
	EMPLOYEE BENEFIT PLANS

PENSION AND OTHER POSTRETIREMENT DEFINED BENEFIT PLANS We sponsor various qualified and non-qualified defined benefit pension plans for our eligible associates. We also maintain hourly and salaried benefit plans that provide postretirement medical, dental, vision, legal and life insurance benefits (OPEB) to our eligible retirees and their dependents in the U.S.

As part of the 2009 Settlement and Commercial Agreement, GM confirmed its obligation to share proportionally in the cost of OPEB for eligible retirees based on the length of service an employee had with AAM and GM. We have included in our OPEB obligation the amounts expected to be received pursuant to this agreement of $270.6 million and $254.4 million at December 31, 2011 and December 31, 2010, respectively. We have also recorded a corresponding asset for these amounts on our Consolidated Balance Sheet, $10.4 million that is classified as a current asset and $260.2 million that is classified as a noncurrent asset as of December 31, 2011.

Actuarial valuations of our benefit plans were made as of December 31, 2011 and 2010. The principal weighted-average assumptions used in the year-end valuation of our U.S. and U.K. plans appear in the following table. The U.S. discount rates are based on an actuarial review of a hypothetical portfolio of long-term, high quality corporate bonds matched against the expected payment stream for each of our plans. The U.K. discount rate is based on a review of long-term bonds, in consideration of the average duration of plan liabilities. The assumptions for expected return on plan assets are based on future capital market expectations for the asset classes represented within our portfolios and a review of long-term historical returns. The rates of increase in compensation and health care costs are based on current market conditions, inflationary expectations and historical information.



	Pension Benefits												OPEB
	2011				2010				2009				2011		2010		2009
	U.S.		U.K		U.S.		U.K		U.S.		U.K.
Discount rate	5.10	%	4.65	%	5.70	%	5.35	%	6.10	%	5.70	%	5.10	%	5.70	%	6.00	%
Expected return on plan assets	8.00	%	4.60	%	8.00	%	6.00	%	8.00	%	6.25	%	N/A		N/A		N/A
Rate of compensation increase	4.00	%	3.25	%	3.75	%	3.65	%	3.75	%	3.75	%	4.00	%	3.75	%	3.75	%

The accumulated benefit obligation for all defined benefit pension plans was $706.2 million and $656.5 million at December 31, 2011 and December 31, 2010, respectively. The following table summarizes the changes in projected benefit obligations and plan assets and reconciles the funded status of the benefit plans, which is the net benefit plan liability:



	Pension Benefits						OPEB
	December 31,						December 31,
	2011			2010			2011			2010
	(in millions)						(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	665.4		$	619.6		$	564.3		$	507.1
Service cost	4.8			4.9			0.9			1.0
Interest cost	37.1			36.8			17.1			16.1
Plan amendments	—			4.4			—			—
Actuarial loss	45.5			35.3			11.4			25.4
Change in GM portion of OPEB obligation	—			—			16.2			25.1
Participant contributions	0.6			0.7			—			—
Curtailments	(2.5		)	0.1			(10.0		)	—
Benefit payments	(33.7		)	(33.6		)	(11.5		)	(10.4		)
Currency fluctuations	(0.5		)	(2.8		)	—			—
Net change	51.3			45.8			24.1			57.2
Benefit obligation at end of year	$	716.7		$	665.4		$	588.4		$	564.3

Change in plan assets
Fair value of plan assets at beginning of year	$	412.4		$	358.7		$	—		$	—
Actual return on plan assets	11.0			44.7			—			—
Employer contributions	52.0			44.0			11.5			10.4
Participant contributions	0.6			0.7			—			—
Benefit payments	(33.7		)	(33.6		)	(11.5		)	(10.4		)
Currency fluctuations	(0.6		)	(2.1		)	—			—
Net change	29.3			53.7			—			—
Fair value of plan assets at end of year	$	441.7		$	412.4		$	—		$	—

Amounts recognized in our balance sheets are as follows:



	Pension Benefits						OPEB
	December 31,						December 31,
	2011			2010			2011			2010
	(in millions)						(in millions)
Current liabilities	$	(1.2	)	$	(1.2	)	$	(29.4	)	$	(28.8	)
Noncurrent liabilities	(273.8		)	(251.8		)	(559.0		)	(535.5		)
Net liability	$	(275.0	)	$	(253.0	)	$	(588.4	)	$	(564.3	)

Pre-tax amounts recorded in AOCI, not yet recognized in net periodic benefit cost (credit) as of December 31, 2011 and 2010, consists of:



	Pension Benefits						OPEB
	December 31,						December 31,
	2011			2010			2011			2010
	(in millions)						(in millions)
Net actuarial gain (loss)	$	(230.3	)	$	(171.2	)	$	(1.8	)	$	9.2
Net prior service credit	0.9			1.0			13.6			28.8
Deferred curtailment gain	—			—			22.0			—
Total amounts recorded	$	(229.4	)	$	(170.2	)	$	33.8		$	38.0

The components of net periodic benefit cost (credit) are as follows:



	Pension Benefits									OPEB
	2011			2010			2009			2011			2010			2009
	(in millions)									(in millions)
Service cost	$	4.8		$	4.9		$	5.2		$	0.9		$	1.0		$	2.3
Interest cost	37.1			36.8			36.1			17.1			16.1			17.8
Expected asset return	(31.9		)	(31.8		)	(30.4		)	—			—			—
Amortized actuarial loss (gain)	4.5			2.5			1.3			0.4			(1.4		)	(1.7		)
Amortized prior service credit	(0.1		)	—			(0.1		)	(3.2		)	(3.1		)	(5.4		)
Special and contractual
termination benefits	—			—			2.5			—			—			(0.7		)
Curtailments	—			0.2			(1.5		)	—			—			(68.0		)
Settlement	0.1			—			0.4			—			—			—
Net periodic benefit cost (credit)	$	14.5		$	12.6		$	13.5		$	15.2		$	12.6		$	(55.7	)

Our postretirement cost sharing asset from GM is measured on the same basis as the portion of the obligation to which it relates. The actuarial gains and losses related to the GM portion of the OPEB obligation are recognized immediately in the Consolidated Statement of Operations as an offset against the gains and losses related to the change in the corresponding GM postretirement cost sharing asset. These items are presented net in the change in benefit obligation and net periodic benefit cost components disclosed above. Remaining actuarial gains and losses are deferred and amortized over the expected future service periods of the active participants.

The estimated net actuarial loss and prior service credit for the defined benefit pension plans that is expected to be amortized from AOCI into net periodic benefit cost in 2012 are $6.8 million and $0.1 million, respectively. The estimated net actuarial loss and prior service credit for the other defined benefit postretirement plans that is expected to be amortized from AOCI into net periodic benefit cost in 2012 are $0.6 million and $2.0 million, respectively.

For measurement purposes, a weighted average annual increase in the per-capita cost of covered health care benefits of 8.5% was assumed for 2012. The rate was assumed to decrease gradually to 5.0% by 2019 and to remain at that level thereafter. Health care cost trend rates have a significant effect on the amounts reported for the health care plans. A 1.0% increase in the assumed health care cost trend rate would have increased total service and interest cost in 2011 and the postretirement obligation, net of GM cost sharing, at December 31, 2011 by $1.7 million and $35.9 million, respectively. A 1.0% decrease in the assumed health care cost trend rate would have decreased total service and interest cost in 2011 and the postretirement obligation, net of GM cost sharing, at December 31, 2011 by $1.5 million and $29.9 million, respectively.

The expected future pension and other postretirement benefits to be paid, net of GM cost sharing, for each of the next five years and in the aggregate for the succeeding five years thereafter are as follows: $51.1 million in 2012; $52.9 million in 2013; $54.8 million in 2014; $56.4 million in 2015; $57.2 million in 2016 and $300.7 million for 2017 through 2021. These amounts were estimated using the same assumptions to measure our 2011 year-end pension and OPEB obligations and include an estimate of future employee service.

Contributions We currently estimate our regulatory pension funding requirements in 2012 to be approximately $35 million. We expect our cash outlay, net of GM cost sharing, for OPEB to be approximately $16 million.

Attrition and separation programs In 2009, we completed multiple valuations of the assets and liabilities of our pension and OPEB plans. We recorded a net gain $69.5 million for the curtailment of certain pension and other postretirement benefits in 2009. These curtailments relate primarily to UAW-represented associates who participated in attrition programs in 2008 but did not terminate employment with AAM until 2009, UAW-represented associates who terminated employment in 2009 by electing to accelerate their remaining buydown payments and a reduction in our salaried workforce. In addition, we recorded expense of $1.8 million for special termination benefits in 2009. This charge primarily relates to the voluntary salaried retirement incentive program benefits paid under our pension plans, net of an adjustment resulting from the closing agreement we signed with the International Association of Machinists in the second quarter of 2009.

Pension plan assets The weighted-average asset allocations of our pension plan assets at December 31, 2011 and 2010 appear in the following table. The asset allocation for our plans is developed in consideration of the demographics of the plan participants and expected payment stream of the benefit obligation.



	U.S.						U.K.
					Target						Target
	2011		2010		Allocation		2011		2010		Allocation
Equity securities	50.8	%	51.6	%	50	%	44.5	%	50.5	%	45% - 55%
Fixed income securities	35.5		32.8		30% - 35%		47.9		44.3		45% - 55%
Hedge funds	13.5		11.0		0% - 15%		—		—		0%
Cash	0.2		4.6		0% - 5%		7.6		5.2		0% - 5%
Total	100.0	%	100.0	%			100.0	%	100.0	%

The primary objective of our pension plan assets is to provide a source of retirement income for participants and beneficiaries. Our primary financial objectives for the pension plan assets have been established in conjunction with a comprehensive review of our current and projected financial requirements. These objectives include having the ability to pay all future benefits and expenses when due, maintaining flexibility and minimizing volatility. These objectives are based on a long-term investment horizon.

Postretirement Benefit Plan Assets Investments in our defined benefit plans are stated at fair value. Level 1 assets are valued using quoted market prices that represent the asset value of the shares held by the trusts. The level 2 assets are investments in pooled funds, which are valued using a model to reflect the valuation of their underlying assets that are publicly traded with observable values. The fair value of our level 3 postretirement benefit plan assets are measured by compiling the portfolio holdings and independently valuing the securities in those portfolios. The fair values of our pension plan assets are as follows:



December 31, 2011
Asset Categories	Level 1		Level 2		Level 3		Total
	(in millions)
Cash & Cash Equivalents	$	8.0	$	—	$	—	$	8.0
Equity
U.S. Large Cap	88.6		—		—		88.6
U.S. Small/Mid Cap	43.5		—		—		43.5
World Equity	65.3		20.6		—		85.9
Fixed Income Securities
Government & Agencies	56.6		—		—		56.6
Corporate Bonds - Investment Grade	68.5		—		—		68.5
Corporate Bonds - Non-investment Grade	25.3		—		—		25.3
Emerging Market Debt	11.8		—		—		11.8
Other	7.0		—		—		7.0
Hedge Funds
Multi Strategy Hedge Fund	—		—		46.5		46.5
Total Plan Assets	$	374.6	$	20.6	$	46.5	$	441.7

December 31, 2010
Asset Categories	Level 1		Level 2		Level 3		Total
	(in millions)
Cash & Cash Equivalents	$	19.5	$	—	$	—	$	19.5
Equity
U.S. Large Cap	68.2		2.6		—		70.8
U.S. Small/Mid Cap	45.0		4.3		—		49.3
World Equity	54.6		37.2		—		91.8
Fixed Income Securities
Government & Agencies	44.1		—		—		44.1
Corporate Bonds - Investment Grade	59.8		—		—		59.8
Corporate Bonds - Non-investment Grade	28.5		—		—		28.5
Emerging Market Debt	9.0		—		—		9.0
Other	3.9		—		—		3.9
Hedge Funds
Multi Strategy Hedge Fund	—		—		35.7		35.7
Total Plan Assets	$	332.6	$	44.1	$	35.7	$	412.4

The changes in the fair value of our level 3 assets in the Multi Strategy Hedge Fund are as follows:



	December 31,
	2011			2010
	(in millions)
Beginning balance	$	35.7		$	35.3
Actual return on plan assets:
Relating to assets still held at the reporting date	(0.5		)	0.4
Purchases, sales and settlements, net	11.3			—
Ending balance	$	46.5		$	35.7

DEFINED CONTRIBUTION PLANS Most of our salaried U.S. associates are eligible to participate in voluntary savings plans. Our maximum match is 50% of eligible salaried associates' contribution up to 10% of their eligible salary. Matching contributions amounted to $3.2 million in 2011, $3.1 million in 2010 and $3.3 million in 2009. U.S. salaried associates are eligible to receive an additional annual retirement contribution (ARC) benefit between 3% to 5% of eligible salary, depending on years of service. We made contributions of $3.6 million, $3.5 million and $2.9 million in 2011, 2010 and 2009, respectively, for the ARC.

As part of the 2008 labor agreements, certain UAW represented associates at our original U.S. locations are eligible for a Company match on associate contributions made to the voluntary savings plans, which began in 2009. Our maximum match will be 25% of hourly associates' contribution up to the first 6% of their contributions. Matching contributions amounted to $0.2 million in both 2011 and 2010 and $0.4 million in 2009. Certain UAW represented associates are also eligible to receive an ARC benefit of 5% of eligible wages, which also began in 2009. We made contributions of $1.9 million in 2011 and $1.8 million in both 2010 and 2009 for the ARC related to these associates.

DEFERRED COMPENSATION PLAN Certain U.S. associates are eligible to participate in a non-qualified deferred compensation plan. Payments of $1.1 million, $1.6 million and $1.4 million have been made in 2011, 2010 and 2009, respectively, to eligible associates that have elected distributions. At December 31, 2011 and 2010, our deferred compensation liability was $10.6 million and $11.2 million, respectively. Due to the changes in the value of this deferred compensation plan we increased our liability by $0.3 million, $1.1 million, and $2.0 million in 2011, 2010 and 2009, respectively.