Dauch Corp (DCH)

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

This management’s discussion and analysis (MD&A) should be read in conjunction with the unaudited condensed consolidated financial statements and notes appearing elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2025.

Effective January 26, 2026, American Axle & Manufacturing Holdings, Inc. changed its name to Dauch Corporation. As used in this report, except as the context otherwise requires, references to “our Company,” “we,” “our,” “us” or “Dauch” mean Dauch Corporation and its subsidiaries and predecessors, collectively.

COMPANY OVERVIEW

Dauch Corporation is a premier Driveline and Metal Forming supplier serving the global automotive industry with a powertrain-agnostic product portfolio that supports electric, hybrid, and internal combustion vehicles. The company is headquartered in Detroit, Michigan, with operations that span 24 countries and more than 175 locations. Formed through the acquisition of Dowlais Group plc (name subsequently changed to Dowlais Group Limited) (Dowlais) and its subsidiaries - GKN Automotive and GKN Powder Metallurgy, Dauch unites deep engineering roots with global manufacturing capabilities and an entrepreneurial spirit to move mobility forward.

Major Customers

We are a primary supplier of driveline products to General Motors Company (GM) for its full-size rear-wheel drive (RWD) light trucks, sport utility vehicles (SUVs), and crossover vehicles manufactured in North America, supplying a significant portion of GM’s rear axle and four-wheel drive and all-wheel drive (4WD/AWD) axle requirements for these vehicle platforms. We also supply GM with various components from our Metal Forming segment. Sales to GM were approximately 30% of our consolidated net sales for the first six months of 2026, and 44% for both the first six months of 2025 and the full year 2025.

We also supply driveline system products to Stellantis N.V. (Stellantis) for programs including the heavy-duty Ram full-size pickup truck and its derivatives. In addition, we sell various components to Stellantis from our Metal Forming segment. Sales to Stellantis were approximately 13% of our consolidated net sales for each of the first six months of 2026, the first six months of 2025 and the full year 2025.

We are also a supplier to Ford Motor Company (Ford) for driveline system products on certain vehicle programs including the Bronco Sport, Maverick and Lincoln Nautilus, and we also sell various components to Ford from our Metal Forming segment. Sales to Ford were approximately 11% of our consolidated net sales for the first six months of 2026, and 15% for both the first six months of 2025 and the full year 2025.

No other customer represented 10% or more of consolidated net sales during these periods.

Business Combination with Dowlais Group plc

On February 3, 2026, we completed our previously announced acquisition of Dowlais whereby we acquired the entire issued share capital of Dowlais (the Business Combination). Pursuant to the Business Combination, Dowlais shareholders received for each Dowlais ordinary share: 0.0881 shares of new Dauch Corporation common stock and 43 pence per share in cash (approximately $0.59 per share as of the closing date), resulting in the issuance of approximately 117 million shares (and an increase in authorized shares from 150 million shares to 375 million shares) and a total purchase price of approximately $1.7 billion.

Uncertainty Associated with Tariffs and Trade Relations and Other Supply Chain Constraints

In 2025, the U.S. government implemented tariffs and increased certain existing tariffs on various products including assembled vehicles and automotive parts and components imported into the U.S., and there is considerable uncertainty around the extent, timing and duration of these tariffs. This has resulted in retaliatory tariffs against the U.S. by the governments of various countries, resulting in significant instability and uncertainty in U.S. trade relations with certain countries. Additionally, the expected 2026 review of the United States-Mexico-Canada Agreement (USMCA) could further contribute to this instability and uncertainty in trade relations.

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For the six months ended June 30, 2026, the net impact on earnings related to the aforementioned tariffs was approximately $30 million and we expect a continuing impact from tariffs in future periods. For the year ended December 31, 2025, the net impact on earnings related to the aforementioned tariffs was approximately $10 million. We are implementing mitigation actions and pursuing recoveries from our customers for the cost increases resulting from the tariffs but have not reached final agreement with all customers and therefore the total amount and timing of such recoveries is unknown. Further, certain of these recoveries may include government-issued credits and there is uncertainty about whether we will be able to effectively monetize such credits. For the full year 2026, we anticipate the impact on earnings of these tariffs to be approximately $10 million to $20 million after mitigation actions and estimated customer recoveries. However, due to uncertainty associated with the potential further implementation or expansion of tariffs, as well as the potential for additional retaliatory actions and other changes to existing trade agreements or changes in international trade relations, the actual impact on 2026 earnings could differ materially from this estimate.

During the first six months of 2026, geopolitical conflicts have indirectly impacted our operations and financial results primarily through supply chain disruptions. We continue to work with customers and suppliers in our effort to protect continuity of supply as we expect these challenges to continue in 2026. Due to the ongoing uncertainty associated with these supply chain constraints, the ultimate impact on our net sales, results of operations and cash flows is unknown.

UAW Work Stoppage

In June 2026, following the expiration of the existing collective bargaining agreement with the United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) we experienced a work stoppage at one of our manufacturing facilities in the United States. A new four-year collective bargaining agreement was ratified by the UAW in June 2026. During the second quarter of 2026, we incurred approximately $8 million of one-time costs related to the work stoppage.

Commercial Matters

In April 2024, one of our largest customers notified the Company that production purchase orders related to a previously announced contract to supply e-Beam axles for a future vehicle program were terminated. We believe that the termination of these purchase orders reflects, in part, the significant uncertainty currently underlying the electric vehicle environment, including volatility in estimated volumes and the timing of production.

In January of 2026, we reached a settlement agreement with the customer on this matter. As a result, we received approximately $28 million in the first quarter of 2026 for the reimbursement of the Company's capitalized engineering, design and development costs.

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RESULTS OF OPERATIONS –– THREE MONTHS ENDED JUNE 30, 2026 AS COMPARED TO THREE MONTHS ENDED JUNE 30, 2025

Net Sales

The impact of the Business Combination on net sales in the second quarter of 2026 was approximately $1,439 million. Excluding the impact of the Business Combination, the change in net sales for the second quarter of 2026, as compared to the second quarter of 2025, primarily reflects lower production volumes on certain vehicle programs that we support and a reduction of approximately $34 million as a result of the sale of AAM India Manufacturing Corporation Pvt., Ltd., which was completed on July 1, 2025. These decreases were partially offset by an increase of approximately $35 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments.

Cost of Goods Sold

The impact on cost of goods sold of the Business Combination was approximately $1,300 million for the second quarter of 2026. Excluding the impact of the Business Combination, the change in cost of goods sold in the second quarter of 2026, as compared to the second quarter of 2025, primarily reflects lower production volumes on certain vehicle programs that we support. For the three months ended June 30, 2026, material costs were approximately 51% of total costs of goods sold, as compared to approximately 55% for the three months ended June 30, 2025.

Gross Profit

Gross margin was 11.4% in the second quarter of 2026, as compared to 13.1% in the second quarter of 2025. Gross profit and gross margin were impacted by the factors discussed in Net Sales and Cost of Goods Sold above.

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Selling, General and Administrative Expenses (SG&A)

SG&A as a percentage of net sales was 5.6% in the second quarter of 2026, as compared to 6.6% in the second quarter of 2025. Research and development (R&D) expense, net of customer engineering, design and development (ED&D) recoveries, was approximately $56.8 million in the second quarter of 2026, as compared to $36.1 million in the second quarter of 2025. In addition to the increase in R&D expense, the change in SG&A in the second quarter of 2026, as compared to the second quarter of 2025, reflects an increase of approximately $46 million associated with the Business Combination, which was partially offset by the achievement of synergies as a result of the Business Combination.

Amortization of Intangible Assets Amortization expense related to intangible assets was $21.8 million for the three months ended June 30, 2026 and $20.4 million for the three months ended June 30, 2025.

Impairment Charge In connection with the sale of AAM India Manufacturing Corporation Pvt., Ltd., we recorded an impairment charge in the three months ended June 30, 2025 of $8.0 million to reduce the carrying value of this business to fair value less costs to sell. See Note 2 - Acquisitions and Dispositions for additional detail regarding the sale of AAM India Manufacturing Corporation Pvt., Ltd.

Restructuring and Acquisition-Related Costs Restructuring and acquisition-related costs were $49.8 million in the second quarter of 2026 and $16.5 million in the second quarter of 2025.

During the three months ended June 30, 2026, we incurred approximately $3 million of acquisition-related costs and approximately $26 million of integration expenses associated with the Business Combination. Acquisition-related costs in the second quarter of 2026 primarily consisted of expenses related to compensation arrangements under the Co-operation Agreement associated with the Business Combination. Integration expenses primarily reflect costs for synergy attainment, including profess

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)

COMPANY OVERVIEW

Effective January 26, 2026, American Axle & Manufacturing Holdings, Inc. changed its name to Dauch Corporation. As used in this report, except as otherwise indicated in information incorporated by reference, references to “our Company,” "we," "our," "us" or “Dauch” mean Dauch Corporation and its subsidiaries and predecessors, collectively.

Dauch Corporation is a premier Driveline and Metal Forming supplier serving the global automotive industry with a powertrain-agnostic product portfolio that supports electric, hybrid, and internal combustion vehicles. The company is headquartered in Detroit, Michigan, with operations that span 24 countries and more than 175 locations. Formed through the acquisition of Dowlais Group plc and its subsidiaries - GKN Automotive and GKN Powder Metallurgy, Dauch unites deep engineering roots with global manufacturing capabilities and an entrepreneurial spirit to move mobility forward.

We are a primary supplier of driveline components to General Motors Company (GM) for its full-size rear-wheel drive (RWD) light trucks, sport utility vehicles (SUV), and crossover vehicles manufactured in North America, supplying a significant portion of GM's rear axle and four-wheel drive and all-wheel drive (4WD/AWD) axle requirements for these vehicle platforms. We also supply GM with various products from our Metal Forming segment. Sales to GM were approximately 44% of our consolidated net sales in 2025, 42% in 2024, and 39% in 2023.

We are also a supplier to Ford Motor Company (Ford) for driveline system products on certain vehicle programs including the Bronco Sport, Maverick, Escape and Lincoln Nautilus, and we also sell various products to Ford from our Metal Forming segment. Sales to Ford were approximately 15% of our consolidated net sales in 2025, 13% in 2024, and 12% in 2023.

We also supply driveline system products to Stellantis N.V. (Stellantis) for programs including the heavy-duty Ram full-size pickup truck and its derivatives. In addition, we sell various products to Stellantis from our Metal Forming segment. Sales to Stellantis were approximately 13% of our consolidated net sales in both 2025 and 2024, and 16% in 2023.

No other customer represented 10% or more of consolidated net sales during these periods.

Acquisition of Dowlais Group plc

On February 3, 2026, we completed our previously announced acquisition of Dowlais Group plc (Dowlais) whereby we acquired the entire issued share capital of Dowlais (the Business Combination). Pursuant to the Business Combination, Dowlais shareholders received for each Dowlais ordinary share: 0.0881 shares of new Company common stock and 43 pence per share in cash (approximately $0.59 per share as of the closing date), resulting in the issuance of approximately 117 million shares (and an increase in authorized shares from 150 million to 375 million shares) and a total purchase price of approximately $1.7 billion. Following the close of the transaction, the combined company is headquartered in Detroit, Michigan and led by the Company's Chairman and CEO.

Disposition of AAM India Manufacturing Corporation Pvt., Ltd.

During 2025, we completed the sale of our commercial vehicle axle business and related assets in India (AAM India Manufacturing Corporation Pvt., Ltd.) to Bharat Forge Limited (BFL) for approximately $65 million, net of closing adjustments (the India Sale Agreement). For the years ended December 31, 2025 and 2024, we recorded impairment charges of $8 million and $12 million, respectively, to reduce the carrying value of this business to fair value less costs to sell.

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Uncertainty Associated with Tariffs and Trade Relations

In 2025, the U.S. government implemented tariffs and increased certain existing tariffs on various products including assembled vehicles and automotive parts and components imported into the U.S., and there is considerable uncertainty around the extent, timing and duration of these tariffs. This has resulted in retaliatory tariffs against the U.S. by the governments of various countries, resulting in significant instability and uncertainty in U.S. trade relations with certain countries. Additionally, the expected 2026 review of the United States-Mexico-Canada Agreement (USMCA) could further contribute to this instability and uncertainty in trade relations.

For the year ended December 31, 2025, the net impact on earnings related to the aforementioned tariffs was approximately $10 million and we expect a continuing impact from tariffs in future periods. We are implementing mitigation actions and pursuing recoveries from our customers for the cost increases resulting from the tariffs but have not reached final agreement with all customers and therefore the total amount and timing of such recoveries is unknown. Further, certain of these recoveries may include government issued credits and there is uncertainty about whether we will be able to effectively monetize such credits.

Commercial Matters

In April 2024, one of our largest customers notified the Company that production purchase orders related to a previously announced contract to supply e-Beam axles for a future vehicle program were terminated. We believe that the termination of these purchase orders reflects, in part, the significant uncertainty currently underlying the electric vehicle environment, including volatility in estimated volumes and the timing of production.

In January of 2026, we reached a settlement agreement with the customer on this matter (the Electric Vehicle Cancellation Settlement). As a result, we expect to receive approximately $28 million in the first quarter of 2026 for the reimbursement of the Company's capitalized engineering, design and development costs. In addition, we recorded a charge in the fourth quarter of 2025 of $20 million for the write-off of certain assets that were not recovered under the agreement, and also recorded a write-off of approximately $22 million related to an asset for which there was an offsetting corresponding liability that was also substantially removed. This settlement agreement is final resolution of this matter with the customer and we do not expect any additional impact in future periods.

INDUSTRY TRENDS

There are a number of significant trends affecting the markets in which we compete. Intense competition, volatility in the price and availability of raw materials, certain labor shortages, particularly those associated with skilled trades, increased labor costs, fluctuations in exchange rates and interest rates, and significant pricing pressures remain. At the same time, there is a focus on investing in future products that will incorporate the latest technology and meet evolving customer demands. The ability to respond timely to the continued advancement of technology and product innovation, as well as the ability to enhance cost reduction initiatives and continue to source programs and maintain a resilient supply chain on a global basis, are critical to attracting and retaining business in our global markets.

INDUSTRY UNCERTAINTY REGARDING ADOPTION OF ELECTRIC VEHICLES The automotive industry has experienced lower than anticipated adoption of electric vehicles. Various barriers to end-user acceptance exist, such as higher vehicle cost, limited offerings, safety concerns, regulatory uncertainty, battery range and vehicle performance anxiety and a lack of necessary charging infrastructure. As a result, there is significant uncertainty currently underlying the electric vehicle environment, including volatility in estimated volumes and the timing of program launches and production of electric vehicles. This uncertainty has caused industry participants to reassess capital allocation plans, and has resulted in the extension of certain internal combustion engine (ICE) and hybrid programs.

Additionally, competition to develop and market new and alternative technologies and fuel types, including from new market entrants such as non-traditional automotive companies and technology companies continues to increase. Further, some traditional automotive industry participants are developing strategic partnerships with technology companies as each party seeks to leverage the existing customer relationships and technical knowledge of the partner, and expedite the development and commercialization of new technologies.

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We are responding, in part, with ongoing research and development (R&D) activities, reviewing our capital investment plans and continuing to enhance our product portfolio to allow us to meet our customers' needs for high performance vehicles with reduced emissions and reduced environmental impact. We are improving existing products to reduce emissions through lightweighting and efficiency initiatives, such as higher speed transmissions, and downsized engines and continuing to develop new technologies, such as hybrid and electric driveline systems and related subsystems and components. Through lightweight and high-efficiency axles, all-wheel drive systems, high-strength connecting rod technology, refined vibration control systems, and hybrid and electric vehicle components, including our e-drive systems and e-Beam axle technology, we have significantly advanced our efforts to improve ride and handling performance, while reducing emissions and mass. Our efforts have positioned us to compete in the evolving global marketplace.

GLOBAL CONSUMER PREFERENCE AND OEM PRODUCTION FAVORING LIGHT TRUCKS, SPORT UTILITY VEHICLES (SUVs) AND CROSSOVER VEHICLES (CUVs) There has been ongoing demand for light trucks, SUVs and CUVs in certain markets, while demand for passenger cars has decreased. This increase in demand for light trucks, SUVs and CUVs has been driven by changes in consumer preference as technology advancements have made these vehicles lighter and more efficient. Certain OEMs are responding to this change in consumer preference by shifting their focus to developing and manufacturing these types of vehicles, resulting in a significant reduction of passenger car vehicle programs, especially in North America. We have benefited from this trend as a significant portion of our business supports light truck, SUV and CUV programs in North America.

GLOBAL AUTOMOTIVE PRODUCTION AND INCREASED INDUSTRY CONSOLIDATION Our customers continue to design their products to meet demand in global markets and therefore require global support from their suppliers. For this reason, it is critical that suppliers maintain a global presence in these markets in order to compete for new contracts. We have business and engineering offices around the world to support our global locations and provide technical solutions to our customers on a regional basis, including in North America, which represents the largest portion of our core business, as well as in China and Europe where consumer acceptance of electric vehicles has been stronger.

At the same time, in 2025, the U.S. government implemented tariffs and increased certain existing tariffs on various products including assembled vehicles and automotive parts and components imported into the U.S. In response, various other countries have imposed retaliatory tariffs against the U.S. This has resulted in some OEMs and their suppliers shifting focus to producing more products within the U.S.

The cyclical nature of the automotive industry, volatile commodity prices, the shifting demands of consumer preference, regulatory requirements and trade agreements require OEMs and suppliers to remain agile with regard to product development and global capability. A critical objective for OEMs and suppliers is the ability to meet these global demands while effectively managing costs and capital investment. Some OEMs and suppliers may be preparing for these challenges through merger and acquisition activity, restructuring ac

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