsibilities he assumed in the areas of labor relations,
legal and administration. NEO base salaries for 2010, 2009 and
2008 are shown in the Summary Compensation Table.
Annual Incentive Compensation. Annual
incentive compensation at AAM is designed to:
| • | Encourage executives to achieve short-term goals to foster the long-term goals of the Company; | |
| • | Reward performance to support strategic initiatives; and | |
| • | Provide incentives for executive retention. |
Annual incentive compensation is measured by our achievement of
financial targets established under AAM’s Incentive
Compensation Plan for Executive Officers. On an annual basis,
the Committee determines one or more performance factors, and
the relative weighting of each factor, in consideration of the
Company’s key performance objectives. Under the plan, the
performance factors that may be selected are (1) net income
as a percentage of sales, (2) after tax return on
invested capital (ROIC) and (3) net operating cash flow.
ROIC is defined as after-tax return divided by average invested
capital. Net operating cash flow is defined as cash provided by
or used in operating activities less capital expenditures.
Target performance levels, established annually, are intended to
be aggressive but achievable metrics based on industry
conditions.
Cash incentive awards are permitted to the extent the Company
meets or exceeds threshold levels of performance and reports
positive net income for the performance year. However, the plan
permits the Committee to make adjustments if the Committee
determines that the achievement of performance targets for a
plan year do not reflect the true performance of the Company due
to unanticipated circumstances specified in the plan. No such
adjustments were made for the 2008, 2009 or 2010 plan years.
Individual awards may be increased or decreased by the
Committee, based on the CEO’s recommendation, in
consideration of individual experience, time in position,
professional development, contribution to the Company,
individual performance and other factors. No changes were
recommended for 2010 annual incentive awards paid to executive
officers.
2010 Annual
Incentives
In support of the Company’s 2010 strategic initiatives, the
Committee approved the use of net operating cash flow as the
sole performance metric to be used in determining 2010 annual
incentives for the following reasons:
| • | Cash flow is a critical financial metric for AAM at this time due to its impact on liquidity and debt reduction; |
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| • | Increasing cash flow is key to achieving credit rating upgrades, which will have a favorable impact on the Company’s cost of future financing; and | |
| • | The Committee believes increasing cash flow benefits AAM stakeholders. |
The following table summarizes the approved target annual
incentive opportunities for the NEOs in 2010 and 2011 (stated as
a percentage of base salary):
|
Annual Incentive |
||||
| Opportunity | ||||
|
Richard. E. Dauch
|
* | |||
|
Michael K. Simonte
|
80 | % | ||
|
David C. Dauch
|
90 | % | ||
|
John J. Bellanti
|
80 | % | ||
|
John E. Jerge
|
60 | % | ||
|
Patrick S. Lancaster (Retired 1/1/2011)
|
80 | % | ||
| * | Mr. R.E. Dauch received no annual incentive award in 2010 in consideration of the $3 million compensation limitation under the 2009 Settlement and Commercial Agreement. |
In the fourth quarter of 2009, the Committee determined the 2010
award levels for the net operating cash flow performance metric
in conjunction with a review of the Board-approved annual budget
and projections provided to AAM’s lenders. The award levels
are as follows:
| Net Operating Cash Flow | ||||||
| Performance | Payout | |||||
|
Threshold
|
$(60) million | 50 | % | |||
|
Target
|
Breakeven | 100 | % | |||
|
Maximum
|
$25 million | 125 | % | |||
The 2010 threshold award level for net operating cash flow was
based on projections provided to AAM’s lenders in 2009 in
obtaining amendments to our senior credit agreements and
refinancing substantially all senior debt maturities through
2014. The target award level was set at breakeven net operating
cash flow. The maximum award level was determined to be an
aggressive target based on the Company’s projected volumes
and industry conditions when the target was established.
The Company’s 2010 net operating cash flow performance
exceeded the maximum target award level by more than $100
million. Accordingly, the Committee approved a payout of
125 percent of target. The annual incentive awards paid to
the NEOs are shown in the Summary Compensation Table.
2011 Annual
Incentives
In 2010, the Compensation Committee approved the use of net
operating cash flow and net income as a percentage of sales
(NIPS), each with an equal weighting, as the performance metrics
to be used in determining 2011 annual incentives. Net operating
cash flow was selected for the reasons described above under
2010 Annual Incentives. NIPS was selected as a
performance metric for 2011 for the following reasons:
| • | Net income is a key indicator of financial and operational performance; and | |
| • | Net income and net income growth is highly correlated to cash flow, return on invested capital and stockholder value creation. |
Award levels for NIPS and net operating cash flow were
determined in the fourth quarter of 2010. Target and threshold
performance levels for NIPS were established based on a review
of our competitor peer group benchmarks for the three most
recently completed years. AAM’s competitor
24
Table of Contents
peer group as shown in our 2010 annual report includes
ArvinMeritor Inc.; Autoliv Inc.; BorgWarner Inc.; Dana
Corporation; Lear Corporation; Magna International Inc.; Tenneco
Automotive Inc. and Visteon Corporation (competitor peer group).
The target performance level for NIPS, or 3 percent, was
set at a level to meet the performance of the top one-third of
our competitor peer group for the three most recently completed
fiscal years.
The Committee determined the performance award levels for net
operating cash flow performance based on the Board approved
budget. The target performance level for net operating cash flow
is based on our outperforming the budget by $25 million and
the maximum performance level is based on outperforming the
budget by $50 million. These 2011 performance targets will
be disclosed in our 2012 proxy statement.
Long-Term Incentives. Long-term incentive
compensation at AAM is designed to:
| • | Align executive officer and stockholder interests; | |
| • | Reward achievement of long-term performance goals; and | |
| • | Provide incentives for executive retention. |
In prior years, AAM granted equity awards to executive officers
under the 1999 Stock Incentive Plan. That plan expired in 2009
and was not replaced by the Company. Since AAM does not have an
equity plan in place, the Committee approved changes to the
long-term incentive program for executive officers that impact
both (1) each executive officer’s award opportunity
and (2) the type of long-term incentive awards.
Cash-Based Long-Term Incentive Plan. In 2009,
the Committee approved a cash-based long-term incentive program,
which provides the entire long-term incentive opportunity for
executive officers. Under the AAM 2009 Long-Term Incentive Plan
(AAM LTIP), each participant receives a target award value,
stated as a dollar amount based on a percentage of base salary.
The following table summarizes the target award amounts for the
NEOs in 2011 and 2010:
|
2011 |
2010 |
|||||||
|
Target Award |
Target Award |
|||||||
| Amount | Amount | |||||||
|
Richard. E. Dauch
|
$ | — | $ | — | ||||
|
Michael K. Simonte
|
$ | 618,000 | $ | 600,000 | ||||
|
David C. Dauch
|
$ | 1,170,000 | $ | 1,008,000 | ||||
|
John J. Bellanti
|
$ | 568,560 | $ | 552,000 | ||||
|
John E. Jerge
|
$ | 242,400 | $ | 228,000 | ||||
|
Patrick S. Lancaster (Retired 1/1/11)
|
$ | — | $ | 528,000 | ||||
| * | Mr. R.E. Dauch received no long-term incentive award in 2010 in consideration of the $3 million compensation limit under the 2009 Settlement and Commercial Agreement. |
Award payouts can range from 0 percent to 200 percent
of the target value based on the level of performance over a
three-year period beginning in January of the year of the award.
Performance
Measures
For grants under the AAM LTIP, the actual cash payouts will be
determined based on the level of performance against two
performance metrics approved by the Committee. One-half of the
target award payment will be earned based on the cumulative
amount of earnings before interest, taxes, depreciation and
amortization (EBITDA) over a three-year performance period. In
calculating this award, the plan gives the Committee discretion
to exclude certain special items from EBITDA, such as special
charges or gains, non-recurring operating costs, extraordinary
gains or losses, the impact of changes in accounting principles,
or any other unusual items. EBITDA was chosen as one of the
measures of Company performance as it is a key indicator of the
Company’s financial and operational
25
Table of Contents
performance and is useful in analyzing entity valuation. In
addition, EBITDA as a performance measure complements the
metrics used to determine payouts under other incentive programs.
The remaining one-half of the target award amount will be earned
based on a total shareholder return (TSR) measure that compares
the Company’s TSR over the three-year performance period
relative to the TSR of AAM’s competitor peer group.
Relative TSR was chosen as one of the measures of Company
performance in order to motivate executive officers to build
long-term value for our stockholders above that of our
competitor peer group. Share price appreciation and dividends
paid will be measured over the performance period to determine
TSR.
The following tables illustrate the threshold, target and
maximum performance levels for determining award payouts for
each performance measure. The EBITDA performance levels shown
below were designed to drive a level of performance in the top
one-third of our competitor peer group.
EBITDA
Performance Measure
|
Percent of |
||||||||
|
3-Year Cumulative |
Target Award |
|||||||
|
Performance Level
|
EBITDA | Opportunity Earned | ||||||
|
Threshold
|
8 | % | 25 | % | ||||
|
Target
|
12 | % | 100 | % | ||||
|
Maximum
|
15 | % | 200 | % | ||||
TSR
Performance Measure
|
Percent of |
||||||||
|
Company’s TSR |
Target Award |
|||||||
|
Percentile |
Opportunity |
|||||||
|
Performance Level
|
Rank | Earned | ||||||
|
Threshold
|
35(th | ) | 50 | % | ||||
|
Target
|
50(th | ) | 100 | % | ||||
|
Maximum
|
75(th | ) | 200 | % | ||||
Senior Executive Special Incentive Program. On
March 15, 2010, the Compensation Committee approved a
special incentive program for certain NEOs. The special
incentive program was developed to recognize the extraordinary
efforts of Mr. Simonte, Mr. D.C. Dauch,
Mr. Bellanti and Mr. Lancaster in navigating the
Company through the turbulent financial and market conditions in
2009. As a result of their individual and collective efforts,
the Company was able to successfully complete its restructuring
outside of bankruptcy, gain contract clarity with GM, and
address liquidity concerns by entering into the 2009 Settlement
and Commercial Agreement, amending senior credit agreements and
raising cash proceeds through an equity offering.
Payments under the special incentive program for
Mr. Simonte, Mr. D.C. Dauch and Mr. Bellanti are
contingent upon termination of the financial accommodations
provided by GM in connection with the 2009 Settlement and
Commercial Agreement and the Access and Security Agreement
(Access Agreement). The Committee and the full Board believe
that termination of the financial accommodations provided by GM
and the Access Agreement is in the best interests of AAM, its
stockholders and other key stakeholders. The benefits to AAM of
terminating the financial accommodations provided by GM and the
Access Agreement include, among other things, a cost savings
associated with eliminating the one percent sales discount
related to the expedited payment terms. The Company also
anticipates improved flexibility in accessing new sources of
debt capital by eliminating certain covenants and other
restrictions that accompany the financial accommodations
provided by GM and the Access Agreement.
The special incentive program was also designed to retain
Mr. Simonte, Mr. D.C. Dauch and Mr. Bellanti and
to motivate them to accomplish the objectives described above.
It is expected that
26
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they will be instrumental to the Company in strengthening our
financial and competitive position in the future. The special
incentive program for Mr. Lancaster was designed to reward
his efforts in 2009 and provide him with an additional
retirement incentive. The special incentive program awards for
Mr. Simonte, Mr. D. C. Dauch, Mr. Bellanti and
Mr. Lancaster (award recipients) are as follows:
|
Total |
||||
| Award Value | ||||
|
David C. Dauch
|
$ | 5,000,000 | ||
|
Michael K. Simonte
|
$ | 3,000,000 | ||
|
John J. Bellanti
|
$ | 1,000,000 | ||
|
Patrick S. Lancaster
|
$ | 1,000,000 | ||
|
Total
|
$ | 10,000,000 | ||
The Committee determined that the special incentive program was
appropriately valued at $10 million in consideration of the
total value that the award recipients preserved for the
Company’s stockholders and other key stakeholders. The
program is cash based due in part to the lack of equity
available for compensation awards. The amount allocated to each
award recipient was determined based on individual
contributions. As President & COO, Mr. D.C. Dauch
led the operational restructuring of the Company and
negotiations with GM resulting in the 2009 Settlement and
Commercial Agreement described above. Mr. Simonte led the
Company’s financial restructuring, including negotiations
with lenders and GM, and effectively managed investor and media
communications. Mr. Bellanti played a critical role in the
operational restructuring efforts, while maintaining excellence
in the Company’s quality, warranty, delivery and launch
performance during an extremely difficult and volatile
production environment. Mr. Bellanti’s management of
the
day-to-day
operations of the Company enabled Mr. D.C. Dauch and
Mr. Simonte to focus their efforts on the broader
restructuring plans, negotiations and liquidity issues.
Mr. Lancaster supported the GM negotiations with a focus on
gaining commercial contract clarity and protecting the
Company’s interests during GM’s bankruptcy proceedings.
The awards for Mr. Simonte, Mr. D.C. Dauch and
Mr. Bellanti are comprised of special incentives and annual
incentives. Special incentives are approximately 30 percent to
40 percent of the total award and will be payable to the award
recipients upon termination of the financial accommodations
provided by GM and the Access Agreement. Annual incentives are
comprised of four equal installments and the date on which the
installment payments commence is contingent upon the date of
termination of the GM financial accommodations and the Access
Agreement. The first annual incentive installment payment will
be made no earlier than October 31, 2011 and the final
annual incentive installment payment will be made no later than
January 31, 2015. In the case of both the special
incentives and the annual incentives, the recipient will forfeit
the award if the Access Agreement is not terminated by
December 31, 2014. The award recipients must be employed
with AAM on the relevant payment date to receive payment under
the award, except in the event of death, disability, and
resignation for good reason or termination other than for cause.
Upon his retirement, the award for Mr. Lancaster became
payable in a lump sum.
The contributions of Mr. R.E. Dauch and his leadership role
with the Company are discussed further in Compensation of
Chief Executive Officer.
Settlement
Agreement with Mr. Lancaster
On July 12, 2010, the Committee approved a settlement
agreement between AAM and Mr. Lancaster to provide cash
payments and certain other benefits to Mr. Lancaster in
connection with his retirement from AAM effective
January 1, 2011 (Settlement Agreement). The payments and
benefits payable to Mr. Lancaster pursuant to the
Settlement Agreement are described in the Narrative to
Summary Compensation Table and Grants of Plan-Based Awards Table
and Potential Payments Upon Termination or Change in
Control.
27
Table of Contents
Other
Compensation Components
Benefits. Our executive officers participate
in the benefits and retirement plans provided to
U.S. salaried associates. A group of approximately 40
senior executives, including executive officers, also receive
supplemental life, supplemental disability, umbrella liability
and travel accident insurance benefits.
Executive officers are eligible to participate in AAM’s
qualified and nonqualified defined benefit pension plans and
defined contribution plan. They are also eligible to participate
in a nonqualified deferred compensation plan that permits
deferrals of a portion of base salary
and/or
annual cash incentive compensation on a pretax basis. These
plans are described in the Pension Benefits and
Nonqualified Deferred Compensation sections below.
Change in Control Payments and Benefits. Under
the 2009 Settlement and Commercial Agreement, all executive
officer continuity agreements were terminated. These agreements
had provided enhanced severance benefits following a change in
control of the Company.
Perquisites. AAM provides a limited number of
perquisites for senior executives, including executive officers,
which are described in the footnotes to the Summary
Compensation Table. The most significant perquisite provided
is the use of a Company-provided vehicle with AAM content. This
perquisite is common among automotive suppliers. AAM has never
owned a corporate aircraft and does not provide leased aircraft
for personal use. AAM does not pay for country club memberships.
Compensation of
Chief Executive Officer
Mr. R. E. Dauch’s compensation is governed by an
employment agreement, which was amended in December 2009. The
agreement is further described in the Narrative to Summary
Compensation and Grants of Plan-Based Awards Table below.
The CEO’s compensation arrangements are structured in
consideration of the breadth of his responsibilities for the
entire Company, his unique experience in the automotive
industry, his leadership skills and service to AAM since he
co-founded the Company in 1994.
Compensation Limit. In accordance with the
December 22, 2009 employment agreement amendment between
the Company and Mr. R. E. Dauch, the CEO agreed to forego
compensation payable to him under his then current employment
agreement to the extent his annual compensation would exceed the
$3 million limit set forth in the 2009 Settlement and
Commercial Agreement.
The primary elements of the CEO’s compensation as set forth
in his employment agreement are base salary, annual cash bonus,
benefits and perquisites, subject in each case to the $3 million
compensation limit described above. As discussed below,
effective January 1, 2010, Mr. R.E. Dauch will no
longer receive annual equity awards from the Company.
Base Salary. Base salary is determined by the
Committee as part of the annual compensation review process. In
determining Mr. R.E. Dauch’s compensation in 2009, the
Committee considered his role in overseeing and directing the
Company’s successful restructuring outside of bankruptcy
under the extraordinary circumstances facing the automotive
industry in 2009. As a result, value was preserved for
AAM’s stockholders and other key stakeholders. The
Committee considers Mr. R.E. Dauch’s continuing
leadership, unique role and the services he provides to AAM
critical to the achievement of the Company’s strategic
goals for 2010. No change was made to Mr. R.E. Dauch’s
base salary for 2010 or 2011.
In connection with the annual compensation limit set forth in
the 2009 Settlement and Commercial Agreement, Mr. R.E.
Dauch agreed to forego certain compensation and benefits that he
was entitled to in accordance with his employment agreement. As
described below, Mr. R. E. Dauch will no longer receive
equity grants and did not receive a bonus in 2010, 2009 and
2008. He also agreed to terminate his change in control
agreement. These factors were also taken into consideration by
the Committee in determining Mr. R.E. Dauch’s base
salary. Pursuant to the December 22, 2009
28
Table of Contents
employment agreement amendment, Mr. R.E. Dauch’s
annual base salary is $2,702,300, effective June 16, 2009.
Base salary for 2010, 2009 and 2008 is shown in the Summary
Compensation Table.
Annual Cash Bonus. Mr. R. E. Dauch is
eligible for an annual cash bonus as described in his employment
agreement. See Narrative to Summary Compensation Table and
Grants of Plan-Based Awards Table below. The annual cash
bonus is based on the Committee’s assessment of Company
performance as compared to that of the competitor peer group.
Pursuant to his employment agreement, Mr. R.E. Dauch is
entitled to receive an annual bonus payment of three times his
annual salary if AAM outperforms its competitor peer group by
greater than the historical amount. However, his annual bonus
will be reduced, if necessary, to comply with the
$3 million limit on annual compensation set forth in the
2009 Settlement and Commercial Agreement. In determining
Mr. R. E. Dauch’s annual cash award, the Committee may
use discretion in considering other factors, which may differ
from year to year.
Long-term Incentives. Pursuant to the
December 22, 2009 employment agreement amendment,
Mr. R. E. Dauch agreed to forego receipt of the annual
equity awards the Company had agreed to provide under his
employment agreement since it was first executed in November
1997. As a result, effective January 1, 2010, Mr. R.E.
Dauch will no longer receive annual equity awards from the
Company. The terms of the outstanding awards granted prior to
2010 are described in the Narrative to Summary Compensation
Table and Grants of Plan-Based Awards Table.
Benefits and Perquisites. Mr. R. E. Dauch
participates in the same benefit programs provided for other
executive officers. In addition, under his employment agreement,
AAM provides Mr. R. E. Dauch with the use of an additional
Company vehicle and reimburses him for premiums under a
$5 million life insurance policy. The Company will also
provide postretirement health care benefits upon expiration of
his employment agreement. Perquisites provided to the CEO in
2010, 2009 and 2008 are reported in the Summary Compensation
Table.
Management’s
Stock Ownership Requirements & Anti-Hedging
Policy
The Committee has established stock ownership requirements for
executive officers. The lack of an equity plan to grant
restricted stock or other equity awards restricts the
Company’s ability to support their achievement of stock
ownership requirements. To address this issue, the Committee
determined provisional stock ownership requirements based on a
set number of shares.
Fixed Share
Requirement for Executive Officers
| No. of Shares | ||||
|
Chief Executive Officer
|
350,000 | |||
|
President & COO
|
50,000 | |||
|
Executive Vice President
|
25,000 | |||
|
Vice President
|
15,000 | |||
The stock ownership requirements must be attained within five
years from the effective date or, for newly appointed executive
officers, within five years of such appointment. Currently, all
executive officers are in compliance with the stock ownership
requirements.
AAM prohibits hedging and pledging of Company stock.
Federal Income
Tax Considerations
Deductibility of Executive Compensation. In
general, the compensation awarded to the NEOs will be taxable to
the executive and will give rise to a corresponding corporate
deduction at the time the compensation is paid.
Section 162(m) of the Internal Revenue Code (Code) denies a
federal income tax deduction for certain compensation in excess
of $1 million per year paid to the CEO or to any of the
other NEOs other than the CFO. The portion of the compensation
in excess of $1 million paid to certain NEOs in 2010 was
not deductible for federal income tax purposes.
29
Table of Contents
Although deductibility of compensation is preferred, tax
deductibility is not a primary objective of the Company’s
compensation programs. The Committee believes that achieving the
compensation objectives set forth above is more important than
the benefit of tax deductibility. The Company reserves the right
to maintain flexibility in how executive officers are
compensated, which may result in limiting the deductibility of
amounts of compensation from time to time.
Risk Assessment
of Compensation Policies and Practices
In 2011, AAM management conducted a risk assessment of the
Company’s compensation policies and practices relating to
AAM’s compensation programs for executive officers and
other associates on a global basis. The process used by
management to conduct the risk assessment was approved by the
Compensation Committee. Based on the risk assessment and other
factors, management concluded that AAM’s compensation
policies and practices do not create risks that are reasonably
likely to have a material adverse effect on the Company. The
Compensation Committee agreed with management’s conclusion.
REPORT OF THE
COMPENSATION COMMITTEE
The Compensation Committee has reviewed and discussed with
management the Compensation Discussion and Analysis required by
Item 402(b) of
Regulation S-K,
and based on such review and discussions, recommended to the
Board of Directors that such Compensation Discussion and
Analysis be included in this proxy statement.
Compensation
Committee of the Board of Directors
Forest J. Farmer, Chairman
Elizabeth A. Chappell
Larry K. Switzer
Thomas K. Walker
30
Table of Contents
SUMMARY
COMPENSATION TABLE
The following table summarizes the compensation of our named
executive officers (Richard E. Dauch, Co-Founder, Chairman of
the Board & Chief Executive Officer, Michael K.
Simonte, Executive Vice President —
Finance & Chief Financial Officer, David C. Dauch,
President & Chief Operating Officer, John J. Bellanti,
Executive Vice President, Worldwide Operations, John E. Jerge,
President — AAM Americas and Patrick S. Lancaster,
retired effective January 1, 2011, former Executive Vice
President, Chief Administrative Officer & Secretary,
for the fiscal years ended December 31, 2010,
December 31, 2009 and December 31, 2008.
|
Change in |
|||||||||||||||||||||||||||||||||||||||||||||
|
Pension Value |
|||||||||||||||||||||||||||||||||||||||||||||
|
Non-Equity |
and |
||||||||||||||||||||||||||||||||||||||||||||
|
Incentive |
Nonqualified |
||||||||||||||||||||||||||||||||||||||||||||
|
Plan |
Deferred |
All Other |
|||||||||||||||||||||||||||||||||||||||||||
|
Stock |
Options |
Compen- |
Compensation |
Compen- |
|||||||||||||||||||||||||||||||||||||||||
|
Name and |
Salary |
Bonus(2) |
Awards(3) |
Awards(3) |
sation(4) |
Earnings(5) |
sation(6) |
Total |
|||||||||||||||||||||||||||||||||||||
| Principal Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||||||||||||||||||
| Richard E. Dauch(1) | |||||||||||||||||||||||||||||||||||||||||||||
|
Co-Founder, Chairman &
|
2010 | 2,702,304 | — | — | — | — | 2,692,143 | (7) | 158,981 | 5,553,428 | (7) | ||||||||||||||||||||||||||||||||||
|
Chief Executive Officer
|
2009 | 2,156,269 | — | 167,583 | 210,000 | — | 7,074,845 | 112,485 | 9,721,182 | ||||||||||||||||||||||||||||||||||||
| 2008 | 1,620,667 | — | 596,655 | 400,500 | — | 3,081,360 | 105,673 | 5,804,855 | |||||||||||||||||||||||||||||||||||||
| Michael K. Simonte | |||||||||||||||||||||||||||||||||||||||||||||
|
Executive Vice President —
|
2010 | 500,004 | — | — | — | 500,000 | 97,430 | 51,294 | 1,148,728 | ||||||||||||||||||||||||||||||||||||
|
Finance & Chief Financial Officer
|
2009 | 372,375 | — | — | — | — | 69,597 | 46,477 | 488,449 | ||||||||||||||||||||||||||||||||||||
| 2008 | 271,125 | — | 100,800 | 33,375 | — | 59,884 | 44,235 | 509,419 | |||||||||||||||||||||||||||||||||||||
| David C. Dauch(1) | |||||||||||||||||||||||||||||||||||||||||||||
|
President & Chief
|
2010 | 575,004 | — | — | — | 731,250 | 97,540 | 27,006 | 1,430,800 | ||||||||||||||||||||||||||||||||||||
|
Operating Officer
|
2009 | 411,125 | — | — | — | — | 101,071 | 27,748 | 539,944 | ||||||||||||||||||||||||||||||||||||
| 2008 | 358,875 | — | 120,960 | 41,385 | — | 96,222 | 21,460 | 638,902 | |||||||||||||||||||||||||||||||||||||
| John J. Bellanti | |||||||||||||||||||||||||||||||||||||||||||||
|
Executive Vice President,
|
2010 | 459,996 | — | — | — | 460,000 | 357,673 | 30,312 | 1,307,981 | ||||||||||||||||||||||||||||||||||||
|
Worldwide Operations
|
2009 | 355,417 | — | — | — | — | 224,999 | 31,518 | 611,934 | ||||||||||||||||||||||||||||||||||||
| John E. Jerge | |||||||||||||||||||||||||||||||||||||||||||||
|
President — AAM Americas
|
2010 | 288,000 | — | — | — | 227,250 | 74,685 | 43,226 | 633,161 | ||||||||||||||||||||||||||||||||||||
| Patrick S. Lancaster(8) | |||||||||||||||||||||||||||||||||||||||||||||
|
Former Executive Vice President,
|
2010 | 440,004 | 704,000 | — | — | 173,184 | 283,152 | (8) | 1,081,878 | (9) | 2,682,218 | (10) | |||||||||||||||||||||||||||||||||
|
Chief Administrative Officer &
|
2009 | 356,158 | — | — | — | — | 348,353 | 31,999 | 736,510 | ||||||||||||||||||||||||||||||||||||
|
Secretary
|
2008 | 268,896 | — | 146,160 | 32,040 | — | 145,474 | 33,979 | 626,549 | ||||||||||||||||||||||||||||||||||||
| (1) | Mr. R. E. Dauch and Mr. D.C. Dauch receive compensation based solely on their role as executive officers. They receive no additional compensation for serving as directors. | |
| (2) | Mr. R.E. Dauch received no annual incentive award in 2010 in consideration of the $3 million compensation limitation in the 2009 Settlement and Commercial Agreement. Mr. Lancaster received a 2010 bonus payment pursuant to the Settlement Agreement as described in the Narrative to Summary Compensation Table and Grants of Plan-Based Award Table. | |
| (3) | Reflects the full grant date fair value of equity awards made during fiscal years 2009 and 2008. The grant date fair value of stock awards is calculated using the closing market price of AAM common stock on the date of grant. The grant date fair value of option awards was $1.40 and $2.67 per share of common stock covered by the award for 2009 and 2008 respectively, calculated using the Black-Scholes option pricing model. Fiscal year amounts for 2008 were recomputed based on each award’s full grant date fair value reported in that fiscal year’s Grants of Plan-Based Awards Table. | |
| (4) | Reflects amounts earned under the AAM Incentive Compensation Plan for Executive Officers for Mr. Simonte, Mr. D.C. Dauch, Mr. Bellanti and Mr. Jerge. Amount reflected for Mr. Lancaster is a pro-rata payment of the 2010 performance award under the AAM LTIP that vested upon his retirement; the remaining amount was forfeited. |
31
Table of Contents
| (5) | This column reflects the annualized increase in pension value under the Salaried Retirement Program and the Supplemental Executive Retirement Program (SERP). There are no above-market or preferential earnings on compensation deferred under our Executive Deferred Compensation Plan. | |
| (6) | Includes, for 2010, employer contributions under the 401(k) plan, executive life insurance premiums and personal umbrella liability insurance premiums. Also includes meals provided during business hours for each NEO and personal use of Company-provided vehicles for Mr. R.E. Dauch, Mr. Simonte, Mr. Bellanti, Mr. Jerge and Mr. Lancaster, and executive physical examinations for Mr. R.E. Dauch, Mr. D.C. Dauch, Mr. Bellanti, Mr. Jerge and Mr. Lancaster. Employer contributions under the Company’s 401(k) Plan consisted of matching contributions of $11,925 for Mr. R.E. Dauch, Mr. Simonte and Mr. Jerge; $11,740 for Mr. D.C. Dauch; and $8,250 for Mr. Bellanti and Mr. Lancaster; retirement contributions of $12,250 for Mr. Simonte, Mr. D.C. Dauch and Mr. Jerge. The total for Mr. R.E. Dauch includes $117,586 for executive life insurance premiums and the cost of his spouse’s attendance at Company business events. | |
| (7) | The benefits associated with the change in other pension values are excluded from the measurement of total compensation under the 2009 Settlement and Commercial Agreement. Under the 2009 Settlement and Commercial Agreement, annual compensation for any executive officer, current or former, cannot exceed $3 million. The following table illustrates AAM’s compliance with this provision of the 2009 Settlement and Commercial Agreement as it relates to Mr. R.E. Dauch’s 2010 compensation: |
|
Total 2010 compensation as presented on Summary Compensation
Table
|
$ | 5,553,428 | ||
|
Less: Value of pension / SERP benefits granted prior to 2010
|
2,692,143 | |||
|
Total 2010 compensation as measured under the 2009 Settlement
and Commercial Agreement
|
$ | 2,861,285 | ||
| (8) | Effective July 12, 2010, Mr. Lancaster assumed the role of Special Advisor to AAM’s Co-Founder, Chairman & CEO, a non-officer position, and retired from AAM effective January 1, 2011. His Salaried Pension and SERP benefit commenced in 2011. The change in pension value reflects actual commencement dates and form of payment elections. | |
| (9) | Includes a $1 million special incentive program award earned by Mr. Lancaster as of December 31, 2010. Also includes $47,444, which represents the value of the Company vehicle transferred to Mr. Lancaster pursuant to the Settlement Agreement. | |
| (10) | Mr. Lancaster’s total 2010 annual compensation is in compliance with the $3 million annual compensation limit under the 2009 Settlement and Commercial Agreement. |
32
Table of Contents
GRANTS OF
PLAN-BASED AWARDS
Annual and long-term incentive awards granted in 2010 to the
NEOs are shown in the following table. The annual and long-term
incentive compensation programs are described in Compensation
Discussion and Analysis and following the table below.
|
Estimated Future Payouts Under |
||||||||||||||||||||
| Non-Equity Incentive Plan Awards(2)(3) | ||||||||||||||||||||
| Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | ||||||||||||||||
|
Richard E.
Dauch(1)
|
— | — | — | — | ||||||||||||||||
|
Michael K. Simonte
|
||||||||||||||||||||
|
Annual
Incentive(2)
|
— | 200,000 | 400,000 | 500,000 | ||||||||||||||||
|
Long-Term
Incentive(3)
|
01/07/2010 | 225,000 | 600,000 | 1,200,000 | ||||||||||||||||
|
Senior Executive Special Incentive
Program(4)
|
03/15/2010 | 3,000,000 | 3,000,000 | 3,000,000 | ||||||||||||||||
|
David C. Dauch
|
||||||||||||||||||||
|
Annual
Incentive(2)
|
— | 292,500 | 585,000 | 731,250 | ||||||||||||||||
|
Long-Term
Incentive(3)
|
01/07/2010 | 378,000 | 1,008,000 | 2,016,000 | ||||||||||||||||
|
Senior Executive Special Incentive
Program(4)
|
03/15/2010 | 5,000,000 | 5,000,000 | 5,000,000 | ||||||||||||||||
|
John J. Bellanti
|
||||||||||||||||||||
|
Annual
Incentive(2)
|
— | 184,000 | 368,000 | 460,000 | ||||||||||||||||
|
Long-Term
Incentive(3)
|
01/07/2010 | 207,000 | 552,000 | 1,104,000 | ||||||||||||||||
|
Senior Executive Special Incentive
Program(4)
|
03/15/2010 | 1,000,000 | 1,000,000 | 1,000,000 | ||||||||||||||||
|
John E. Jerge
|
||||||||||||||||||||
|
Annual
Incentive(2)
|
— | 90,900 | 181,800 | 227,250 | ||||||||||||||||
|
Long-Term
Incentive(3)
|
01/07/2010 | 85,500 | 228,000 | 456,000 | ||||||||||||||||
|
Patrick S. Lancaster
|
||||||||||||||||||||
|
Annual
Incentive(5)
|
— | 176,000 | 352,000 | 440,000 | ||||||||||||||||
|
Long-Term
Incentive(3)(6)
|
01/07/2010 | 198,000 | 528,000 | 1,056,000 | ||||||||||||||||
| (1) | Mr. R.E. Dauch received no annual incentive or long-term incentive awards in 2010 in consideration of the $3 million annual compensation limit set forth in the 2009 Settlement and Commercial Agreement. | |
| (2) | Annual incentive awards granted under the AAM Incentive Compensation Plan for Executive Officers. See further discussion of determination of the awards under Annual Incentive Compensation in the Compensation Discussion and Analysis. | |
| (3) | Long-term incentive performance awards were granted under the AAM LTIP. See further discussion of the awards under Long-Term Incentives in the Compensation Discussion and Analysis. | |
| (4) | Mr. Simonte, Mr. D.C. Dauch and Mr. Bellanti received awards under the Senior Executive Special Incentive Program further described in the Compensation Discussion and Analysis. | |
| (5) | Mr. Lancaster received a bonus payment of $704,000 for 2010 in accordance with the Settlement Agreement. | |
| (6) | Mr. Lancaster received a pro-rata payment of the 2010 performance award, shown in the Summary Compensation Table, in connection with his retirement effective January 1, 2011. |
33
Table of Contents
Narrative to
Summary Compensation Table and Grants of Plan-Based Awards
Table
CEO Employment
Agreement
In accordance with the December 22, 2009 employment
agreement amendment between the Company and Mr. R. E.
Dauch, the CEO agreed to forego compensation payable to him
under his then current Employment Agreement to the extent his
annual compensation would exceed the $3 million limit set
forth in the 2009 Settlement and Commercial Agreement.
Mr. R.E. Dauch’s employment agreement, as amended,
provides for the following compensation and benefits (subject to
the $3 million compensation limit under the 2009 Settlement
and Commercial Agreement with GM):
| • | Annual base salary of $2,702,300 (effective June 16, 2009), subject to annual adjustment by the Committee; | |
| • | Subject to the $3 million limit on annual compensation described above, annual cash bonus in an amount determined by the Committee based on our financial performance, relative to our competitor peer group: |
| • | equal to 3 times annual base salary if we continue to outperform our competitor peer group; | |
| • | greater than 3 times annual base salary if we outperform our competitor peer group by greater than the historical amount; or | |
| • | up to the amount of Mr. R.E. Dauch’s base salary if we do not outperform our competitor peer group; |
| • | Reimbursement of premiums under a $5 million life insurance policy purchased by Mr. R.E. Dauch; | |
| • | Annual executive physical examination and health and disability coverage as provided to other senior executives; and | |
| • | Use and maintenance of two Company-provided automobiles and the perquisites and other benefits provided to our senior executives. |
The current term continues through December 31, 2011 and is
automatically extended for successive one-year terms, unless
either party gives notice of termination at least 60 days
prior to the end of the applicable term. The potential payments
and benefits upon termination of Mr. R.E. Dauch’s
employment are described in Potential Payments Upon
Termination or Change in Control.
Settlement
Agreement with Mr. Lancaster
In accordance with the Settlement Agreement between AAM and
Mr. Lancaster effective July 12, 2010, the Committee
approved the following cash payments and other benefits to
Mr. Lancaster in connection with his retirement effective
January 1, 2011 (Retirement Date):
| • | Continued payment of his annual base salary in consideration of his services as Special Advisor to the CEO through December 31, 2010; | |
| • | A 2010 bonus payment of $704,000 on March 15, 2011; | |
| • | Payment of $850,000, less withholding taxes, on or before August 15, 2010 in settlement of a claim; | |
| • | Title to his Company-provided vehicle as of December 31, 2010; | |
| • | Consulting fees of $420,000 for services provided during 2011, payable in monthly installments, provided that Mr. Lancaster performs no work for a competitor of AAM; | |
| • | Vesting of his outstanding restricted stock and restricted stock units on the Retirement Date; | |
| • | Continued eligibility for the $1,000,000 Senior Special Incentive Program award granted to him on March 15, 2010; and | |
| • | Continued eligibility to receive a pro rata portion of outstanding long-term cash incentive awards granted in 2009 and 2010. |
34
Table of Contents
Payments made pursuant to this agreement were conditioned upon
Mr. Lancaster’s execution of a full waiver and release
of claims against AAM, which he signed on January 5, 2011.
The payments and benefits payable to Mr. Lancaster pursuant
to the Settlement Agreement are described in Potential
Payments Upon Termination or Change in Control.
Long-Term
Incentive Awards
The following description refers to awards granted prior to 2010
under the Company’s 1999 Stock Incentive Plan, which has
since expired. Information concerning outstanding awards is
included under Outstanding Equity Awards at December 31,
2010 below.
Stock Options. Outstanding options vest in
three approximately equal installments on the first, second and
third anniversaries of the grant date. Generally, vesting may
accelerate upon termination of employment due to death,
disability or upon a change in control. The award is forfeited
if employment is terminated for any other reason prior to
vesting. Vested options expire ten years after the grant date
and may be exercised any time before the earliest of:
(1) the expiration of the grant, (2) five years
following termination of employment (one year following
termination for options granted before 2002) due to death,
disability, retirement or a change in control,
(3) 90 days following termination of employment
without cause and (4) termination of employment for cause.
Restricted Stock. Restricted stock awarded to
executives under age 60 vests on the third anniversary of
the grant date. Restricted stock awarded to executives
age 60 and over vests in three approximately equal annual
installments through March 14, 2011. Vesting accelerates
upon death, disability, termination of employment by the Company
pursuant to a reduction in force or similar program approved by
the CEO, or upon a change in control.
Performance Accelerated Restricted Stock (PARS) and
Performance Accelerated Restricted Stock Units
(RSUs). PARS and RSUs vest on the fifth
anniversary of the grant date unless vesting is accelerated on
the third or fourth anniversaries of the grant date based on our
total shareholder return. Vesting may also accelerate upon
termination of employment due to death, disability or upon a
change in control. If the NEO’s employment is terminated
for any other reason, he will forfeit his unvested PARS and RSUs.
Vesting is accelerated on the third anniversary of the grant
date if AAM’s total shareholder return for the preceding
three-year period meets or exceeds the 66th percentile of
our competitor peer group. If vesting is not accelerated on the
third anniversary, then vesting is accelerated on the fourth
anniversary of the grant date if shareholder return exceeds the
66th percentile of our competitor peer group for the
preceding four years. Total shareholder return is defined as the
cumulative appreciation (assuming reinvestment of dividends) of
an investment in common stock. Vesting will not accelerate
unless AAM has positive TSR.
PARS consist of issued and outstanding shares of AAM common
stock, subject to forfeiture and transfer restrictions prior to
vesting of the awards, and carry voting and dividend rights from
the date of grant. RSUs consist of the right to receive, upon
vesting of the award, an amount in cash equal to the fair market
value of the number of shares of common stock covered by the
award. RSUs carry the right to receive dividend equivalent
payments from the date of grant, payable in the calendar quarter
when dividends are paid on our common stock.
2008 Performance Awards. In 2008,
Mr. Simonte, Mr. D.C. Dauch, Mr. Bellanti and
Mr. Jerge received 25 percent of their long-term
incentive award in the form of performance awards. The award
represented the right to a payment in cash based on AAM’s
relative TSR over a three year performance period beginning in
January 2008. Based on AAM’s relative TSR for the period
January 2008 through December 2010, the awards did not result in
a payment to Mr. Simonte, Mr. D.C. Dauch,
Mr. Bellanti or Mr. Jerge.
Performance Awards. The Performance
Awards are discussed in the Compensation Discussion and
Analysis.
35
Table of Contents
OUTSTANDING
EQUITY AWARDS AT DECEMBER 31, 2010
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||
|
Market |
||||||||||||||||||||||||||||||
|
Number of |
Value of |
|||||||||||||||||||||||||||||
|
Shares |
Shares |
|||||||||||||||||||||||||||||
|
Number of |
Number of |
or Units |
or Units |
|||||||||||||||||||||||||||
|
Securities |
Securities |
of Stock |
of Stock |
|||||||||||||||||||||||||||
|
Underlying |
Underlying |
That |
That |
|||||||||||||||||||||||||||
|
Unexercised |
Unexercised |
Option |
Have |
Have |
||||||||||||||||||||||||||
|
Options |
Options |
Exercise |
Option |
Not |
Not |
|||||||||||||||||||||||||
|
Exercisable |
Unexercisable |
Price |
Expiration |
Vested |
Vested(8) |
|||||||||||||||||||||||||
| Name | (#) | (#) | ($) | Date | (#) | ($) | ||||||||||||||||||||||||
|
Richard E. Dauch
|
240,000 | 8.85 | 4/2/2011 | 19,534 | (1) | 251,207 | ||||||||||||||||||||||||
| 300,000 | 24.15 | 1/23/2012 | 39,958 | (2) | 513,860 | |||||||||||||||||||||||||
| 300,000 | 23.73 | 1/22/2013 | ||||||||||||||||||||||||||||
| 300,000 | 38.70 | 2/2/2014 | ||||||||||||||||||||||||||||
| 150,000 | 26.65 | 3/15/2015 | ||||||||||||||||||||||||||||
| 150,000 | 15.58 | 3/15/2016 | ||||||||||||||||||||||||||||
| 150,000 | 26.02 | 3/14/2017 | ||||||||||||||||||||||||||||
| 100,500 | 49,500(1 | ) | 10.08 | 6/25/2018 | ||||||||||||||||||||||||||
| — | 100,500(2 | ) | 2.81 | 1/6/2019 | ||||||||||||||||||||||||||
|
Michael K. Simonte
|
39,664 | 15.56 | 2/2/2011 | 3,600 | (3)(6) | 46,296 | ||||||||||||||||||||||||
| 9,500 | 24.15 | 1/23/2012 | 2,400 | (4)(6) | 30,864 | |||||||||||||||||||||||||
| 10,000 | 23.73 | 1/22/2013 | 3,600 | (3)(7) | 46,296 | |||||||||||||||||||||||||
| 8,500 | 38.70 | 2/2/2014 | 2,400 | (4)(7) | 30,864 | |||||||||||||||||||||||||
| 9,000 | 26.65 | 3/15/2015 | 10,000 | (5) | 128,600 | |||||||||||||||||||||||||
| 10,000 | 15.58 | 3/15/2016 | ||||||||||||||||||||||||||||
| 10,000 | 26.02 | 3/14/2017 | ||||||||||||||||||||||||||||
| 8,375 | 4,125(1 | ) | 10.08 | 6/25/2018 | ||||||||||||||||||||||||||
|
David C. Dauch
|
7,260 | 8.85 | 4/2/2011 | 4,800 | (3)(6) | 61,728 | ||||||||||||||||||||||||
| 16,750 | 24.15 | 1/23/2012 | 3,200 | (4)(6) | 41,152 | |||||||||||||||||||||||||
| 28,000 | 23.73 | 1/22/2013 | 4,500 | (3)(7) | 57,870 | |||||||||||||||||||||||||
| 28,000 | 38.70 | 2/2/2014 | 3,000 | (4)(7) | 38,580 | |||||||||||||||||||||||||
| 12,000 | 26.65 | 3/15/2015 | 12,000 | (5) | 154,320 | |||||||||||||||||||||||||
| 15,000 | 15.58 | 3/15/2016 | ||||||||||||||||||||||||||||
| 13,000 | 26.02 | 3/14/2017 | ||||||||||||||||||||||||||||
| 10,385 | 5,115(1 | ) | 10.08 | 6/25/2018 | ||||||||||||||||||||||||||
|
John J. Bellanti
|
12,000 | 24.15 | 1/23/2012 | 3,600 | (3)(6) | 46,296 | ||||||||||||||||||||||||
| 13,000 | 23.73 | 1/22/2013 | 2,400 | (4)(6) | 30,864 | |||||||||||||||||||||||||
| 16,000 | 38.70 | 2/2/2014 | 3,600 | (3)(7) | 46,296 | |||||||||||||||||||||||||
| 9,000 | 26.65 | 3/15/2015 | 2,400 | (4)(7) | 30,864 | |||||||||||||||||||||||||
| 6,700 | 15.58 | 3/15/2016 | 9,000 | (5) | 115,740 | |||||||||||||||||||||||||
| 10,000 | 26.02 | 3/14/2017 | ||||||||||||||||||||||||||||
| 7,370 | 3,630(1 | ) | 10.08 | 6/25/2018 | ||||||||||||||||||||||||||
|
John E. Jerge
|
11,500 | 24.15 | 1/23/2012 | 3,600 | (3)(6) | 46,296 | ||||||||||||||||||||||||
| 12,000 | 23.73 | 1/22/2013 | 2,400 | (4)(6) | 30,864 | |||||||||||||||||||||||||
| 10,000 | 38.70 | 2/2/2014 | 3,300 | (3)(7) | 42,438 | |||||||||||||||||||||||||
| 8,000 | 26.65 | 3/15/2015 | 2,200 | (4)(7) | 28,292 | |||||||||||||||||||||||||
| 10,000 | 15.58 | 3/15/2016 | 7,000 | (5) | 90,020 | |||||||||||||||||||||||||
| 9,500 | 26.02 | 3/14/2017 | ||||||||||||||||||||||||||||
| 6,030 | 2,970(1 | ) | 10.08 | 6/25/2018 | ||||||||||||||||||||||||||
36
Table of Contents
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||
|
Market |
||||||||||||||||||||||||||||||
|
Number of |
Value of |
|||||||||||||||||||||||||||||
|
Shares |
Shares |
|||||||||||||||||||||||||||||
|
Number of |
Number of |
or Units |
or Units |
|||||||||||||||||||||||||||
|
Securities |
Securities |
of Stock |
of Stock |
|||||||||||||||||||||||||||
|
Underlying |
Underlying |
That |
That |
|||||||||||||||||||||||||||
|
Unexercised |
Unexercised |
Option |
Have |
Have |
||||||||||||||||||||||||||
|
Options |
Options |
Exercise |
Option |
Not |
Not |
|||||||||||||||||||||||||
|
Exercisable |
Unexercisable |
Price |
Expiration |
Vested |
Vested(8) |
|||||||||||||||||||||||||
| Name | (#) | (#) | ($) | Date | (#) | ($) | ||||||||||||||||||||||||
|
Patrick S. Lancaster
|
35,000 | 8.85 | 4/2/2011 | 3,900 | (10) | 50,154 | ||||||||||||||||||||||||
| 40,000 | 24.15 | 1/23/2012 | 2,600 | (10) | 33,436 | |||||||||||||||||||||||||
| 30,000 | 23.73 | 1/22/2013 | 3,300 | (10) | 42,438 | |||||||||||||||||||||||||
| 25,000 | 38.70 | 2/2/2014 | 2,200 | (10) | 28,292 | |||||||||||||||||||||||||
| 9,000 | 26.65 | 3/15/2015 | 4,785 | (10) | 61,535 | |||||||||||||||||||||||||
| 11,000 | (9) | 15.58 | 1/1/2016 | |||||||||||||||||||||||||||
| 9,500 | (9) | 26.02 | 1/1/2016 | |||||||||||||||||||||||||||
| 8,040 | (9) | 3,960(9 | ) | 10.08 | 1/1/2016 | |||||||||||||||||||||||||
| (1) | Granted under the 1999 Stock Incentive Plan on June 25, 2008. The remaining shares and options vested on March 14, 2011. | |
| (2) | Granted under the 1999 Stock Incentive Plan on January 6, 2009. Approximately one-half of the shares vested on January 6, 2011 and one-half vest on January 6, 2012. | |
| (3) | Reflects PARS granted under the 1999 Stock Incentive Plan. PARS vest on the fifth anniversary of the grant date, unless vesting is accelerated at the end of the fourth year after the grant date. Accelerated vesting is contingent upon our achievement of predetermined performance goals, measured by our relative TSR. Vesting will not be accelerated unless TSR is positive. | |
| (4) | Reflects RSUs granted under the 1999 Stock Incentive Plan. RSUs vest on the fifth anniversary of the grant date, unless vesting is accelerated at the end of the fourth year after the grant date. Accelerated vesting is contingent upon our achievement of predetermined performance goals, measured by our relative TSR. Vesting will not be accelerated unless TSR is positive. | |
| (5) | Reflects restricted stock granted under the 1999 Stock Incentive Plan on June 25, 2008. The restricted stock awards vested on March 14, 2011. | |
| (6) | Granted on March 15, 2006. The PARS and RSUs vested on March 15, 2011. | |
| (7) | Granted on March 14, 2007. The PARS and RSUs vest on March 14, 2012. Vesting of these awards did not accelerate on March 14, 2011. | |
| (8) | Reflects the closing market value on December 31, 2010 ($12.86) of the number of shares of AAM common stock covered by outstanding PARS, RSUs and restricted stock awards on December 31, 2010. | |
| (9) | Mr. Lancaster has five years from retirement to exercise these vested options. Unvested options were forfeited. | |
| (10) | Mr. Lancaster’s outstanding stock awards vested upon his retirement effective January 1, 2011 pursuant to the Settlement Agreement. |
37
Table of Contents
OPTIONS EXERCISED
AND STOCK VESTED
| Option Awards | Stock Awards | |||||||||||||||||||
|
Number of |
Number of |
|||||||||||||||||||
|
Shares |
Value |
Shares |
Value |
|||||||||||||||||
|
Acquired on |
Realized on |
Acquired on |
Realized on |
|||||||||||||||||
|
Exercise |
Exercise(1) |
Vesting(2)(3)(4) |
Vesting(5) |
|||||||||||||||||
| Name | (#) | ($) | (#) | ($) | ||||||||||||||||
|
Richard E. Dauch
|
49,500 | 430,758 | 39,805 | 361,413 | ||||||||||||||||
|
Michael K. Simonte
|
10,000 | 36,601 | 5,500 | 55,275 | ||||||||||||||||
|
David C. Dauch
|
— | — | 7,000 | 70,350 | ||||||||||||||||
|
John J. Bellanti
|
— | — | 5,000 | 50,250 | ||||||||||||||||
|
John E. Jerge
|
11,000 | 24,938 | 5,000 | 50,250 | ||||||||||||||||
|
Patrick S. Lancaster
|
— | — | 10,930 | 102,698 | ||||||||||||||||
| (1) | For Mr. R.E. Dauch, Mr. Simonte and Mr. Jerge, reflects the number of shares received upon exercise of stock options multiplied by the difference between the sale price and the exercise price for such options. | |
| (2) | Reflects the lapse of the transfer and forfeiture restrictions under awards of restricted stock granted to Mr. R.E. Dauch in January 2009. Restricted stock awarded to executives age 60 and over vest in three approximately equal annual installments through January 6, 2012. | |
| (3) | Reflects the lapse of the transfer and forfeiture restrictions under awards of restricted stock granted to Mr. R.E. Dauch and Mr. Lancaster in June 2008. Restricted stock awarded to executives over age 60 vest in three approximately equal annual installments through March 14, 2011. | |
| (4) | Reflects the lapse of the transfer and forfeiture restrictions under awards of PARS and RSUs granted to Mr. Simonte, Mr. D.C. Dauch, Mr. Bellanti, Mr. Jerge and Mr. Lancaster in March 2005. These awards vested in March 2010. | |
| (5) | Reflects the number of restricted shares, PARS and RSUs vested, multiplied by the closing market price of AAM common stock on the vesting date. |
38
Table of Contents
PENSION
BENEFITS
The following table shows the value of the benefits accumulated
by the NEOs and their years of credited service under AAM’s
Salaried Retirement Program and the SERP. The years of credited
service are through December 31, 2010, AAM’s fiscal
year-end measurement date used for financial statement reporting
purposes. The values shown are based on unreduced benefits
deferred to the earliest age at which unreduced benefits are
payable. The assumptions used to calculate the actuarial present
value of accumulated benefits are the same assumptions used in
our audited consolidated financial statements for the fiscal
year ended December 31, 2010, except that the values in the
table do not reflect assumptions for future compensation
increases or future service credits and assume continued service
until unreduced retirement age is attained.
|
Number of |
Present |
||||||||||||
|
Years of |
Value of |
||||||||||||
|
Credited |
Accumulated |
||||||||||||
|
Service |
Benefit |
||||||||||||
| Name | Plan Name | (#) | ($) | ||||||||||
|
Richard E.
Dauch(1)
|
AAM Retirement Program for Salaried Employees | 16.8333 | 843,319 | ||||||||||
| AAM Supplemental Executive Retirement Program | 21.0000 | (2) | 22,862,681 | ||||||||||
|
Michael K. Simonte
|
AAM Retirement Program for Salaried Employees | 8.0833 | (3) | 117,400 | |||||||||
| AAM Supplemental Executive Retirement Program | 12.0833 | 300,241 | |||||||||||
|
David C. Dauch
|
AAM Retirement Program for Salaried Employees | 11.5000 | (3) | 176,622 | |||||||||
| AAM Supplemental Executive Retirement Program | 15.5000 | 483,193 | |||||||||||
|
John J.
Bellanti(4)
|
AAM Retirement Program for Salaried Employees | 16.8333 | 647,252 | ||||||||||
| AAM Supplemental Executive Retirement Program | 16.8333 | 614,249 | |||||||||||
|
John E. Jerge
|
AAM Retirement Program for Salaried Employees | 12.8333 | (3) | 206,053 | |||||||||
| AAM Supplemental Executive Retirement Program | 16.8333 | 335,632 | |||||||||||
|
Patrick S.
Lancaster(5)
|
AAM Retirement Program for Salaried Employees | 16.5833 | 861,446 | ||||||||||
| AAM Supplemental Executive Retirement Program | 16.5833 | 727,786 | |||||||||||
| (1) | Mr. R.E. Dauch was eligible to retire on December 31, 2010 with full benefits under the Salaried Retirement Program and the SERP. | |
| (2) | As of December 31, 2009, Mr. R.E. Dauch earned 20 years of credited service in accordance with his employment agreement extension dated November 3, 2005. | |
| (3) | Benefits were frozen effective December 31, 2006 under the Salaried Retirement Program for Mr. Simonte, Mr. D.C. Dauch and Mr. Jerge. | |
| (4) | Mr. Bellanti was eligible to retire on December 31, 2010 under both the Salaried Retirement Program and the SERP. He qualifies for a reduced benefit of approximately 68% of the unreduced benefit under the Salaried Retirement Program and for the basic form of benefit under the SERP. | |
| (5) | Mr. Lancaster retired effective January 1, 2011. Benefits under both plans commence in 2011. The present values reflect actual commencement dates and form of payment elections. |
We provide pension benefits for NEOs under our Salaried
Retirement Program, a broad-based defined benefit pension plan
open to substantially all of our U.S. salaried associates
hired prior to January 1, 2002, and our SERP. The purpose
of the SERP is to provide total retirement benefits at a
competitive level with executives of other major industrial
companies.
Salaried Retirement Program. The annual
retirement benefit payable to each executive, commencing on
retirement at or after age 65, equals the sum of the
executive’s contributions plus an additional benefit based
on the executive’s average monthly salary (determined as
the average of the executive’s base salary in the highest
60 months during his final 10 years of service) and
years of credited service. The amount of compensation that may
be taken into account for determining benefits is limited under
the Internal Revenue Code. The maximum annual compensation under
this limit was $245,000 for the year ended December 31,
2010.
39
Table of Contents
Benefits under the Salaried Retirement Program may be paid as a
single life annuity or, upon election, in the form of a joint
and survivor annuity with a reduction in the amount of the
annual benefit.
Effective December 31, 2006, the Salaried Retirement
Program was amended to freeze benefits at current levels for
associates who will not be eligible to retire by
December 1, 2011. Mr. R.E. Dauch, Mr. Lancaster
and Mr. Bellanti are grandfathered and will continue to
accrue benefits under the program through the earlier of
(1) December 31, 2011 or (2) the date of
retirement or other termination of employment.
Supplemental Executive Retirement
Program. Mr. R.E. Dauch, Mr. Lancaster
and Mr. Bellanti are eligible to receive the basic form of
pension benefit under our SERP upon retirement. In addition,
they are eligible to receive the alternative form of benefit, if
greater than the basic benefit, upon retirement at or after
age 62. The executive must have at least 10 years of
credited service to receive either form of benefit under the
SERP.
The total monthly benefit payable under the basic form of SERP
is equal to the following amount:
| • | Two percent of the executive’s average monthly salary (as determined for the Salaried Retirement Program excluding the limitations as specified under the Internal Revenue Code), multiplied by the executive’s years of credited service; less | |
| • | The benefit payable to the executive under the Salaried Retirement Program (without reduction for survivor benefits), plus two percent of the maximum monthly social security benefit payable at age 65 multiplied by the executive’s years of credited service. |
The Compensation Committee has discretion to reduce or eliminate
the amount payable under the alternative form of benefit.
Subject to the Committee’s discretion, the total monthly
benefit payable under the alternative form of SERP is equal to
the following amount:
| • | 1.5 percent of the executive’s average monthly salary (as determined for the Salaried Retirement Program excluding the limitations as specified under the Internal Revenue Code) and average monthly incentive compensation (determined as the average of the highest five of the executive’s last 10 annual cash incentive awards, divided by 12) multiplied by the executive’s years of credited service; less | |
| • | The benefit payable to the executive under the Salaried Retirement Program (without reduction for survivor benefits), plus the maximum monthly social security benefit payable at age 65. |
SERP benefits payable under the basic and alternative forms are
generally paid as a single life annuity. If the executive’s
spouse is eligible for survivor benefits under the Salaried
Retirement Program, however, the executive’s monthly SERP
benefit will be reduced and paid in the form of a joint and
survivor annuity.
Effective January 1, 2007, the SERP was amended to change
the benefit accrual formulae for executives who are not
grandfathered under the Salaried Retirement Program. Because
they are grandfathered, Mr. R.E. Dauch and
Mr. Bellanti may continue to accrue SERP benefits under the
basic and alternative forms through December 31, 2011.
Mr. Simonte, Mr. D.C. Dauch and Mr. Jerge, who
are not grandfathered under the Salaried Retirement Program, are
eligible to receive a defined contribution benefit, payable
six months after retirement in a lump sum. The amount of
the benefit will be equal to 12.5 percent of the
executive’s final average compensation (determined as the
executive’s average annual base salary and cash incentive
for the highest five consecutive years), multiplied by the
executive’s years of credited service, less the sum of the
actuarially equivalent value of the executive’s benefits
payable under the Salaried Retirement Program and the balance of
the executive’s retirement contribution account under our
401(k) plan.
40
Table of Contents
NONQUALIFIED
DEFERRED COMPENSATION
The following table summarizes the NEOs compensation under the
Executive Deferred Compensation Plan for the 2010 fiscal year.
All of the NEOs are fully vested in any applicable Company
matching contributions.
|
Executive |
Registrant |
Aggregate |
Aggregate |
Aggregate |
|||||||||||||||||||||
|
Contributions |
contributions in |
Earnings |
Withdrawals |
Balance at |
|||||||||||||||||||||
|
in Last FY |
Last FY |
In Last
FY(1) |
Distributions |
Last FYE |
|||||||||||||||||||||
| Name | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||
|
Richard E. Dauch
|
— | — | 360,214 | — | 4,865,696 | ||||||||||||||||||||
|
Michael K. Simonte
|
— | — | — | — | — | ||||||||||||||||||||
|
David C. Dauch
|
— | — | 30,545 | — | 263,066 | ||||||||||||||||||||
|
John J. Bellanti
|
— | — | 58,046 | — | 498,071 | ||||||||||||||||||||
|
John E. Jerge
|
— | — | — | — | — | ||||||||||||||||||||
|
Patrick S. Lancaster
|
— | — | — | — | — | ||||||||||||||||||||
| (1) | Reflects hypothetical accrued earnings during 2010 on notional investments designed to track the performance of funds similar to those available to participants in the Company’s 401(k) plan. None of the earnings shown in this column are reported as compensation in the Summary Compensation Table. |
Under AAM’s Executive Deferred Compensation Plan, a
nonqualified, tax-deferred savings plan, certain executives,
including our NEOs, may elect to defer the payment of six to
75 percent of their base salary
and/or their
annual incentive compensation award during any plan year. Base
salary deferred into the Executive Deferred Compensation Plan
receives a three percent Company match. The amounts deferred are
unfunded and unsecured obligations of AAM.
Amounts deferred or credited into this plan are represented in
the executive’s notional account and are
“invested” among funds similar to those available
under the Company’s 401(k) plan. Forty percent of deferral
elections are automatically and irrevocably allocated to the
restricted investment benchmark, the PIMCO Total Return Fund.
The remaining 60 percent of deferral elections may be
allocated by the executive to any of the investments available
under the plan and may be reallocated on a daily basis among any
of the investments available under the plan. Although the
executive has no actual or constructive ownership of shares in
the investment funds, the return on the executive’s account
is determined as if the amounts were notionally invested in
these funds.
41
Table of Contents
The table below shows the investment fund options available
under the Executive Deferred Compensation Plan and the annual
rates of return for the calendar year ended December 31,
2010.
|
Rate of |
Rate of |
||||||||
| Name of Fund | Return | Name of Fund | Return | ||||||
|
Fidelity Retirement Money Market Portfolio
|
.02% | Fidelity Freedom Income Fund | 7.63% | ||||||
|
PIMCO Total Return Fund
|
8.83% | Fidelity Freedom 2000 Fund | 7.86% | ||||||
|
PIMCO High Yield Fund
|
14.24% | Fidelity Freedom 2005 Fund | 10.57% | ||||||
|
Fifth Third Disciplined Large Cap Value Fund
|
13.44% | Fidelity Freedom 2010 Fund | 11.65% | ||||||
|
Domini Social Equity Fund
|
14.36% | Fidelity Freedom 2015 Fund | 11.75% | ||||||
|
Spartan U.S. Equity Index Fund
|
14.98% | Fidelity Freedom 2020 Fund | 12.93% | ||||||
|
American Funds Growth Fund of America
|
12.63% | Fidelity Freedom 2025 Fund | 13.82% | ||||||
|
Fidelity Growth Company Fund
|
20.55% | Fidelity Freedom 2030 Fund | 14.04% | ||||||
|
Fidelity Low-Priced Stock Fund
|
20.70% | Fidelity Freedom 2035 Fund | 14.46% | ||||||
|
Nuveen Mid Cap Growth
Opportunities(1)
|
27.91% | Fidelity Freedom 2040 Fund | 14.62% | ||||||
|
American Beacon Small Cap Value Fund
|
26.19% | Fidelity Freedom 2045 Fund | 14.72% | ||||||
|
Munder Small Cap Value Fund
|
27.16% | Fidelity Freedom 2050 Fund | 14.90% | ||||||
|
Fidelity Diversified International Fund
|
9.65% | ||||||||
|
Spartan International Index Fund
|
7.70% | ||||||||
|
Vanguard External Market Index
|
27.37% | ||||||||
| (1) | Formerly First American Mid Cap Growth Opportunities. |
Distributions can be received (1) upon retirement in a lump
sum or in annual payments over a period of five or ten years,
(2) in a lump sum upon death, disability, termination of
employment, change in control or (3) if elected by the
executive, during employment at a specified date after a minimum
deferral period. The minimum deferral period is at least three
years following the end of the plan year to which the deferral
election relates, and distributions during employment consist of
employee deferrals and related earnings or losses (not the
Company contributions and related earnings or losses).
42
Table of Contents
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Under the employment agreement with our CEO and other
arrangements covering our NEOs, certain payments and benefits
will be provided to the NEOs in the event of termination of
employment. The following tables show the estimated potential
payments and benefits that each of the NEOs would receive upon
termination of employment under different scenarios, assuming
that the termination was effective on December 31, 2010.
Termination of
Continuity Agreements
Prior to 2009, all executive officers had continuity agreements
with the Company, which provided certain severance benefits
following a change in control. In accordance with the 2009
Settlement and Commercial Agreement, all executive officers
agreed to terminate their continuity agreements in 2009.
CEO Employment
Agreement
Under our employment agreement with Mr. R.E. Dauch, the
Company may terminate his employment with or without cause, or
upon his disability. Cause exists if he:
| • | is convicted of a felony involving an intentional act; | |
| • | engages in dishonesty or fraud; or | |
| • | breaches any of his material obligations to AAM, including willful neglect or misconduct of his duties or willful and material breach of any of the terms and conditions of his employment agreement. |
In addition, he may resign for good reason, meaning the Company:
| • | reduces his base salary or bonus opportunity; | |
| • | substantially reduces his duties, responsibilities or reporting responsibilities; or | |
| • | relocates him outside of the Detroit-metropolitan area. |
If his employment is terminated for cause, Mr. R.E. Dauch
will be entitled to accrued but unpaid amounts as of the
termination date.
If his employment is terminated without cause, or if he resigns
for good reason, he will be entitled to:
| • | severance payments equal to two years of his annual base salary; | |
| • | continuation of his health care benefits for two years; | |
| • | bonus payments accrued as of the termination date; and | |
| • | reimbursement of premiums for his purchase of a $5 million executive life insurance policy for two years. |
If he resigns without good reason, Mr. R.E. Dauch will be
entitled to (1) accrued but unpaid amounts as of the
termination date and (2) reimbursement of premiums for two
years for a $5 million executive life insurance policy
purchased by Mr. R.E. Dauch.
Under the employment agreement, Mr. R.E. Dauch is subject
to:
| • | a non-disclosure and confidentiality provision extending two years following termination or expiration of the agreement; | |
| • | a non-competition covenant, which prohibits him, throughout the term of the employment agreement and for two years following the termination or expiration of the agreement, from directly or indirectly engaging in any business competitive with AAM and our products and business plans; and a covenant prohibiting solicitation of our employees and customers for two years thereafter. |
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Table of Contents
If AAM terminates his employment due to disability,
Mr. R.E. Dauch will be entitled to accrued benefits under
applicable benefit plans and programs (such as our Deferred
Compensation Plan, Salaried Retirement Plan and SERP) and
reimbursement of executive life insurance premiums as described
above. Should Mr. R.E. Dauch die during the term of his
employment agreement, his estate
and/or
spouse would be entitled to accrued benefits under applicable
benefit plans and programs.
In accordance with his employment agreement, as amended, the CEO
agreed to forego compensation payable to him to the extent his
annual compensation would exceed the $3 million limit.
Settlement
Agreement with Mr. Lancaster
On July 12, 2010, the Compensation Committee approved an
agreement between AAM and Mr. Lancaster to provide cash
payments and certain other benefits to Mr. Lancaster in
connection with his retirement from AAM effective
January 1, 2011. The terms of the Settlement Agreement are
described in the Narrative to Summary Compensation Table and
Grants of Plan-Based Awards Table.
Non-Competition
Agreements
Mr. Simonte, Mr. D.C. Dauch, Mr. Bellanti and
Mr. Jerge have each entered into a non-competition
agreement that prohibits, while employed by AAM and following
termination of employment, the executive from:
| • | directly or indirectly engaging in any business or activity that is in competition with AAM and its products for one year following termination of employment unless the reason for such termination is a reduction in force by AAM; | |
| • | recruiting, soliciting or inducing (or attempting to recruit, solicit or induce) any of our employees to leave AAM, or offer employment to our employees or otherwise interfere with our relationship with our employees, agents or consultants; and | |
| • | using, exploiting, disclosing or communicating our confidential information to any third party without our prior written consent. |
44
Table of Contents
Potential
Payments Upon Termination or Change in Control
Richard E.
Dauch
The following table shows estimated potential payments upon
termination, retirement and a change in control for
Mr. R.E. Dauch. Mr. R.E. Dauch was eligible to retire
on December 31, 2010. The assumptions used to determine
retirement benefits are the same assumptions used in our audited
consolidated financial statements for the fiscal year ended
December 31, 2010.
|
Not for |
|||||||||||||||||||||||||
|
For Cause |
Cause |
Disability |
Change in |
||||||||||||||||||||||
|
Termination |
Termination |
Retirement(1) |
Retirement |
Control |
|||||||||||||||||||||
| ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||
|
Compensation:
|
— | — | — | — | — | ||||||||||||||||||||
|
Bonus(2)
|
— | — | — | — | — | ||||||||||||||||||||
|
Severance(3)
|
— | — | — | — | — | ||||||||||||||||||||
|
Retirement Plans:
|
|||||||||||||||||||||||||
|
Defined Benefit
|
|||||||||||||||||||||||||
|
Retirement
Program(4)
|
— | — | 843,319 | 843,319 | — | ||||||||||||||||||||
|
SERP(5)
|
— | — | 22,862,681 | 22,862,681 | — | ||||||||||||||||||||
|
Welfare
Benefit(6)
|
— | — | 1,440,270 | 1,440,270 | — | ||||||||||||||||||||
|
Equity:
|
— | — | — | — | — | ||||||||||||||||||||
|
Stock
Options(7)
|
— | — | 1,147,635 | — | 1,147,635 | ||||||||||||||||||||
|
Restricted
Stock(8)
|
— | — | 765,067 | — | 765,067 | ||||||||||||||||||||
|
Other Benefits:
|
— | — | — | — | — | ||||||||||||||||||||
|
Deferred
Compensation(9)
|
4,865,696 | 4,865,696 | 4,865,696 | 4,865,696 | 4,865,696 | ||||||||||||||||||||
|
Health
care(10)
|
— | 17,858 | — | — | — | ||||||||||||||||||||
|
Life
Insurance(11)
|
— | 47,780 | 47,780 | 47,780 | — | ||||||||||||||||||||
|
Use of
Vehicles(3)
|
— | — | — | — | — | ||||||||||||||||||||
|
280G Tax
Gross-Up(3)
|
— | — | — | — | — | ||||||||||||||||||||
|
Total
|
4,865,696 | 4,931,334 | 31,972,448 | 30,059,746 | 6,778,398 | ||||||||||||||||||||
| (1) | Assumes retirement due to total and permanent disability on December 31, 2010. | |
| (2) | Assumes $3 million compensation limit is in effect on December 31, 2010. | |
| (3) | Benefit was previously provided under the continuity agreement that was terminated in 2009. | |
| (4) | Reflects a present value of a joint and survivor annuity benefit payable monthly. | |
| (5) | The present value calculated under the alternative formula assuming a joint and survivor annuity benefit payable monthly. | |
| (6) | Reflects benefits for Mr. R.E. Dauch and his spouse assuming retirement or disability on December 31, 2010 as set forth in his employment agreement. | |
| (7) | Generally, outstanding stock option awards vest upon termination of employment due to death, disability or upon a change in control. At December 31, 2010, the fair market value of the underlying shares was greater than the exercise price of certain unvested options. | |
| (8) | Vesting of outstanding restricted stock awards is accelerated upon disability, termination of employment by the Company pursuant to a reduction in force or similar program approved by the CEO or upon a change in control. The value of restricted stock reflects the fair market value of unvested awards. | |
| (9) | Assumes amount is payable in a lump sum upon occurrence of termination event. |
45
Table of Contents
| (10) | Upon termination without cause, Mr. R.E. Dauch would receive two years of health care benefits. | |
| (11) | Represents reimbursement for the premiums associated with Mr. R.E. Dauch’s purchase of a $5 million executive life insurance policy for two years. |
Michael K.
Simonte
The following table shows estimated potential payments upon
resignation, termination, disability and a change in control for
Mr. Simonte as of December 31, 2010. Mr. Simonte
was not eligible to retire as of December 31, 2010.
|
Disability |
Change in |
|||||||||||||||||||
|
Resignation |
Termination |
Retirement(1) |
Control |
|||||||||||||||||
| ($) | ($) | ($) | ($) | |||||||||||||||||
|
Compensation:
|
— | — | — | — | ||||||||||||||||
|
Bonus(2)
|
— | — | — | — | ||||||||||||||||
|
Severance(2)
|
— | — | — | — | ||||||||||||||||
|
Long Term Incentives:
|
— | — | — | — | ||||||||||||||||
|
Stock
Options(3)
|
— | — | 11,468 | 11,468 | ||||||||||||||||
|
PARS and
RSUs(4)
|
— | — | 154,320 | 154,320 | ||||||||||||||||
|
Restricted
Stock(5)
|
— | — | 128,600 | 128,600 | ||||||||||||||||
|
2009 Performance
Award(6)
|
— | — | 337,500 | 506,250 | ||||||||||||||||
|
2010 Performance
Award(7)
|
— | — | 200,000 | — | ||||||||||||||||
|
Other Benefits:
|
— | — | — | — | ||||||||||||||||
|
Health
care(8)
|
— | — | 237,857 | — | ||||||||||||||||
|
Disability(9)
|
— | — | 4,078,916 | — | ||||||||||||||||
|
Life
Insurance(10)
|
— | — | 59,822 | — | ||||||||||||||||
|
Use of
Vehicles(2)
|
— | — | — | — | ||||||||||||||||
|
280G Tax
Gross-Up(2)
|
— | — | — | — | ||||||||||||||||
|
Total
|
— | — | 5,208,483 | 800,638 | ||||||||||||||||
| (1) | Assumes total and permanent disability on December 31, 2010. Because Mr. Simonte has more than 10 years of service, he is eligible to retire due to total and permanent disability and receive pension and postretiree health care benefits. Amount assumes continued employment (on leave) until retirement. | |
| (2) | Benefit was previously provided under the continuity agreement that was terminated in 2009. | |
| (3) | Generally, outstanding stock option awards vest upon termination of employment due to death, disability or upon a change in control. At December 31, 2010, the fair market value of the underlying shares was greater than the exercise price of certain unvested options. | |
| (4) | Outstanding PARS and RSU awards vest upon termination of employment due to death, disability or upon a change in control. The value for PARS and RSUs reflects the fair market value of unvested awards. | |
| (5) | Vesting of outstanding restricted stock awards is accelerated upon disability, termination of employment by the Company pursuant to a reduction in force or similar program approved by the CEO or upon a change in control. The value for restricted stock reflects the fair market value of unvested awards. | |
| (6) | The 2009 performance award payable to Mr. Simonte in the event of a disability would be based on actual performance and on the pro-rata portion of his employment as compared to the |
46
Table of Contents
| performance period. As of December 31, 2010, two-thirds of the performance period would have lapsed. Reflects pro-rata award assuming target is achieved. Upon a change in control, the award is payable at target. | ||
| (7) | The 2010 performance award payable to Mr. Simonte in the event of a disability would be based on actual performance and on the pro-rata portion of his employment as compared to the performance period. As of December 31, 2010, one-third of the performance period would have lapsed. Reflects pro-rata award assuming target is achieved. The 2010 awards do not include a provision for payment upon change in control. | |
| (8) | Under the disability scenario, reflects health care benefits until retirement. | |
| (9) | Reflects benefits equal to 100% of base salary for year one and 662/3% of base salary until retirement. | |
| (10) | Under the disability scenario, reflects basic and supplemental life insurance benefits until retirement. |
David C.
Dauch
The following table shows estimated potential payments upon
resignation, termination, disability and a change in control for
Mr. D.C. Dauch as of December 31, 2010. Mr. D.C.
Dauch was not eligible to retire as of December 31, 2010.
|
Disability |
Change in |
|||||||||||||||||||
|
Resignation |
Termination |
Retirement(1) |
Control |
|||||||||||||||||
| ($) | ($) | ($) | ($) | |||||||||||||||||
|
Compensation:
|
— | — | — | — | ||||||||||||||||
|
Bonus(2)
|
— | — | — | — | ||||||||||||||||
|
Severance(2)
|
— | — | — | — | ||||||||||||||||
|
Long Term Incentives:
|
— | — | — | — | ||||||||||||||||
|
Stock
Options(3)
|
— | — | 14,220 | 14,220 | ||||||||||||||||
|
PARS and
RSUs(4)
|
— | — | 199,330 | 199,330 | ||||||||||||||||
|
Restricted
Stock(5)
|
— | — | 154,320 | 154,320 | ||||||||||||||||
|
2009 Performance
Award(6)
|
— | — | 621,000 | 931,500 | ||||||||||||||||
|
2010 Performance
Award(7)
|
— | — | 336,000 | — | ||||||||||||||||
|
Other Benefits:
|
— | — | — | — | ||||||||||||||||
|
Deferred
Compensation(8)
|
263,066 | 263,066 | 263,066 | 263,066 | ||||||||||||||||
|
Health
care(9)
|
— | — | 241,068 | — | ||||||||||||||||
|
Disability(10)
|
— | — | 4,885,679 | — | ||||||||||||||||
|
Life
Insurance(11)
|
— | — | 80,062 | — | ||||||||||||||||
|
Use of
Vehicles(2)
|
— | — | — | — | ||||||||||||||||
|
280G Tax
Gross-Up(2)
|
— | — | — | — | ||||||||||||||||
|
Total
|
263,066 | 263,066 | 6,794,745 | 1,562,436 | ||||||||||||||||
| (1) | Assumes total and permanent disability on December 31, 2010. Because Mr. D.C. Dauch has more than 10 years of service, he is eligible to retire due to total and permanent disability and receive pension and postretiree health care benefits. Amount assumes continued employment (on leave) until retirement. | |
| (2) | Benefit was previously provided under the continuity agreement that was terminated in 2009. | |
| (3) | Generally, outstanding stock option awards vest upon termination of employment due to death, disability or upon a change in control. At December 31, 2010, the fair market value of the underlying shares was greater than the exercise price of certain unvested options. |
47
Table of Contents
| (4) | Outstanding PARS and RSU awards vest upon termination of employment due to death, disability or upon a change in control. The value for PARS and RSUs reflects the fair market value of unvested awards. | |
| (5) | Vesting of outstanding restricted stock awards is accelerated upon disability, termination of employment by the Company pursuant to a reduction in force or similar program approved by the CEO or upon a change in control. The value for restricted stock reflects the fair market value of unvested awards. | |
| (6) | The 2009 performance award payable to Mr. D.C. Dauch in the event of a disability would be based on actual performance and on the pro-rata portion of his employment as compared to the performance period. As of December 31, 2010, two-thirds of the performance period would have lapsed. Reflects pro-rata award assuming target is achieved. Upon a change in control, the award is payable at target. | |
| (7) | The 2010 performance award payable to Mr. D.C. Dauch in the event of a disability would be based on actual performance and on the pro-rata portion of his employment as compared to the performance period. As of December 31, 2010, one-third of the performance period would have lapsed. Reflects pro-rata award assuming target is achieved. The 2010 awards do not include a provision for payment upon change in control. | |
| (8) | Assumes amount is payable in a lump sum upon occurrence of termination event. | |
| (9) | Under the disability scenario, reflects health care benefits to retirement. | |
| (10) | Reflects benefits equal to 100% of base salary for year one and 60% of base salary to retirement. | |
| (11) | Under the disability scenario, reflects basic and supplemental life insurance benefits to retirement. |
48
Table of Contents
John J.
Bellanti
The following table shows the estimated potential payments upon
termination, retirement and a change in control for
Mr. Bellanti as of December 31, 2010.
Mr. Bellanti was eligible to retire on December 31,
2010. The assumptions used to determine retirement benefits are
the same assumptions used in our audited consolidated financial
statements for the fiscal year ended December 31, 2010.
|
Disability |
Change in |
|||||||||||||||||||
|
Termination |
Retirement(1) |
Retirement |
Control |
|||||||||||||||||
| ($) | ($) | ($) | ($) | |||||||||||||||||
|
Compensation:
|
— | — | — | — | ||||||||||||||||
|
Bonus(2)
|
— | — | — | — | ||||||||||||||||
|
Severance(2)
|
— | — | — | — | ||||||||||||||||
|
Retirement Plans:
|
— | — | — | — | ||||||||||||||||
|
Defined Benefit
|
— | — | — | — | ||||||||||||||||
|
Retirement
Program(3)
|
— | 972,382 | 661,351 | — | ||||||||||||||||
|
SERP(4)
|
— | 265,752 | 614,249 | — | ||||||||||||||||
|
Welfare
Benefit(5)
|
— | 120,377 | 120,377 | — | ||||||||||||||||
|
Equity:
|
— | — | — | — | ||||||||||||||||
|
Stock
Options(6)
|
— | 10,091 | — | 10,091 | ||||||||||||||||
|
PARS and
RSUs(7)
|
— | 154,320 | — | 154,320 | ||||||||||||||||
|
Restricted
Stock(8)
|
— | 115,740 | — | 115,740 | ||||||||||||||||
|
2009 Performance
Award(9)
|
— | 315,000 | 315,000 | 472,500 | ||||||||||||||||
|
2010 Performance
Award(10)
|
— | 184,000 | 184,000 | — | ||||||||||||||||
|
Other Benefits:
|
— | — | — | — | ||||||||||||||||
|
Deferred
Compensation(11)
|
498,071 | 498,071 | 498,071 | 498,071 | ||||||||||||||||
|
Use of
Vehicles(2)
|
— | — | — | — | ||||||||||||||||
|
280G Tax
Gross-Up(2)
|
— | — | — | — | ||||||||||||||||
|
Total
|
498,071 | 2,635,733 | 2,393,048 | 1,250,722 | ||||||||||||||||
| (1) | Assumes retirement due to total and permanent disability on December 31, 2010. | |
| (2) | Benefit was previously provided under the continuity agreement that was terminated in 2009. | |
| (3) | Reflects a joint and survivor annuity benefit payable monthly. | |
| (4) | The present value calculated under the alternative formula assuming a joint and survivor annuity benefit payable monthly under the disability and retirement scenarios. | |
| (5) | Reflects benefits for Mr. Bellanti and his spouse assuming retirement on December 31, 2010 under the welfare benefit plan effective January 1, 2008. | |
| (6) | Generally, outstanding stock option awards vest upon termination of employment due to death, disability or upon a change in control. At December 31, 2010, the fair market value of the underlying shares was greater than the exercise price of certain unvested options. | |
| (7) | Outstanding PARS and RSU awards vest upon termination of employment due to death, disability or upon a change in control. The value for PARS and RSUs reflects the fair market value of unvested awards. |
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Table of Contents
| (8) | Vesting of outstanding restricted stock awards is accelerated upon disability, termination of employment by the Company pursuant to a reduction in force or similar program approved by the CEO or upon a change in control. The value of restricted stock reflects the fair market value of unvested awards. | |
| (9) | The 2009 performance award payable to Mr. Bellanti in the event of a disability or retirement would be based on actual performance and on the pro-rata portion of his employment as compared to the performance period. As of December 31, 2010, two-thirds of the performance period would have lapsed. Reflects pro-rata award assuming target is achieved. Upon a change in control, the award is payable at target. | |
| (10) | The 2010 performance award payable to Mr. Bellanti in the event of a disability would be based on actual performance and on the pro-rata portion of his employment as compared to the performance period. As of December 31, 2010, one-third of the performance period would have lapsed. Reflects pro-rata award assuming target is achieved. The 2010 awards do not include a provision for payment upon change in control. | |
| (11) | Assumes amount is payable in a lump sum upon occurrence of termination event. |
John E.
Jerge
The following table shows estimated potential payments upon
resignation, termination, disability and a change in control for
Mr. Jerge as of December 31, 2010. Mr. Jerge was
not eligible to retire as of December 31, 2010.
|
Disability |
Change in |
|||||||||||||||||||
|
Resignation |
Termination |
Retirement(1) |
Control |
|||||||||||||||||
| ($) | ($) | ($) | ($) | |||||||||||||||||
|
Compensation:
|
— | — | — | — | ||||||||||||||||
|
Bonus(2)
|
— | — | — | — | ||||||||||||||||
|
Severance(2)
|
— | — | — | — | ||||||||||||||||
|
Long Term Incentives:
|
— | — | — | — | ||||||||||||||||
|
Stock
Options(3)
|
— | — | 8,257 | 8,257 | ||||||||||||||||
|
PARS and
RSUs(4)
|
— | — | 147,890 | 147,890 | ||||||||||||||||
|
Restricted
Stock(5)
|
— | — | 90,020 | 90,020 | ||||||||||||||||
|
2009 Performance
Award(6)
|
— | — | 162,000 | 243,000 | ||||||||||||||||
|
2010 Performance
Award(7)
|
— | — | 76,000 | — | ||||||||||||||||
|
Other Benefits:
|
— | — | — | — | ||||||||||||||||
|
Health
care(8)
|
— | — | 216,631 | — | ||||||||||||||||
|
Disability(9)
|
— | — | 2,000,624 | — | ||||||||||||||||
|
Life
Insurance(10)
|
— | — | 36,246 | — | ||||||||||||||||
|
Use of
Vehicles(2)
|
— | — | — | — | ||||||||||||||||
|
280G Tax
Gross-Up(2)
|
— | — | — | — | ||||||||||||||||
|
Total
|
— | — | 2,737,668 | 489,167 | ||||||||||||||||
| (1) | Assumes total and permanent disability on December 31, 2010. Because Mr. Jerge has more than 10 years of service, he is eligible to retire due to total and permanent disability and receive pension and postretiree health care benefits. Amount assumes continued employment (on leave) until retirement. | |
| (2) | Benefit was previously provided under the continuity agreement that was terminated in 2009. |
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Table of Contents
| (3) | Generally, outstanding stock option awards vest upon termination of employment due to death, disability or upon a change in control. At December 31, 2010, the fair market value of the underlying shares was greater than the exercise price of certain unvested options. | |
| (4) | Outstanding PARS and RSU awards vest upon termination of employment due to death, disability or upon a change in control. The value for PARS and RSUs reflects the fair market value of unvested awards | |
| (5) | Vesting of outstanding restricted stock awards is accelerated upon disability, termination of employment by the Company pursuant to a reduction in force or similar program approved by the CEO or upon a change in control. The value for restricted stock reflects the fair market value of unvested awards. | |
| (6) | The 2009 performance award payable to Mr. Jerge in the event of a disability would be based on actual performance and on the pro-rata portion of his employment as compared to the performance period. As of December 31, 2010, two-thirds of the performance period would have lapsed. Reflects pro-rata award assuming target is achieved. Upon a change in control, the award is payable at target. | |
| (7) | The 2010 performance award payable to Mr. Jerge in the event of a disability would be based on actual performance and on the pro-rata portion of his employment as compared to the performance period. As of December 31, 2010, one-third of the performance period would have lapsed. Reflects pro-rata award assuming target is achieved. The 2010 awards do not include a provision for payment upon change in control. | |
| (8) | Under the disability scenario, reflects health care benefits to retirement. | |
| (9) | Reflects benefits equal to 100% of base salary for year one and 60% of base salary to retirement. | |
| (10) | Under the disability scenario, reflects basic and supplemental life insurance benefits to retirement. |
Patrick S.
Lancaster
The following table shows estimated payments and other benefits
for Mr. Lancaster as of December 31, 2010 in
accordance with the Settlement Agreement between AAM and
Mr. Lancaster effective July 12, 2010.
Mr. Lancaster retired effective January 1, 2011.
|
Retirement |
|||||
| ($) | |||||
|
Compensation:
|
— | ||||
|
Bonus(1)
|
704,000 | ||||
|
Retirement Plans:
|
— | ||||
|
Defined Benefit
|
— | ||||
|
Retirement
Program(2)
|
861,446 | ||||
|
SERP(2)
|
727,786 | ||||
|
Welfare
Benefit(3)
|
182,338 | ||||
|
Long Term Incentives:
|
— | ||||
|
PARS and
RSUs(4)
|
154,320 | ||||
|
Restricted
Stock(4)
|
61,535 | ||||
|
2009 Performance
Award(5)
|
315,000 | ||||
|
2010 Performance
Award(6)
|
173,184 | ||||
|
Senior Executive Special Incentive
Award(7)
|
1,000,000 | ||||
|
Other Benefits:
|
— | ||||
|
Consulting
Fees(8)
|
420,000 | ||||
|
Total
|
4,599,609 | ||||
| (1) | Mr. Lancaster received a 2010 bonus payment of $704,000 in March 2011 in accordance with the Settlement Agreement. |
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Table of Contents
| (2) | Mr. Lancaster retired on January 1, 2011. His Salaried Pension Plan benefit commenced as a 65% Joint and Survivor annuity on January 1, 2011 and his SERP benefit will commence as a 65% Joint and Survivor annuity on July 1, 2011. The amounts presented reflect the actual commencement dates, form of payment elections and his spouse’s date of birth. | |
| (3) | Mr. Lancaster is entitled to retiree medical account balance and executive life insurance. The amount presented reflects these benefits. | |
| (4) | In accordance with the Settlement Agreement, Mr. Lancaster’s outstanding PARS, RSU awards and restricted stock vested upon his retirement effective January 1, 2011. | |
| (5) | The 2009 performance award payable to Mr. Lancaster is based on actual performance through March 31, 2011 prorated for the portion of his employment as compared to the performance period. Reflects pro-rata award assuming target is achieved. | |
| (6) | The 2010 performance award payable to Mr. Lancaster is based on actual performance through December 31, 2010 prorated for the portion of his employment as compared to the performance period. Mr. Lancaster received payment of the award in March 2011. | |
| (7) | In accordance with the Senior Executive Special Incentive award, upon his retirement as of January 1, 2011, Mr. Lancaster will receive payment of $1 million in 2011. | |
| (8) | Mr. Lancaster will receive consulting fees of $420,000, payable in monthly installments in 2011, for services provided pursuant to the Settlement Agreement. |
52
Table of Contents
PROPOSAL 2:
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Section 951 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (the
Dodd-Frank
Act) requires AAM to seek a non-binding advisory vote from our
stockholders to approve the compensation of our named executive
officers as disclosed in the Compensation Discussion and
Analysis (CD&A) and narrative and tabular disclosures in
this Proxy Statement. In the CD&A, we have provided a
detailed description of our compensation programs, including our
compensation philosophy and objectives, the individual elements
of executive pay, and how the programs are administered. We
encourage you to review the CD&A, together with the other
narrative and tabular disclosures, in considering your advisory
vote on our named executive officers’ compensation.
Our executive officer compensation program is designed to reward
performance that supports the achievement of the Company’s
business objectives and creates long-term stockholder value. The
Compensation Committee considers the following fundamental
objectives, among others, in determining our compensation
programs for our executive officers:
| • | Compensation and benefit programs should attract, motivate and retain experienced executives who are vital to our short-term and long-term success, profitability and growth. | |
| • | Compensation and benefit programs should foster the long-term focus required for success in the global automotive industry. | |
| • | Executive officers should be AAM stockholders. | |
| • | The objectives of rewarding performance and retention should be balanced. |
Features of our compensation program and practices include the
following:
| • | A significant portion of executive compensation is tied to Company performance. Payouts of annual and long-term incentive awards are based on the achievement of a mix of financial objectives. | |
| • | Executive officers are required to comply with stock ownership guidelines established by the Compensation Committee and are prohibited from hedging/pledging Company stock. | |
| • | There are no golden parachute agreements and no excise tax gross-ups. |
The Board and the Compensation Committee believe that AAM’s
compensation programs have been effective in motivating our
senior management team to successfully deliver on our strategic
goals and achieve superior results for AAM and its stockholders
and other key stakeholders. We believe the effectiveness of our
compensation programs and policies is demonstrated by the recent
accomplishments of AAM’s senior management team. Our senior
management team led a comprehensive, multi-year restructuring of
our business, yielding significant, permanent structural cost
reductions and positioning us to significantly improve our
profitability and free cash flow performance in 2010. We believe
that our executive compensation programs are designed to
continue to drive positive performance in the achievement of
AAM’s long-term strategic goals and provide value for our
stockholders.
Although the advisory vote is not binding, the Board and the
Compensation Committee will consider the outcome of the advisory
vote on executive compensation when making future compensation
decisions.
The Board of Directors unanimously recommends a vote FOR the
following non-binding resolution:
RESOLVED, that the stockholders approve the compensation of
our named executive officers as described in the Compensation
Discussion and Analysis, tables and related narrative disclosure
in this proxy statement made pursuant to the compensation
disclosure rules of the Securities and Exchange Commission.
53
Table of Contents
PROPOSAL 3: FREQUENCY
OF ADVISORY VOTE ON EXECUTIVE OFFICER COMPENSATION
Under the Dodd-Frank Act, AAM is also required to submit for
stockholder vote a non-binding resolution to determine whether
the advisory stockholder vote on executive compensation
(say-on-pay)
shall occur every one, two or three years. Although this vote is
advisory and non-binding, the Board will review voting results
and give consideration to the outcome of the vote when
considering the frequency of future
say-on-pay
proposals.
The Board believes that submitting the advisory vote on
executive compensation to stockholders on an annual basis is
appropriate for AAM and its stockholders at this time. While the
Board is recommending that you vote in favor of submitting
advisory votes every year, you are not voting to approve or
disapprove the Board’s recommendation. The proxy card
provides you with a choice of voting to submit the vote every
one, two or three years, or of abstaining from voting.
The Board unanimously recommends that you vote for the
alternative of “one year” for future advisory votes on
executive compensation.
54
Table of Contents
2010 COMPENSATION
OF NON-EMPLOYEE DIRECTORS
Total 2010 compensation of our non-employee directors is shown
below.
|
Non-Equity |
||||||||||||
|
Fees Earned or |
Incentive Plan |
|||||||||||
|
Paid in Cash |
Compensation(2) |
Total |
||||||||||
|
Name(1)
|
($) | ($) | ($) | |||||||||
|
Salvatore J. Bonanno, Sr.
|
63,450 | 84,000 | 147,450 | |||||||||
|
Elizabeth A. Chappell
|
71,250 | 79,632 | 150,882 | |||||||||
|
Forest J. Farmer
|
86,150 | 84,000 | 170,150 | |||||||||
|
Richard C. Lappin
|
71,450 | 84,000 | 155,450 | |||||||||
|
William P. Miller II
|
75,450 | 75,264 | 150,714 | |||||||||
|
Larry K. Switzer
|
79,250 | 75,264 | 154,514 | |||||||||
|
Thomas K. Walker
|
97,250 | 84,000 | 181,250 | |||||||||
|
Dr. Henry T. Yang
|
66,450 | 79,632 | 146,082 | |||||||||
| (1) | James A. McCaslin joined the Board effective February 8, 2011 and received no compensation in 2010. | |
| (2) | Reflects amounts earned under the 2009 deferred compensation unit (DCUs) award as described below. The 2009 annual awards were adjusted for certain directors based on the amount of restricted stock unit grants received in 2008. |
No equity awards were granted to non-employee directors during
2010. As of December 31, 2010, each non-employee director
had the following number of outstanding options and restricted
stock units (RSUs):
|
Option Awards |
Restricted Stock |
|||||||
|
Outstanding |
Units Outstanding |
|||||||
|
Name
|
($) | ($) | ||||||
|
Salvatore J. Bonanno, Sr.
|
— | — | ||||||
|
Elizabeth A. Chappell
|
5,000 | 11,100 | ||||||
|
Forest J. Farmer
|
7,500 | 4,600 | ||||||
|
Richard C. Lappin
|
7,500 | 5,650 | ||||||
|
William P. Miller II
|
7,500 | 14,350 | ||||||
|
Larry K. Switzer
|
7,500 | 14,350 | ||||||
|
Thomas K. Walker
|
7,500 | 7,850 | ||||||
|
Dr. Henry T. Yang
|
7,500 | 11,100 | ||||||
Elements of
Compensation
Our non-employee director compensation program in effect during
2010 consisted of annual retainer and meeting attendance fees
and an annual award of deferred compensation units (DCUs) as
described below. Employee directors do not receive compensation
for service on the Board.
2010 Annual
Retainer and Meeting Attendance Fees
|
Annual retainer
|
$ | 50,000 | ||
|
Board meeting attendance fee
|
1,500 | |||
|
Committee meeting attendance fee:
|
||||
|
Committee chairman
|
3,000 | |||
|
Other committee members
|
2,000 | |||
|
Committee chairman attendance at meetings at the Company
for Committee-related business |
1,000 |
55
Table of Contents
Deferred
Compensation Units
In April 2010, annual DCU awards of $70,000 were made to each
non-employee director as of the 2010 annual meeting of
stockholders. The DCU awards vest in one year and the total
payment will be based on AAM’s total shareholder return,
with payments ranging from 80 percent to 120 percent of the DCU
award amount.
2011 Non-Employee
Director Compensation
The Board of Directors, upon the recommendation of the
Compensation Committee, approved an increase in the annual
retainer and the annual DCU award amount for non-employee
directors for 2011. Effective January 1, 2011, the retainer
was increased to $60,000. Effective at the 2011 annual meeting
of stockholders, non-employee directors will receive an annual
DCU award in the amount of $80,000. These adjustments to
AAM’s non-employee director compensation program were made
in consideration of a market study of non-employee director
compensation performed in 2010 by the Compensation
Committee’s independent compensation consultant, Meridian
Compensation Partners, LLC.
Deferral
Non-employee directors may elect to defer, on a pre-tax basis, a
portion of their retainer and meeting fees and receive
tax-deferred earnings (or losses) on the deferrals under
AAM’s Executive Deferred Compensation Plan. The rate of
return on deferred amounts is based on the performance of
selected benchmark funds identified in the plan, which is
described in Nonqualified Deferred Compensation above.
Non-employee directors may also elect to defer settlement of
RSUs and DCUs until after termination of service from the Board.
Stock Ownership
Guidelines
The stock ownership guidelines for non-employee directors
recommend a minimum ownership of 4,000 shares of AAM common
stock. Stock ownership of our non-employee directors is shown in
the Security Ownership section below.
56
Table of Contents
SECURITY
OWNERSHIP
The following tables show the number of shares of AAM common
stock beneficially owned as of March 3, 2011 by:
| • | each person known to us who beneficially owns more than 5 percent of AAM common stock; | |
| • | each of our non-employee directors and nominees; | |
| • | our named executive officers; and | |
| • | all directors, nominees and executive officers (as of March 3, 2011) as a group. |
A beneficial owner of stock is a person who has voting power
(the power to control voting decisions) or investment power (the
power to cause the sale of the stock). All individuals listed in
the tables have sole voting and investment power over the shares
unless otherwise noted.
The beneficial ownership calculation includes
75,301,263 shares of AAM common stock outstanding on
March 3, 2011.
MORE THAN 5%
BENEFICIAL OWNERS
The following persons have filed reports with the SEC for the
period ending December 31, 2010, stating that they
beneficially own more than five percent of AAM’s
common stock.
|
Shares of |
||||||||
|
Common Stock |
Percent of |
|||||||
|
Beneficially |
Shares |
|||||||
|
Name and Address
|
Owned | Outstanding | ||||||
| Barrow, Hanley, Mewhinney & Strauss, Inc.(1) | 4,529,426 | 6.35 | ||||||
|
2200 Ross Avenue, 31st Floor Dallas, TX 75201 |
||||||||
| Eagle Asset Management, Inc.(2) | 4,817,674 | 6.75 | ||||||
|
880 Carillon Parkway St. Petersburg, FL 33716 |
||||||||
| TIAA-CREF Investment Management, LLC(3) | 6,417,325 | 8.99 | ||||||
|
730 Third Avenue New York, NY 10017 |
||||||||
| (1) | Based on the Schedule 13G filed by Barrow, Hanley, Mewhinney & Strauss, Inc., reporting shared voting power over 2,628,400 shares, sole voting power over 1,901,026 shares, and sole investment power over 4,529,426 shares. | |
| (2) | Based on the Schedule 13G filed by Eagle Asset Management, Inc., reporting sole voting and investment power over 4,817,674 shares. | |
| (3) | Based on the Schedule 13G filed jointly by TIAA-CREF Investment Management, LLC and Teachers Advisors, Inc., reporting sole voting and investment power over 6,417,325 shares. |
57
Table of Contents
DIRECTORS AND
EXECUTIVE OFFICERS
|
Percent |
||||||||||||
|
Shares |
of |
|||||||||||
|
Beneficially |
Shares |
|||||||||||
| Owned(1)(2) | Outstanding | |||||||||||
|
Directors
|
||||||||||||
|
Salvatore J. Bonanno, Sr.
|
25,000 | * | ||||||||||
|
Elizabeth A. Chappell
|
17,100 | * | ||||||||||
|
Forest J. Farmer
|
30,350 | * | ||||||||||
|
Richard C. Lappin
|
21,950 | * | ||||||||||
|
James A. McCaslin
|
— | * | ||||||||||
|
William P. Miller II
|
27,850 | * | ||||||||||
|
Larry K. Switzer
|
22,850 | * | ||||||||||
|
Thomas K. Walker
|
21,350 | * | ||||||||||
|
Dr. Henry T. Yang
|
19,600 | * | ||||||||||
|
Named Executive
Officers(3)
|
||||||||||||
|
Richard E.
Dauch(4)
|
7,249,187 | 9.5 | ||||||||||
|
Michael K. Simonte
|
96,951 | * | ||||||||||
|
David C.
Dauch(5)
|
168,025 | * | ||||||||||
|
John J. Bellanti
|
107,400 | * | ||||||||||
|
John E. Jerge
|
116,900 | * | ||||||||||
|
Directors and Executive Officers as a Group
(24 persons)(6)
|
8,605,202 | 11.1 | ||||||||||
| (*) | Less than 1 percent of the outstanding shares of AAM common stock. | |
| (1) | Includes RSUs awarded to non-employee directors that have vested or will vest within 60 days. For the number of RSUs held by each non-employee director, see table to the 2010 Compensation of Non-Employee Directors. | |
| (2) | Includes the following number of shares of common stock which may be acquired upon exercise of options that were exercisable or would become exercisable within 60 days: 5,000 for Ms. Chappell; 7,500 for Messrs. Farmer, Lappin, Miller, Switzer, Walker and Yang; 1,399,500 for Mr. R.E. Dauch; 69,500 for Mr. Simonte; 117,865 for Mr. D.C. Dauch; 77,700 for Mr. Bellanti and 70,000 for Mr. Jerge. | |
| (3) | Includes shares of restricted stock held by named executive officers over which they have sole voting power but no investment power: 39,215 for Mr. R.E. Dauch; 17,200 for Mr. Simonte; 21,300 for Mr. D.C. Dauch; 16,200 for Mr. Bellanti and 13,900 for Mr. Jerge. | |
| (4) | Includes 1,938,060 shares of AAM common stock held in family trusts and 111,710 held in a charitable family foundation. Mr. R.E. Dauch shares voting and investment power over shares held by the family trusts and the charitable family foundation. Also includes 3,760,702 shares held by the Sandra J. Dauch Gift Trust, of which Mr. R.E. Dauch is trustee. | |
| (5) | Includes 532 shares held in trusts for the benefit of Mr. D.C. Dauch’s children. | |
| (6) | Includes shares held jointly with family members over which a director or executive officer shares voting and/or investment power. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires our directors and executive officers, and persons who
own more than 10 percent of a registered class of our
equity securities, to file with the SEC initial reports of
ownership and reports of changes in ownership of our common
stock. Based solely on our review of these reports, and written
representations from such reporting persons, we believe that all
Section 16(a) filing requirements applicable to our
executive officers, directors and owners of more than
10 percent of AAM’s common stock were met during 2010.
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| PROPOSAL 4: | RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2011 |
The Audit Committee of the Board of Directors of AAM has
appointed Deloitte & Touche LLP to serve as the
independent registered public accounting firm to examine the
Company’s consolidated financial statements for the year
ending December 31, 2011. Although ratification is not
required by our bylaws or otherwise, the Board is submitting the
appointment of Deloitte & Touche LLP to our
stockholders as a matter of good corporate practice. If the
appointment is not ratified, the Audit Committee will consider
whether the appointment is appropriate and will use its
discretion in determining whether the appointment of
Deloitte & Touche LLP is in the best interests of the
Company and its stockholders.
Representatives of Deloitte & Touche LLP will attend
the 2011 annual meeting and be available to make a statement or
respond to appropriate questions.
The Board unanimously recommends a vote FOR ratification of
the appointment of Deloitte & Touche LLP as the
Company’s independent registered public accounting firm for
2011.
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AUDIT COMMITTEE
DISCLOSURE
Report of the
Audit Committee
The Audit Committee assists the Board in fulfilling its
oversight responsibilities with respect to the Company’s
financial reporting process, by monitoring, among other matters,
the quality and integrity of the Company’s financial
statements, the independence and performance of
Deloitte & Touche LLP (D&T), the Company’s
independent registered public accounting firm, and the
performance of the Company’s internal auditors. Management
has primary responsibility for preparing the consolidated
financial statements and for the reporting processes, including
the design and maintenance of the Company’s system of
internal controls. The independent registered public accounting
firm is responsible for auditing the Company’s consolidated
financial statements and opining upon the effectiveness of the
internal control over financial reporting under the standards of
the Public Company Accounting Oversight Board (PCAOB). The Audit
Committee is solely responsible for the compensation,
appointment and oversight of the Company’s independent
registered public accounting firm.
In this context, the Audit Committee has met and held
discussions with management, D&T and the internal auditors,
separately and together, with and without management present,
regarding the Company’s audited consolidated financial
statements for the year ended December 31, 2010, and the
Company’s internal controls. Management represented to the
Audit Committee that the Company’s consolidated financial
statements were prepared in accordance with generally accepted
accounting principles in the U.S. The Audit Committee also
discussed with the independent registered public accounting firm
the matters required to be discussed by Auditing Standards
No. 61, as amended (AICPA, Professional Standards, Vol. 1,
AU section 380), as adopted by the Public Company
Accounting Oversight Board in Rule 3200T. Further, the
Audit Committee discussed with the internal auditors the
Company’s plans for and scope of internal audits,
identification of audit risks and results of audit activities.
The Audit Committee reviewed and discussed with the independent
registered public accounting firm the auditor’s
independence from the Company and its management. As part of
that review, D&T submitted to the Audit Committee the
written disclosures and the letter required by the applicable
requirements of the PCAOB regarding D&T’s
communication with the Audit Committee concerning independence
from the Company. Further, the Audit Committee discussed with
D&T the firm’s independence and considered whether
D&T’s provision of non-audit services to the Company
was compatible with maintaining D&T’s independence.
The Audit Committee concluded that D&T is independent from
the Company and its management.
Based upon the considerations described above and subject to the
limitations upon the role and responsibilities of the Audit
Committee, the Audit Committee recommended to the Board that the
audited consolidated financial statements for the year ended
December 31, 2010 be included in the Company’s 2010
Annual Report on
Form 10-K.
Audit Committee
of the Board of Directors
William P. Miller II, Chairman
Larry K. Switzer
Thomas K. Walker
Larry K. Switzer
Thomas K. Walker
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Policy for
Pre-Approval of Audit and Non-Audit Services
The Audit Committee’s policy is to approve in advance all
audit and permitted non-audit services (including scope, fee
structure and the potential effect of the service on the
auditor’s independence) to be performed for the Company by
its independent registered public accounting firm. Pre-approval
is generally provided for up to one year, is detailed as to the
particular service or category of services and is generally
subject to a specific budget. The Audit Committee may also
pre-approve particular services on a
case-by-case
basis. The Chairman of the Audit Committee may pre-approve
permissible non-audit services that arise between Audit
Committee meetings, provided the fees do not exceed a limit
established by the Audit Committee and the Audit Committee is
informed of the decision to pre-approve the service at its next
scheduled meeting. The Audit Committee received regular updates
on the amount of fees and scope of audit, non-audit and tax
services provided by D&T during 2010. During fiscal 2010,
all services provided by D&T as noted in the table below
were authorized and approved by the Audit Committee in
compliance with pre-approval policies and procedures described
herein.
Independent
Registered Public Accounting Firm’s Fees
The aggregate amount of fees billed by D&T, the member
firms of Deloitte Touche Tohmatsu, and their respective
affiliates during the previous two fiscal years is as follows:
| December 31, | ||||||||
| 2010 | 2009 | |||||||
|
Audit
Fees(1)
|
$ | 1,181,000 | $ | 1,353,000 | ||||
|
Audit Related
Fees(2)
|
— | — | ||||||
|
Tax
Fees(3)
|
238,000 | 32,000 | ||||||
|
All Other Fees
|
— | — | ||||||
|
Total
|
$ | 1,419,000 | $ | 1,385,000 | ||||
| (1) | Includes fees for the audit of annual consolidated financial statements, reviews of quarterly consolidated financial statements, statutory audits, consents and comfort letters, reviews of documents filed with the SEC and other services related to SEC matters. Audit fees also include fees incurred in connection with an audit of internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act. | |
| (2) | Audit-related fees are for services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements. This category includes fees related to internal control, financial accounting and reporting standards. | |
| (3) | Fees for tax services in 2010 and 2009 consisted of fees for tax compliance, tax advice and tax planning services. |
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OTHER
MATTERS
Expenses of
Solicitation
The Board is soliciting your proxy, and the expense of
soliciting proxies will be borne by AAM. Proxy materials were
distributed by mail by Computershare Trust Company, N.A. In
addition, AAM will reimburse brokers, banks and other holders of
record for their expenses in forwarding proxy materials to
stockholders.
We have retained Georgeson Inc. to assist in the solicitation of
proxies for an estimated fee of $10,000 plus reimbursement of
certain out-of-pocket expenses. Georgeson may be contacted at
(866) 432-2791.
In addition, our officers and certain other employees may
solicit proxies personally or by telephone, fax or
e-mail. They
will receive no special compensation for these services.
Stockholder
Proposals for 2012 Annual Meeting
Under SEC rules, stockholder proposals for the 2012 annual
meeting of stockholders must be received by the Secretary of AAM
at One Dauch Drive, Detroit, MI
48211-1198,
on or before November 20, 2011 in order to be eligible for
inclusion in the Company’s 2012 proxy materials. In
addition, AAM’s bylaws require stockholders intending to
present any matter for consideration at the 2012 annual meeting
of stockholders, other than through inclusion in our proxy
materials, to notify AAM’s Secretary in writing at the
above address on or before February 19, 2012, but no earlier
than January 30, 2012.
Obtaining a copy
of 2010
Form 10-K
AAM will furnish to stockholders without charge a copy of our
Annual Report on
Form 10-K
for the year ended December 31, 2010. Requests should be
directed to American Axle & Manufacturing Holdings,
Inc., Investor Relations Department, One Dauch Drive, Detroit,
MI
48211-1198,
or by e-mail
to investorrelations@aam.com. The 2010 Annual Report on
Form 10-K
is available on our website at
http://investor.aam.com/sec.cfm.
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| IMPORTANT ANNUAL MEETING INFORMATION Electronic Voting Instructions You can vote by Internet or telephone! Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on April 28, 2011. Vote by Internet • Log on to the Internet and go to www.envisionreports.com/axl • Follow the steps outlined on the secured website. Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada any time on a touch tone telephone. There is NO CHARGE to you for the call. • Follow the instructions provided by the recorded message. 000004 Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. Annual Meeting Proxy Card |
| 1234 5678 9012 345 _IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE A Proposals — The Board of Directors recommends a vote FOR all the nominees listed in Proposal 1, FOR Proposal 2, FOR an annual frequency on Proposal 3, and FOR Proposal 4. 1. Election of Directors: For Withhold For Withhold For Withhold 01 — Richard E. Dauch 02 — James A. McCaslin 03 — William P. Miller II 04 — Larry K. Switzer For Against Abstain 2. Approval, on a advisory basis, of the compensation of the Company’s named executive officers as described in the Compensation Discussion and Analysis, tables and related narrative. 3. Approval, on an advisory basis, of frequency for future advisory votes on say-on-pay. 1 Yr 2 Yrs 3 Yrs Abstain 4. Ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for year ending December 31, 2011. For Against Abstain In their discretion, the proxies are authorized to the extent permitted by law to vote on any and all other matters as may properly come before the meeting, including the authority to vote to adjourn the meeting. Non-Voting Items Change of Address — Please print new address below Meeting Attendance Mark box to the right if you plan to attend the Annual Meeting. Authorized Signatures — This section must be completed for your vote to be counted. C — Date and Sign Below Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. This section must be completed for your instructions to be executed. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. |
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| _IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Proxy — American Axle & Manufacturing Holdings, Inc. |
| PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON APRIL 28, 2011 SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS Richard E. Dauch and Steven R. Keyes, or either of them, with full power of substitution, are authorized to vote all of your shares as if you were present at the Annual Meeting of Stockholders of American Axle & Manufacturing Holdings, Inc. to be held in the Auditorium at AAM’s World Headquarters Complex, One Dauch Drive, Detroit, Michigan, at 3:00 p.m. on April 28, 2011 or at any adjournments of the meeting. This proxy will be voted as you specify on the reverse side. If you do not make a choice, this proxy will be voted for the director nominees in Proposal 1, for the approval of the compensation of the Company’s named executive officers in Proposal 2, “1 year” for the frequency for future advisory votes in Proposal 3 and ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm in Proposal 4. Voting by the Internet or by telephone reduces costs to AAM. If you vote over the Internet or by telephone, please do not mail this card. (Items to be voted appear on reverse side.) |
TABLE OF CONTENTS
INTERNET AVAILABILITY OF PROXY MATERIALSQUESTIONS AND ANSWERS ABOUT VOTING AND THE ANNUAL MEETINGPROPOSAL 1: ELECTION OF DIRECTORSNominees for DirectorprintCORPORATE GOVERNANCECOMPENSATION OF EXECUTIVE OFFICERSCompensation Discussion and AnalysisprintSummary Compensation TableprintGrants of Plan-Based AwardsprintOutstanding Equity Awards at December 31, 2010printOptions Exercised and Stock VestedprintPension BenefitsprintNonqualified Deferred CompensationprintPotential Payments Upon Termination or Change of ControlprintPROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATIONPROPOSAL 3: FREQUENCY OF ADVISORY VOTE ON EXECUTIVE OFFICER COMPENSATION2010 COMPENSATION OF NON-EMPLOYEE DIRECTORSSECURITY OWNERSHIPSection 16(a) Beneficial Ownership Reporting ComplianceprintPROPOSAL 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2011AUDIT COMMITTEE DISCLOSUREReport of the Audit CommitteeprintPolicy for Pre-Approval of Audit and Non-Audit ServicesprintFees of Independent Public AccountantsprintOTHER MATTERS