American Axle & Manufacturing Holdings Inc

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2024, as supplemented by Part II, Item 1A. "Risk Factors" in our Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2025,  and June 30, 2025, except the following risk factors included therein that have been modified on this Form 10-Q for the sixnine months ended JuneSeptember 30, 2025:

Risks Related to the Pending Business Combination with Dowlais (Business Combination)

We may fail to realize the anticipated benefits and operating synergies expected from the Business Combination.

We beliehave that the Business Combination will create a leading global driveline and metal forming supplier with a comprehensive product portfolio and a diversified customer base. However, the success of the Business Combination will depend, in significant part, on our ability to successfully integrate Dowlais, grow the revenue of the combined company and realize the anticipated strategic benefits and synergies from the Business Combination. This growth and the anticipated benefits of the Business Combination may not be realized fully, or at all, or may take longer to realize than we expect. Actual operating, technological, strategic and revenue opportunities, if achieved at all, may be less significanincurred a substantial amount of debt than we expect or may take longer to achieve than anticipated. If the combined company is not able to achieveo complete these objectives and realize the anticipated benefits and synergies expected from the Business Combina acquisition within a reasonable time, the business, results of operations and financial condition of the combined company could be adversely affected.

The Business Combination will result in significant integration costs, and we may not be able to integrate of Dowlais into the combined company successfully.

The Business Combination involves the integration of two businesses that previously operated independently. If the parties complete the Business Combination, our Chairman of the Board and Chief Executive Officer will lead the combined company, two directors of Dowlais are expected to join the board of directors and certain senior Dowlais executives will be invited to join the senior executive management team of the combined company, in roles to be confirmed. The complexity and magnitude of the integration effort associated with the Business Combination are substantial and require that we fund significant capital and operating expenses to support the integration of the combined operations. Such expenses have included significant transaction, consulting and third-party service fees. The anticipated costs of the integration effort are subject to change. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. We have incurred and expect to continue to incur additional operating expenses as we build up internal resources or engage third-party providers while we integrate Dowlais following the Business Combination.

Additionally, the process of integrating operations could cause an interruption of, or loss of momentum in, our activities or those of Dowlais or the combined company. The diversion of managements attention and any delays or difficulties encountered in connection with the integration of the operations, or the failure to successfully integrate the two businesses and leadership team, could have a material adverse effect on our business, financial condition and results of operations, and on the business, financial condition and results of operations of Dowlais and significant debt to complete the combined company.

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We will incur a substantial amount of debt to complete the acquisition of Dowlais.

We will incur significant debt to complete the Business Combination, including incurring approximately $2.2 b,285 million in additional indebtedness under the Second Amendment and the Amended and Restated Bridge Facilities (each as defined below), or pursuant to other permanent financing that replaces such facilities, which may include the issuance of debt securities and/or one or more senior term loan facilities. In connection with the Business Combination, on February 24, 2025, Holdings and certain of its subsidiaries entered into a second amendment to credit agreement (tnet additional indebtedness under the Second Amendment) to ame and that certain amended and restated credit agreement, dated as of March 11, 2022 (as amended, the Amended and Restated Credit Agreement) pursuant to which, subject to the terms and conditions set forthe issuance of therein, the lenders party thereto agreed to provide certain of Holdings' subsidiaries with: (x) incremental term loan B commitments under the existing Amended and Restated Credit Agreement in an aggregate amount of $843 million and (y) incremental revolving commitments in an aggregate amount of $570 million. Additionally, and in connection with the Business Combination, on January 29, 2025, Holdings and certain of its subsidiari 6.375% Notes entered into bridge credit agreements, which bridge facilities were amended and restated on February 24, 2025 by operation of Holdings and certain of its subsidiaries entering into: (i) an Amended and Restated First Lien Bridge Credit Agreement with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent pursuant to which the lenders party thereto have agreed to provide a $843 million interim loan facility (the Amended and Restated First Lien Bridge Credit Agreement); and (ii) an Amended and Restated Second Lien Bridge Credit Agreement with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent pursuant to which the lenders party thereto have agreed to provide a $500 million interim loan facility (the Amended and Restated Second Lien Bridge Credit Agreement, and together with the Amended and Restated First Lien Bridge Credit Agreement, the Amended and Restated Bridge Facilities). The proceeds of the commitments provided under the Second Amendment and Amended and Restated Bridge Facilities, or of other permanent financing that replaces such facilities, which may include the issuance of debt securities and/or one or more senior term loan facilities, will be used, among other things, to finance the cash consideration payable to Dowlais shareholders pursuant to the Business Combination and expenses payable in connection with the Business Combination (including debt refinancing costs) and to refinance certain indebtedness of Dowlais in connection with the Business Combination.

While we expect to replace the Amended and Restated Bridge Facilities with permanent financing before or after the completion of the Business Combination, our ability to pursue permanent financing will depend in part on global capital and credit market conditions, and we cannot assure that any such replacement financing will be available on terms satisfactory to us or at all. Additionally, if the Amended and Restated Bridge Facilities have not been previously repaid in full on or prior to the one-year anniversary of the first date on which loans are made thereunder, any loans thereunder will automatically be converted into a term loan on terms likely to be significantly less favorable to us. While amounts are outstanding under the Amended and Restated Bridge Facilities, the lenders party thereto may require that AAM issue notes in a Rule 144A or other private offering subject to certain terms and conditions, and to use the proceeds to repay all or a portion of the Amended and Restated Bridge Facilities.

and 7.75% Notes (as described in Note 5 - Long-Term Debt). On a combined company basis, we expect that, together with Dowlais, we would have approximately $4.8 b5,440 million of indebtedness at closing, excluding $1.,495 bmillion of undrawn commitments under our revolving credit facility. This substantial additional level of indebtedness that we expect to incurred in connection with the Business Combination could have important consequences to our business, including making it more difficult to satisfy our debt obligations, increasing our vulnerability to general adverse economic and industry conditions, limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate and restricting us from pursuing certain business opportunities. Additionally, any agreements that we may enter into in connection with the pending Business Combination with Dowlais may contain a number of covenants that impose operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interests. Any failure to comply with covenants in the instruments governing our indebtedness could result have entered in a default under our debt agreements and may adversely affect our ability to operate our business, our subsidiaries' and guarantors' ability to operate their respeconnective businesses and our results of operations and financial condition.

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The Business Combination may expose us to significant unanticipated liabilities relating to the operation of the combined company as on well as material liabilities that were not discovered during our due diligence review of Dowlais.

Tith the Business Combination may expose us to significant unanticipated liabilities relatipending to the operation of the combined company as well as material liabilities that were not discovered during our due diligence review of Dowlais due to the limited nature of such review. These liabilities could include employment or severance-related obligations under applicable law or other benefits arrangements, legal claims, warranty or similar liabilities to customers, claims by or amounts owed to vendors and other unknown or contingent liabilities. Particularly in international jurisdictions, our acquisition of Dowlais, or any future decision to independently enter new international markets where Dowlais previously conducted business, could also expose us to tax liabilities and other amounts owed by Dowlais. In addition, even if the due diligence review identified certain risks, unexpected risks may arise, and previously known risks may materialize in an unexpected manner. The occurrence of such unforeseen or unanticipated liabilities, should they be significant, could have a material adverse effect on the combined company's business, financial condition and results of operations. See "Risks Related to the Pending Business Combination with Dowlais (Business Combination) - Efforts to complete the Business Combination could disrupt our relationships with third parties and associates, divert management's attention, or result in negative publicity or legal proceedings" for discussion of litigation related to the Business Combination.

While the Co-operation Agreement is in effect, we are subject to restrictions on our business activities.

From the date of the Co-operation Agreement until to the closing date of the Business Combination, we are restricted from taking certain actions set forth in the Co-operation Agreement unless consented to by Dowlais or required by applicable law or contract as described in the Co-operation Agreement. These limitations include, among other things, certain restrictions on our ability to amend our organizational documents, to acquire other businesses and assets that would be reasonably likely to precontain a number of covent or materially delay or prejudice the consummation of the Business Combination, to reclassify or issue AAM's capital stock or other certain equity securities, and to pay dividends (or make any other distribution or return of capital). These restrictions could prevent us from pursuing strategic business opportunities and takants that impose operating actions with respect to our business that we may consider advantageous and may, as a result, have a material adverse effect on our fnd financial condition and results of operations.

Stockholders in the combined company will be exposed to additional currency exchange rate fluctuationtrictions on us as, following completion of the Business Combination, there will be an increased proportion of assets, liabilities and earnings denominated in foreign currencies.

As a result of the Business Combination, the financial results of the combined company will be more exposed to currency exchange rate fluctuations and an increased proportion of assets, liabilities and earnings will be denominated in foreign currencies. The combined company will present its financial statements in U.S. dollars and is expected to have a significant proportion of net assets and income in foreign currencies. The combined company's financial condition and results of operations will therefore be more sensitive to movements in foreign exchange rates. A depreciation of foreign currencies relative to the U.S. dollar could have an adverse impact on the combined company's financial results.

Certain Dowlais agreements may contain change of control provisions which, if not waived, could have material adverse effects on the combined company.

Dowlais is a party to various agreements with third parties, customer and supplier contrnd may limit our ability to engage in acts and other material contracts, that that may contain change of control provisions that will be triggered upon the completion of the Business Combination. Agreements with change of control provisions typically provide for or permit the termination of the agreement upon the occurrence of a change of control of one of the parties which can be waived by the relevant counterparties. To the extent waivers are required, the inability to obtain waivers from one or more relevant counterparties could have a material adverse effect on the combined company. Further, it is possible that a contractual counterparty or government agency may take a different view on the interpretation of a change in control provision to that taken by us, thereby resulting in a dispute.

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The complexity of the integration and transition associated with the Business Combination may result in us incurring significant costs to implement changes to our internal control over financial reporting for the combined company.

The additional scale of Dowlais operations, together with the complexity of the integration effort, including changes to or implementation of critical information technology systems, may result in us incurring significant costs, including management time, to integrate and implement changes to our internal control over financial reporting. In addition, we will have to train new associates and thirdin our long-party providers and assume operations in jurisdictions where we have not previously had operations. We expect that the Business Combination may necessitate significant modifications to our internal control systems, processes and information systems, both on a transition basis and over the longer-term as we fully integrate the combined company. Due to the complexity of the Business Combination, we cannot be certain that changes to our internal control over financial reporting will be effective for any period, or implemented in an efficient manner which does not incur significant costs and management time. If we are unable to implement such changes to our internal control over financial reporting in an efficient manner, the combined company's business, financial condition and results of operations and the market perception thereof may be materially adversely affected.

Dowlais is not currently required to comply with the rules of the SEC implementing Section 404 of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act), and the combined company may therefore incur significant costs, expenses and management time in implementing controls and procedterm best interests. Any failures required  to meet the standards required by Section 404 of the Sarbanes-Oxley Act. In particular, Dowlais has identified certain matters which would have been characterized as material weaknesses in Dowlais internal control over financial reporting that would have required disclosure pursuant to the Sarbanes-Oxley Act had Dowlais been required to report on internal control over financial reporting at the relevant time. Although these identified material weaknesses are in the process of being remediated, if Dowlais identifies additional material weaknesses in the future or otherwise fails to maintain an effective system of internal control over financial reporting following the closing of the Business Combination, this could increase the costs, expenses and management time required for the combined company to meet the standards required by Section 404 of the Sarbanes-Oxley Act, and therefore adversely affect the business of the combined company and icomply with covenants in the instruments share price.

Dowlais is not currently required to comply with the rules of the SEC implementing Section 404 of the Sarbanes-Oxley Act, and therefore is not required to make a formal assessment of the effectiveness of its internal control over financial reporting for that purpose. Following the closing of the Business Combination (subject to applicable grace periods), however, the combined company will be required to comply with the SEC's rules implementing Section 404 of the Sarbanes-Oxley Act, which will require the combined company to provide in its annual reports on Form 10-K filed with the SEC, an annual management report on the effectiveness of the combined company's internal control over financial reporting and the combined companys independent registered public accounting firm to attest to the effectiveness of the combined company's internal control over financial reporting. Section 302 of the Sarbanes-Oxley Act will also require the management of the combined company to make certifications as to the effectiveness of the combined company's internal control over financial reporting.

For the purposes of the rules of the SEC implementing Section 404 of the Sarbanes-Oxley Act, a material weakness is a governing our indebtedness could result in a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. In connection with the preparation of its financial statements for inclusion in the Preliminary Proxy Statement (as defined below), Dowlais identified matters in the design and operating effectiveness of iault under our debt agreements internal control over financial reporting which would likely have constituted material weaknesses for the purposes of the rules of the SEC implementing Section 404 of the Sarbanes-Oxley Act.

As of December 31, 2024, Dowlais identified material weaknesses in its control activities and monitoring related to the impact of deficiencies in the design and implementation of certain management review controls, and monitoring thereof, including the review of Dowlais' deferred tax liability together with certain other management review controls in the financial reporting process. These deficiencies arose due to a lack of formally identified thresholds for investigation and insufficient documentation as to the judgmental thresholds used, the review comments raised and resolution of these review comments, and in the case of the review of the deferred tax liaand may adversely affect our ability, a lack of completeness regarding the matters considered in the review. As of the date of this Quarterly Report on Form 10-Q, Dowlais is in the process of remediating these deficiencies.

If Dowlais or its independent registered public accounting firm, or following the closing of the Business Combination, the combined company, or its independent registered public accounting firm, identifies additional significant deficiencies or material weaknesses in the future, fails to fully remedy the identified material weaknesses or otherwise fails to maintain an effective system of internal controls, the combined company may incur significant costs, expenses and management time in remediating such deficiencies or weaknesses or improving internal controls, which may adversely affect the combined companys business, financial condition, results of operations and cash flows as well as investor confidence in the combined company and the combined company's share price and ability to access capital markets.

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Issuance of AAM shares in connection with the Business Combination will significantly reduce our existing stockholders to operate our business, our subsidiaries' aggregate ownership and voting interest in the combined company, will result in existing stockholders exercising less influence over management, and may adversely affect the market price of the shares of the combined company following the completion of the Business Combination.

In connection with the issuance of the AAM common stock in connection with the Business Combination (the Share Issuance), we expect to issue approximately 117,000,000 AAM shares. AAM stockholders and Dowlais shareholders are expected to own approximately 51% and 49%, respectively, of AAM following completion of the Business Combination. The issuance of these new shares will significantly reduce our existing stockholders' ownership and voting interest in the combined company and, as a result, our existing stockholders, individually and in the aggregate, will be able to exert less influence over AAM, including with regard to its management and policies. The issuance of these new shares may also result in fluctuations in the market price of the combined company's shares, including a price decrease.

Even if a material adverse change to Dowlais business or prospnd guarantors' ability to operate their respects were to occur prior to closing, we may not be able to invoke the offer conditions and terminate the Business Combination.

Under Rule 2.7 of the United Kingdom City Code on Takeovers and Mergers (the Takeover Code), and except for a limited number of conditions, we may invoke a condition to the Business Combination to cause the Business Combination not to proceeive businesses and only if the UK Panel on Takeovers and Mergers (the Panel) is satisfied that the circumstances giving rise to that condition not being satisfied are of material significance to AAM in the context of the Business Combination. Because of this Panel consent requirement, the conditions, including as to a material adverse change affecting Dowlais, may provide us less protection than the customary conditiur results of operations in an offer for a U.S. domestic company.

The Takeover Code restricts our ability to cause Dowlais to consummate the Business Combination and limits the relief that we may obtain in the event the Dowlais Board of Directors withdraws its support of the Business Combination.

The Takeover Code limits the contractual commitments that may be obtained from Dowlais to take actions in furtherance of the Business Combination, and the Dowlais board of directors may, if its fiduciary duties so require, withdraw its recommendation in support for the Business Combination and withdraw the Court-sanctioned scheme of arrangement (the Scheme of Arrangement), at any time prior to the Scheme of Arrangement becoming effective. The Takeover Code does not permit Dowlais to pay us any break fee if the Dowlais board of directors does so, nor can Dowlais be subject to any restrictions on soliciting or negotiating other offers or transactions involving Dowlais other than the restrictions that arise under the Takeover Code against undertaking actions or entering into agreements which may impact our takeover offer for Dowlais.and financial condition.

The Business Combination with Dowlais may be delayed or not occur at all for a variety of reasons, including that the Business Combination is subject to various closing conditions, including governmental and regulatory approvals, as well as other uncertainties, and there can be no assurances as to whether or when it may be completed.

It is currently anticipated that the Business Combination will be completed in the fourthirst calendar quarter of 20256. The consummation of the Business Combination is subject to the satisfaction or waiver of certain conditions. A number of the conditions are not within our control, and it is possible that such conditions may prevent, delay or otherwise materially adversely affect the completion of the Business Combination. These conditions include, among others: (i) the sanction of the Schecheme of Arrangement by the High Court of Justice in England and Wales (the Court); (ii) the hearing of the Court at which Dowlais will seek an order sanctioning the Scheme of Arrangement pursuant to Part 26 of the Companies Act 2006 (the Sanctarrangement sanction Hearing) being held on or before the 22nd day after ted by the expected date of the Sanction Hearing to be set out in the scheme document sent to Dowlais shareholders describing the terms and conditions of the Scheme of Arrangement and notHigh Court of Justices of Dowlais meetings and the forms of proxy applicable to Dowlais (or such later date (a) as AAM a in England Dowlais may agree or (b) (in a competitive situation) as may be specified by AAM with the consent of the Panel, and in each case that, if so required, the and Wales (the Court may allow); (iii) the Scheme of Arrangement ) becoming unconditional and becoming effective, subject to Rule 2.7 of the Takeover Code, by no later than 11:59 p.m. on June 29, 2026 (the Long Stop Date) (or such later date (if any) as AAM and Dowlais may agree, with the consent of the UK Panel on Takeovers and Mergers, and the Court may allow); (ivi) confirmation having been received by AAM that the AAM common stock to be issued in connection with the Business Combination has been approved for listing, subject to official notice of issuance, on the New York Stock Exchange and (viii) the receipt of certain required antitrust and other regulatory approvals.

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Many of the conditions to complete the Business Combination are not within our control, and we cannot predict with certainty whether and when any of the remaining required conditions will be satisfied or if another uncertainty may arise. Failure to complete the Business Combination within the expected timeframe or at all could adversely affect our business, results of operations, financial condition, and the market price of our common stock in a number of ways, including that:

the market price of our shares may decline to the extent that the current market price reflects an assumption that the Business Combination will be consummated;

we have incurred, and will continue to incur, significant expenses for professional services in connection with the Business Combination for which we will have received little or no benefit if the Business Combination is not consummated;

we may experience negative publicity and/or reactions from our investors, associates, customers, and other business partners; and

we may be subject to litigation related to any failure by us to complete the Business Combination or related to any enforcement proceeding commenced against us to perform our obligations under the Co-operation Agreement. See "Risks Related to the Pending Business Combination with Dowlais (Business Combination) - Efforts to complete the Business Combination could disrupt our relationships with third parties and associates, divert management's attention, or result in negative publicity or legal proceedings" for further discussion of litigation related to the Business Combination.

If certain conditions or approvals are not met or obtained, we will, subject to certain exceptions and exclusions, be required to pay a break fee under the terms of the Co-operation Agreement.

In certain circumstances, such as if our board of directors no longer recommends the Business Combination, we will be required to pay a break fee of $50 million to Dowlais. Furthermore, if we invoke (with the approval of the Panel) any regulatory condition or any regulatory conditions have not been satisfied or waived by us by the Long Stop Date, we will be required to pay a break fee of $50 million to Dowlais. If a break fee is ultimately required to be paid by us, the payment of such fee may have an adverse impact on our financial results.

Efforts to complete the Business Combination could disrupt our relationships with third parties and associates, divert managements attention, or result in negative publicity or legal proceedings.

We have expended, and continue to expend, significant management time and resources in an effort to complete the Business Combination, which may have a negative impact on our ongoing business, strategies and operations. Uncertainty regarding the outcome of the Business Combination and our future could disrupt our business relationships with our existing and potential customers, channel partners, service providers and other business partners, who may attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than us. Uncertainty regarding the outcome of the Business Combination could also adversely affect our ability to recruit and retain key personnel and other associates. The pending Business Combination may also result in negative publicity and a negative impression of us in the financial markets, and has resulted in, and may in the future lead to, litigation against us and our directors and officers. For example, as previously disclosed, complaints were filed on June 19, 2025 and June 20, 2025 (collectively, the Complaints) alleging, among other things, that the preliminary proxy statement (the Preliminary Proxy Statement) filed on May 15, 2025 by AAM with the SEC on Schedule 14A in connection with the Business Combination, and the definitive proxy statement filed on June 2, 2025 by AAM with the SEC on Schedule 14A in connection with the Business Combination, as supplemented by the Current Reports on Form 8-K filed by AAM with the SEC on June 9, 2025 and July 7, 2025 (the Proxy Statement), omitted material information that rendered it incomplete or misleading. The plaintiffs in the Complaints allege negligent misrepresentation and concealment in violation of New York State common law, and are seeking to enjoin the defendants from taking any steps to consummate the Business Combination until the defendants disclose certain allegedly material information in the Proxy Statement in advance of the special meeting of AAMs stockholders to approve certain matters related to the Business Combination, or, in the event the Business Combination is consummated, to rescind the Business Combination or recover actual and punitive damages resulting from the defendants alleged conduct described in the Complaints. AAM and the other named defendants deny that they have violated any laws, believe that the asserted claims are without merit and that the disclosures in the Preliminary Proxy Statement and the Proxy Statement comply fully with applicable law. Such litigation, and any future litigation, may be distracting to management and, may require us to incur significant costs. Such litigation, and any future litigation, could result in the Business Combination being delayed and/or enjoined by a court of competent jurisdiction, which could prevent the Business Combination from being completed. The occurrence of any of these events individually or in combination could have a material and adverse effect on our business, financial condition and results of operations.

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