General Motors Company has agreed to bailout American Axle & Manufacturing Holdings Inc. by giving the key supplier $110 million in exchange for an equity interest in the company it once owned.
Critics have maintained GM sold American Axle for song at a corporate garage sale in the early 1990s, but GM continues to be AAM’s largest and most important customer, accounting for almost 80% of its sales in the second quarter.
American Axle also was forced by its creditors to agree to several restrictions on its operations.
The company’s management outlined the changes in a filing with the Securities Exchange Commission Thursday where it disclosed the terms of the renegotiated covenants.
AAM will be required to comply with revised financial covenants stipulating that it maintain an average daily minimum liquidity of $85 million until June 30, 2010. Without the revised agreement, creditors could have forced AAM into bankruptcy.
AAM expects to post a profit for the third quarter and its sales to total about $400 million, according to the SEC filing, as production at GM resumes.