AAM Announces Sale of Commercial Vehicle Axle Business in India

Rhea-AI Summary

American Axle & Manufacturing Holdings (AAM) has announced the sale of its commercial vehicle axle business and related assets in India to Bharat Forge (BFL) for $65 million. The business being sold generated approximately $156 million in sales in the last twelve months ending June 30, 2024. The transaction includes AAM's manufacturing facilities in Pune and Chennai, as well as the Pune Engineering and Development Center.

The sale is part of AAM's strategy to focus on ICE, hybrid, and full electric passenger car, pickup truck/SUV, and van applications globally. The deal is expected to close in the fourth quarter of 2024, subject to customary closing conditions and regulatory approvals. This move aims to provide AAM with additional financial flexibility while allowing BFL to expand its product portfolio in the component sector.

Positive

• Sale of Indian commercial vehicle axle business for $65 million
• Strategic focus on ICE, hybrid, and electric passenger vehicles
• Additional financial flexibility for AAM
• Retention of Chakan components manufacturing facility and Pune Business Office

Negative

• Divestment of business that generated $156 million in sales over the last 12 months

Insights

Financial Analyst

The sale of AAM's commercial vehicle axle business in India for $65 million is a strategic move that could have mixed implications for the company. On the positive side, this divestiture will provide AAM with additional financial flexibility and allow it to focus on its core competencies in passenger vehicles and electric mobility solutions. The transaction represents a price-to-sales multiple of approximately 0.42x based on the $156 million in sales generated by the business over the last twelve months.

However, the sale also means AAM is exiting a significant revenue stream, which could impact its top-line growth in the short term. The company will need to demonstrate how it plans to offset this revenue loss and leverage the proceeds to drive growth in its focus areas. Investors should closely monitor AAM's future earnings reports to assess the impact of this divestiture on overall financial performance and any potential reinvestment of the sale proceeds.

The transaction's completion in Q4 2024 suggests that the financial impact will be reflected in AAM's 2025 fiscal year results. This move aligns with the broader industry trend of automotive suppliers streamlining operations and pivoting towards electrification and advanced mobility solutions.

Market Research Analyst

AAM's decision to sell its commercial vehicle axle business in India reflects a broader strategic shift in the automotive supply industry. This move aligns with the global trend towards electrification and the focus on higher-margin passenger vehicle segments. By divesting this business unit, AAM is signaling its commitment to reallocating resources towards ICE, hybrid and electric technologies for passenger cars and light trucks.

The buyer, Bharat Forge , gains a significant foothold in the commercial vehicle axle market, which could lead to increased competition in this sector. For AAM, the transaction may result in a more streamlined operation but also reduces its exposure to the growing Indian automotive market. Investors should consider how this geographical shift might affect AAM's long-term growth prospects, especially given India's potential as a major automotive manufacturing hub.

The market's reaction to this news will likely depend on how effectively AAM communicates its post-divestiture strategy and growth plans. The company's ability to demonstrate a clear path to value creation through this strategic realignment will be important for maintaining investor confidence.

DETROIT, Oct. 17, 2024 /PRNewswire/ -- American Axle & Manufacturing Holdings, Inc. (AAM), (NYSE: AXL) announced today that it has entered into a definitive agreement to sell its commercial vehicle axle business and related assets in India (AAM India Manufacturing Corporation Pvt., Ltd. or AAMIMCPL), to Bharat Forge Limited (BFL), for a purchase price of $65 million, subject to certain customary adjustments at closing. The business being sold generated approximately $156 million of sales in the last twelve months ending June 30, 2024. 

BFL is the Pune-based flagship company of Kalyani Group, a global provider of high-performance and safety critical components and solutions to multiple sectors including automotive, rail transportation, defense, construction & mining, aerospace, marine and energy. The company has manufacturing facilities in India, Europe, and North America.

The scope of the transaction includes AAM's manufacturing facilities in Pune and Chennai, which are focused on light, medium and heavy commercial vehicle axles. It also includes AAM's Pune Engineering and Development Center. Excluded from the transaction are the AAM components manufacturing facility in Chakan and the Pune Business Office, which provides Engineering, IT and Procurement shared services for AAM's operations around the world.

"The strategic decision to sell our commercial vehicle axle business in India enables us to strengthen our focus on ICE, hybrid and full electric passenger car, pickup truck / SUV, and van applications globally and provides additional financial flexibility," said David C. Dauch, AAM Chairman and Chief Executive Officer. "We are committed to collaborating with Bharat Forge to execute this agreement efficiently and support the continuity of supply from these facilities to customers during the ownership transition."

Mr. Amit Kalyani, Vice Chairman & Jt. Managing Director, Bharat Forge Limited added, "We are delighted to welcome the AAMIMCPL team to the Bharat Forge family. We look forward to relying on their technical expertise and excellent relationship with key industry players to further scale-up the business over the medium to long term. AAMIMCPL's acquisition, when completed, will be a significant milestone in our transformational journey of adding product solutions to our repertoire on the component side. This transaction will enable BFL to get into a new business for manufacturing of products."

The transaction is expected to close in the fourth quarter of 2024 subject to customary closing conditions, including the receipt of regulatory approvals.

Lincoln International was the exclusive sell side financial advisor to AAM on this transaction.

About AAM
As a leading global Tier 1 Automotive and Mobility Supplier, AAM (NYSE: AXL) designs, engineers and manufactures Driveline and Metal Forming technologies to support electric, hybrid and internal combustion vehicles. Headquartered in Detroit with over 80 facilities in 18 countries, AAM is Bringing the Future Faster for a safer and more sustainable tomorrow. To learn more, visit www.aam.com

About Bharat Forge
Bharat Forge Limited (BFL), the Pune based Indian multinational, is a technology driven global leader in providing high performance, innovative safety critical components and solutions for several sectors including automotive, power, oil and gas, construction & mining, rail, marine, defense and aerospace. BFL has presence across 18 manufacturing locations in five countries with the largest repository of metallurgical knowledge and offers full service supply capability to its geographically dispersed marquee customers from concept to product design, engineering, manufacturing, testing and validation. To learn more, visit www.bharatforge.com.

Forward-Looking Statements
In this press release, we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 and relate to trends and events that may affect our future financial position and operating results. The terms such as "will," "may," "could," "would," "plan," "believe," "expect," "anticipate," "intend," "project," "target," and similar words or expressions, as well as statements in future tense, are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events and are subject to risks and may differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to: global economic conditions, including the impact of inflation, recession or recessionary concerns, or slower growth in the markets in which we operate; reduced purchases of our products by General Motors Company (GM), Stellantis N.V. (Stellantis), Ford Motor Company (Ford) or other customers; our ability to respond to changes in technology, increased competition or pricing pressures; our ability to develop and produce new products that reflect market demand; lower-than-anticipated market acceptance of new or existing products; our ability to attract new customers and programs for new products; reduced demand for our customers' products (particularly light trucks and sport utility vehicles (SUVs) produced by GM, Stellantis and Ford); risks inherent in our global operations (including tariffs and the potential consequences thereof to us, our suppliers, and our customers and their suppliers, adverse changes in trade agreements, such as the United States-Mexico-Canada Agreement (USMCA), compliance with customs and trade regulations, immigration policies, political stability or geopolitical conflicts, taxes and other law changes, potential disruptions of production and supply, and currency rate fluctuations); supply shortages and the availability of natural gas or other fuel and utility sources in certain regions, labor shortages, including increased labor costs, or price increases in raw material and/or freight, utilities or other operating supplies for us or our customers as a result of pandemic or epidemic illness such as COVID-19, geopolitical conflicts, natural disasters or otherwise; a significant disruption in operations at one or more of our key manufacturing facilities; risks inherent in transitioning our business from internal combustion engine vehicle products to hybrid and electric vehicle products; our ability to realize the expected revenues from our new and incremental business backlog; negative or unexpected tax consequences, including those resulting from tax litigation; risks related to a failure of our information technology systems and networks, including cloud-based applications, and risks associated with current and emerging technology threats and damage from computer viruses, unauthorized access, cyber attacks and other similar disruptions; our suppliers', our customers' and their suppliers' ability to maintain satisfactory labor relations and avoid or minimize work stoppages; cost or availability of financing for working capital, capital expenditures, research and development (R&D) or other general corporate purposes including acquisitions, as well as our ability to comply with financial covenants; our customers' and suppliers' availability of financing for working capital, capital expenditures, R&D or other general corporate purposes; an impairment of our goodwill, other intangible assets, or long-lived assets if our business or market conditions indicate that the carrying values of those assets exceed their fair values; liabilities arising from warranty claims, product recall or field actions, product liability and legal proceedings to which we are or may become a party, or the impact of product recall or field actions on our customers; our ability or our customers' and suppliers' ability to successfully launch new product programs on a timely basis; risks of environmental issues, including impacts of climate-related events, that could result in unforeseen issues or costs at our facilities, or risks of noncompliance with environmental laws and regulations, including reputational damage; our ability to maintain satisfactory labor relations and avoid work stoppages; our ability to consummate and successfully integrate acquisitions and joint ventures; our ability to achieve the level of cost reductions required to sustain global cost competitiveness or our ability to recover certain cost increases from our customers; price volatility in, or reduced availability of, fuel; our ability to protect our intellectual property and successfully defend against assertions made against us; adverse changes in laws, government regulations or market conditions affecting our products or our customers' products; our ability or our customers' and suppliers' ability to comply with regulatory requirements and the potential costs of such compliance; changes in liabilities arising from pension and other postretirement benefit obligations; our ability to attract and retain qualified personnel in key positions and functions; and other unanticipated events and conditions that may hinder our ability to compete. It is not possible to foresee or identify all such factors and we make no commitment to update any forward-looking statement or to disclose any facts, events or circumstances after the date hereof that may affect the accuracy of any forward-looking statement.

For more information:

AAM Media Contact:
Christopher M. Son                                                            
Vice President, Marketing & Communications            
(313) 758-4814
chris.son@aam.com

AAM Investor Contact:
David H. Lim
Head of Investor Relations
(313) 758-2006
david.lim@aam.com

BFL Media Contacts:
Bhakti Sharma
+91 70309 42840
bhakti.Sharma@bharatforge.com

Arun Thankappan
+91 99308 60706
arun.thankappan@adfactorspr.com

 

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SOURCE American Axle & Manufacturing Holdings, Inc.

FAQ

What is the value of AAM's sale of its Indian commercial vehicle axle business?

American Axle & Manufacturing (AXL) is selling its Indian commercial vehicle axle business to Bharat Forge for $65 million, subject to customary adjustments at closing.

When is the AAM (AXL) India business sale expected to close?

The transaction between AAM (AXL) and Bharat Forge for the Indian commercial vehicle axle business is expected to close in the fourth quarter of 2024, subject to customary closing conditions and regulatory approvals.

What facilities are included in AAM's (AXL) sale to Bharat Forge ?

The sale includes AAM's (AXL) manufacturing facilities in Pune and Chennai, which focus on light, medium, and heavy commercial vehicle axles, as well as the Pune Engineering and Development Center.

How much revenue did the AAM (AXL) India business generate before the sale?

The AAM (AXL) commercial vehicle axle business in India being sold to Bharat Forge generated approximately $156 million in sales in the last twelve months ending June 30, 2024.