(in thousands, except per share amounts)

EXECUTIVE OVERVIEW

Ampco-Pittsburgh Corporation (the Corporation) operates in two business segments. The Forged and Cast Rolls segment consists of Union Electric Steel Corporation (Union Electric Steel) and Davy Roll Company Limited (Davy Roll). Union Electric Steel is one of the world's largest manufacturers of forged-hardened steel rolls with principal operations in Pennsylvania and Indiana whereas Davy Roll produces cast iron and steel rolls in England. Rolls are supplied to manufacturers of steel and aluminum throughout the world. The Air and Liquid Processing segment consists of Aerofin Corporation (Aerofin), Buffalo Air Handling Company (Buffalo Air Handling) and Buffalo Pumps, Inc. (Buffalo Pumps). Aerofin produces highly-engineered heat-exchange coils for a variety of users including electric utility, HVAC, power generation, industrial process and other manufacturing industries. Buffalo Air Handling produces custom-designed air handling systems for commercial, institutional and industrial building markets. Buffalo Pumps manufactures centrifugal pumps for the defense, refrigeration and power-generation industries. Aerofin and Buffalo Air Handling have operations in Virginia and Buffalo Pumps is located in New York. The segment distributes a significant portion of its products through a common independent group of sales offices located throughout the U.S. and Canada.

For the year, the Forged and Cast Rolls segment achieved record earnings aided significantly by the unprecedented worldwide demand from steel and aluminum producers. However, production in the fourth quarter slowed as a result of the global economic downturn and recession which forced customers to cut back their output, temporarily shut down facilities and place new mill projects on hold. Operating results for Davy Roll have been further impacted by the weakening of the British pound sterling in relation to the U.S. dollar. With ongoing uncertainty in the industry, expectations for 2009 are for reduced roll consumption and, for the Corporation, lower production levels particularly for cast rolls in England. While order backlogs (orders on hand) remain strong, many customers are requesting deferral of roll shipments and the Corporation is working with each of them by agreeing to the extent possible to reschedule deliveries into future periods. The Corporation believes the global shortage of capacity for forged hardened steel rolls, which resulted in the enormous order backlog for Union Electric Steel, will continue to be a significant factor in demand when steel and aluminum production returns to more normal levels. The outlook for the segment in 2009 is for continuing profitability but materially below the record results of the last two years.

While some capital projects have been deferred, the expansion at Union Electric Steel's melting and forging facility along with the installation of a forge press, manipulator and ancillary equipment remain active and targeted for completion in mid-2010. Similarly, furnace enhancements at Davy Roll are proceeding as planned. These projects are critical to minimize equipment downtime, improve productivity and maintain the manufacture of premium, quality product.

In 2007, a subsidiary of Union Electric Steel entered into an agreement with Maanshan Iron & Steel Company Limited (Maanshan) to form a joint venture company in China. The joint venture will principally manufacture and sell forged backup rolling-mill rolls of a size and weight currently not able to be produced by Union Electric Steel. The initial annual capacity of the joint venture was expected to approximate 10,000 metric tons; however, the global slowdown in roll consumption has caused the joint venture to reduce its initial capacity by approximately fifty percent. Production is expected to begin by mid-2010 and Union Electric Steel will have exclusive rights for sales and marketing. Union Electric Steel accounts for its 49% interest in the joint venture on the equity method of accounting.

In 2008, results of the Air and Liquid Processing segment were impacted by a pre-tax charge of $51,018 for the increase in estimated settlement and defense costs of pending and future asbestos claims net of estimated insurance recoveries. The claims result from alleged personal injury from exposure to asbestos-containing components historically used in some products manufactured decades ago by certain subsidiary companies within the Air and Liquid Processing group. With the help of experts in asbestos liability valuation and insurance recovery, the Corporation determined that litigation costs net of insurance recoveries could be reasonably estimated for a period of ten years ending December 2018 causing the additional charge (see Note 17 to Consolidated Financial Statements).

The Air and Liquid Processing group has not been affected by the weakened economy as significantly as the Forged and Cast Rolls group. Based on order backlog, Buffalo Pumps and Aerofin are expected to be operating at normal capacity for the first part of 2009 with performance for the remainder of the year contingent on the volume of new orders. Buffalo Air Handling, however, is dependent on industrial and institutional construction spending which has slowed significantly. Accordingly, it is expected that the business will struggle to repeat results of 2008. Excluding the charge for asbestos litigation in 2008, the comparable outlook for the segment in 2009 is for continuing profitability but at a lower level.

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Along with the global economic downturn and recession during the year, financial markets have deteriorated considerably resulting in stock market losses, collapse of major financial institutions and weakened investment returns causing the funded status of the Corporation's defined benefit pension plans to decline significantly. Consequently, the Corporation will be required to make contributions to each of the plans to meet targeted funding levels. The amount of combined contributions for all of the plans in 2009 is expected to approximate $11,000. This amount may be reduced if temporary relief on funding is granted by Congress to all defined benefit plan sponsors. Further contributions may be necessary in future years and, while such amounts could be significant, are contingent on the investment performance of the plans' assets and the influence of pension protection regulations in the U.S. and the U.K. A voluntary contribution of $8,000 was made by the Corporation to the U.S. qualified defined benefit pension plan in 2008.

The focus for the Corporation and its subsidiaries for 2009 is to minimize the impact of the global recession on the Corporation in particular by working closely with customers to reschedule deliveries into the future, managing ever-changing production schedules and maintaining a workforce level in balance with manufacturing needs. Overall, the Corporation expects to be profitable throughout 2009 despite the difficult economic environment. The Corporation remains financially sound with over $81,600 in cash and cash equivalents as of December 31, 2008.

CONSOLIDATED RESULTS OF OPERATIONS OVERVIEW

Consolidated sales and operating income for 2008, 2007 and 2006 are indicated below. A full discussion of the operating results for each of the segments is presented later in this section.

The Corporation



                                     2008                  2007                  2006
 Net Sales:
 Forged and Cast Rolls            $  282,934      72%   $  241,581      70%   $  206,374      68%
 Air and Liquid Processing           111,579      28%      105,253      30%       95,406      32%
 Total                            $  394,513     100%   $  346,834     100%   $  301,780     100%

 Income (Loss) from Operations:
 Forged and Cast Rolls            $   63,754        -   $   54,523        -   $   36,352        -
 Air and Liquid Processing           (41,020 )      -        9,037        -      (19,206 )      -
 Corporate costs                      (9,126 )      -       (6,143 )      -       (5,574 )      -
 Total                            $   13,608        -   $   57,417        -   $   11,572        -

 Backlog:
 Forged and Cast Rolls            $  635,884      92%   $  684,769      94%   $  548,522      93%
 Air and Liquid Processing            54,843       8%       43,949       6%       41,302       7%
 Total                            $  690,727     100%   $  728,718     100%   $  589,824     100%

In comparison to the prior years, sales improved significantly for each of the segments on higher volumes and, for the Forged and Cast Rolls group, better pricing when compared to 2006. Income from operations for 2008 and 2006 includes a provision for asbestos-related costs of $51,018 and $25,467, respectively. Additionally, operating income for 2008 was negatively impacted by higher corporate expenses including the recognition of stock-based compensation costs associated with stock options granted in September 2008 and higher pension-related costs.

The fluctuation in backlog is primarily attributable to the Forged and Cast Rolls group and is more fully explained below.

Gross margin, excluding depreciation, as a percentage of net sales was comparable for 2008 and 2007 at 29.0% and 29.7%, respectively. The slight decline is attributable to higher costs for scrap and alloys offset by higher volumes during the first part of 2008 for the Forged and Cast Rolls segment. Although the existing variable-index surcharge program helps to protect the Corporation against fluctuations in the cost of steel scrap and alloys, there is a lag in timing between the recognition of these increases and the recovery of such increases from customers. Gross margin, excluding depreciation, as a percentage of net sales approximated 26.5% for 2006. The improvement in 2008 and 2007 from 2006 is primarily attributable to the additional volume and better pricing, particularly for the Forged and Cast Rolls segment, offset by higher pension-related costs.

Selling and administrative expenses totaled $42,867 (10.9% of net sales), $38,972 (11.2% of net sales) and $36,284 (12.0% of net sales) for 2008, 2007 and 2006, respectively. The dollar increase in 2008 over the previous years is principally due to recognition of stock-based compensation associated with stock options granted in 2008, higher sales commissions which are

ampco pittsburgh | 2008 annual report 18

at fixed percentage and accordingly increase as commissionable sales increase and higher pension-related costs. The dollar increase in 2007 from 2006 is primarily attributable to higher sales commissions, general inflationary increases and higher pension-related costs.

The charge for asbestos litigation in 2008 represents an extension of the estimated costs of pending and future asbestos claims, net of estimated insurance recoveries, to a period of ten years ending December 31, 2018 whereas the charge in 2006 represents the estimated costs of pending and future asbestos claims, net of estimated insurance recoveries, for the period ending December 31, 2013. The claims result from alleged personal injury from exposure to asbestos-containing components historically used in some products manufactured decades ago by certain subsidiaries of the Air and Liquid Processing segment (see Note 17 to Consolidated Financial Statements).

Despite the steady increase in investment balances throughout the year, investment-related income decreased in 2008 when compared to 2007 due to the general decline in interest rates and lower appreciation of investments consistent with market experience. Investment-related income improved in 2007 against 2006 as a result of higher investment balances throughout the year and better rates of return. Included in investment-related income are dividends from the Corporation's U.K./Chinese cast-roll joint venture company which approximated $800, $540 and $170 in 2008, 2007 and 2006, respectively. Interest expense for 2008 decreased from 2007 and 2006 attributable to lower interest rates on the Corporation's variable-rate Industrial Revenue Bonds. Other income (expense) fluctuated primarily as a result of higher foreign exchange losses in 2008 and 2007 versus gains in 2006 and a $960 reduction in the accrual for environmental remediation of real estate previously owned by a discontinued operation in 2008 whereas 2006 includes an additional provision of $335 for environmental costs estimated to be incurred relating to the remediation of real estate previously owned by a discontinued operation.

The Corporation's statutory income tax rate equals 35% which compares to an effective rate of 15.1%, 32.8% and (26.7%) for 2008, 2007 and 2006, respectively. For 2008, beneficial permanent differences for the domestic operations favorably impacted the effective rates. In addition, for 2008 and 2007, the effective rates were reduced by the reversal of valuation allowances previously provided against deferred income tax assets associated with capital loss carryforwards. For 2006, reversal of valuation allowances associated primarily with the U.K. operation resulted in an overall income tax benefit for that year.

As a result of the above, the Corporation earned $12,575 or $1.24 per common share for 2008, $39,231 or $3.90 per common share for 2007 and $16,635 or $1.69 per common share for 2006. Net income for 2008 includes an after-tax charge of $30,595 or $3.01 per common share for the estimated costs of asbestos-related litigation through 2018 offset by the release of tax-related valuation allowances associated with capital loss carryforwards. Net income for 2007 includes an after-tax benefit of $714 or $0.07 per common share for the release of tax-related valuation allowances associated with capital loss carryforwards. Net income for 2006 includes a net after-tax charge of $9,388 or $0.96 per common share for the estimated costs of asbestos-related litigation through 2013 offset by the release of tax-related valuation allowances principally for the Corporation's U.K. operation.

Forged and Cast Rolls



                                       2008              2007              2006
             Sales              $   282,934       $   241,581       $   206,374
             Operating income   $    63,754       $    54,523       $    36,352
             Backlog            $   635,884       $   684,769       $   548,522

Sales and operating income for 2008 improved against the prior years due primarily to higher volumes and, when compared to 2006, better pricing. Despite the slowdown in production and some customer deferral of shipments during the fourth quarter, the segment achieved record earnings for the year. Operating income for 2008 also includes approximately $800 of proceeds from the settlement of business interruption insurance claims relating to equipment breakdown at Davy Roll but was negatively impacted by higher costs for steel scrap and alloys for the majority of the year. While the existing variable-index surcharge program helps to protect the Corporation against escalations in the cost of steel scrap and alloys, there is a lag in timing between the recognition of these increases and the recovery of such increases from customers. Deterioration in the weighted-average exchange rates used to translate sales and operating income of Davy Roll from the British pound sterling to the U.S. dollar also affected reported sales and operating income. The improvement in exchange rates during 2007 increased the U.S. dollar equivalency of Davy Roll's sales and operating income for that year by approximately $6,500 and $1,000, respectively.

The value of order backlogs decreased in 2008 in part due to adjustments made to variable-indexed surcharges included therein resulting from the decline in scrap and alloy costs late in the year. In addition, order intake has slowed significantly

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because of the downturn in the economy causing worldwide steel and aluminum customers to have little incentive to place orders for rolls when many of them have already made commitments for two to three years in advance. It is difficult to accurately determine the proportion of the order backlog that will ship beyond the end of 2009; however, based on customers deferring roll deliveries to better meet their production needs, it is likely to be more than $400,000. Currently, it is not expected that orders will be cancelled due to penalty provisions contained in purchase contacts. The Forged and Cast Rolls group also has commitments of more than $72,000 from customers under long-term supply arrangements which will be included in backlog upon receipt of specific purchase orders closer to the requirement dates for delivery. The improvement in 2007 from 2006 was reflective of the increase in global demand along with customers ordering their rolls requirements several years in advance to ensure continuity of supply.

Air and Liquid Processing

Operating (loss) income for 2008 and 2006 includes charges for asbestos litigation relating to claims resulting from alleged personal injury from exposure to asbestos-containing equipment manufactured decades ago by certain subsidiaries of the Air and Liquid Processing segment of $51,018 and $25,467, respectively (see Note 17 to Consolidated Financial Statements). In addition, uninsured legal and case management and valuation costs associated with asbestos litigation approximated $671, $450 and $623 in 2008, 2007 and 2006, respectively.

                                                           2008             2007          2006
Sales                                               $   111,579      $   105,253    $   95,406
Operating income before charge for asbestos
litigation                                          $     9,998      $     9,037    $    6,261
Charge for asbestos litigation                          (51,018 )              -       (25,467 )

Operating (loss) income after charge for
asbestos litigation                                 $   (41,020 )    $     9,037    $  (19,206 )

Backlog                                             $    54,843      $    43,949    $   41,302

Notwithstanding the additional asbestos charge, the Air and Liquid Processing segment had another strong performance. Sales and operating income for Buffalo Pumps in 2008 continued to benefit from increased demand by power generation customers and U.S. Navy shipbuilders. Sales and operating income for Aerofin improved due to higher volumes from original equipment manufacturers and utility customers. With respect to Buffalo Air Handling, weak demand from the construction industry caused a decline in sales and operating income when compared to 2007; however, despite the lower volumes, operating income improved when compared to 2006 as a result of manufacturing efficiencies.

Order backlogs for Buffalo Pumps and Aerofin increased against the prior years. The pumps operation benefited from additional orders by power generation customers and Navy shipbuilders and the heat-exchange coil business experienced increased demand from the electric utility industry. Backlog for Buffalo Air Handling at December 31, 2008 was comparable to the prior year end but less than that as of December 31, 2006 due to the slowing in new construction projects. To date, the segment has not been impacted by customer requests for deferrals; however, there is no guarantee that such requests will not be made in the future. Accordingly, the majority of the 2008 backlog is currently scheduled to ship in 2009.

LIQUIDITY AND CAPITAL RESOURCES

Net cash flows provided by operating activities for 2008 equaled $46,496 compared to $28,505 and $26,714 for 2007 and 2006, respectively. While the charge for asbestos litigation recorded in 2008 and 2006 reduced earnings, it did not impact cash flows for those years by those amounts. Instead, the asbestos liability, net of insurance recoveries, will be paid over a minimum of ten years and will be subject to tax benefits. Net payments in 2008 and 2007 approximated $5,354 and $300, respectively, and are estimated at $6,000 in 2009. Contributions to the Corporation's pension and other postretirement plans are expected to approximate $11,000 in 2009; however, this amount may be reduced if temporary relief on funding is granted by Congress to all defined benefit plan sponsors.

Net cash flows (used in) provided by investing activities were $(24,886), $(14,373) and $24,096 in 2008, 2007 and 2006, respectively. The fluctuation is primarily attributable to a change in the Corporation's investment strategy in 2006 resulting in a liquidation of short-term investments outstanding at December 31, 2005 and at each of the subsequent year ends. Capital expenditures continued to increase as a result of the major capital program which began in 2007. As of December 31, 2008, future capital expenditures approximate $43,000 including the purchase of a forge press, manipulator, and ancillary equipment for Union Electric Steel's melting and forging facility, the majority of which will be spent in 2009. During 2008 and 2007, Union Electric Steel contributed $2,940 for its 49% interest in the joint venture and expects to fund the balance by the end of 2009. Davy Roll also contributed $340 to its Chinese cast-roll joint venture in 2007.

Net cash outflows from financing activities for 2008 represent payment of dividends. Net cash outflows from financing activities were substantially breakeven for 2007 with proceeds from the issuance of stock under the Corporation's stock

ampco pittsburgh | 2008 annual report 20

option plan and resulting excess tax benefits offsetting dividends paid. By comparison, dividends paid in 2006 exceeded proceeds received from the issuance of stock under the Corporation's stock option plan. Quarterly dividends for 2008 were $0.18 per common share, $0.15 per common share in 2007 and $0.10 per common share in 2006.

The effect of exchange rate changes on cash and cash equivalents is primarily attributable to the fluctuation of the British pound sterling against the U.S. dollar which declined significantly during 2008.

As a result of the above, cash and cash equivalents increased by $9,980 in 2008 and ended the year at $81,607 in comparison to $71,627 and $56,084 at December 31, 2007 and 2006, respectively. Funds on hand and funds generated from future operations are expected to be sufficient to finance the operational and capital expenditure requirements of the Corporation. The Corporation also maintains short-term lines of credit in excess of the cash needs of its businesses. The total available at December 31, 2008 was approximately $9,000 (including £3,000 in the U.K. and €400 in Belgium).

The Corporation has the following contractual obligations outstanding as of December 31, 2008:

                                                             Payments Due by Period
                                       Total       <1 year     1-3 years    3-5 years     >5 years     Other

Industrial Revenue Bond Debt(1)     $    13,311   $        -   $        -   $        -   $   13,311   $     -
Operating Lease Obligations               3,322          727        1,047          781          767         -
Capital Expenditures                     43,369       33,376        9,993            -            -         -
Pension and Other Postretirement
Benefit Obligations(2)                   33,385       10,967        6,390        5,415       10,613         -
Purchase Obligations(3)                  19,226        7,068       11,598          560            -         -
Unrecognized Tax Benefits(4)                655            -            -            -            -       655
Contributions to Joint Venture            8,820        8,820            -            -            -         -
Total                               $   122,088   $   60,958   $   29,028   $    6,756   $   24,691   $   655

(1) Amount represents principal only. Interest is not included since it is variable; interest rates ranged between 2.30% and 3.18% in the current year. The Industrial Revenue Bonds begin to mature in 2020; however, if the bonds are unable to be remarketed they will be refinanced under a separate facility. See Note 6 to the Consolidated Financial Statements.

(2) Represents estimated contributions to the Corporation's pension and other postretirement plans. See Note 7 to the Consolidated Financial Statements. In order to meet targeted funding levels, additional contributions may be necessary and, while such amounts could be significant, are contingent on future investment performance of the plans' assets, Congressional action providing temporary funding relief and the influence of pension protection regulations in the U.S. and the U.K.

(3) Represents primarily commitments for the purchase of natural gas through early 2012 covering approximately 85% of anticipated needs to meet orders in backlog.

(4) Represents uncertain tax positions and are included as "Other" since the period of cash settlement can not be reasonably estimated. See Note 13 to the Consolidated Financial Statements.

With respect to environmental matters, the Corporation is currently performing certain remedial actions in connection with the sale of real estate previously owned and has been named a Potentially Responsible Party at three third-party landfill sites. In addition, as a result of a sale of a segment, the Corporation retained the liability to remediate certain environmental contamination at two of the sold locations, one of which has been completed, and has agreed to indemnify the buyer against third-party claims arising from the discharge of certain contamination from one of these locations, the cost for which was accrued at the time of sale. In 2008, based on additional data obtained and meetings with regulators which indicated that the original level of remediation contemplated would not be necessary, the Corporation reduced the accrual for the remediation of the remaining sold location.

Environmental exposures are difficult to assess and estimate for numerous reasons including lack of reliable data, the multiplicity of possible solutions, the years of remedial and monitoring activity required and the identification of new sites. However, the Corporation believes the potential liability for all environmental proceedings of approximately $861 accrued at December 31, 2008 is considered adequate based on information known to date (see Note 18 to Consolidated Financial Statements).

The nature and scope of the Corporation's business brings it into regular contact with a variety of persons, businesses and government agencies in the ordinary course of business. Consequently, the Corporation and its subsidiaries from time to time are named in various legal actions. Generally, the Corporation does not anticipate that its financial condition or liquidity will be materially affected by the costs of known, pending or threatened litigation. However, the Corporation and its subsidiaries are involved in multiple claims for alleged personal injury from exposure to asbestos-containing components used in certain

21 ampco pittsburgh | 2008 annual report

products and there can be no assurance that future claims will not present significantly greater and longer lasting financial exposure than presently contemplated (see Note 17 to Consolidated Financial Statements).

EFFECTS OF INFLATION

. . .