Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. We may from time to time make written or oral statements that are "forward-looking", within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, including statements contained in this report and other filings with the SEC and reports and other public statements to our shareholders. These statements may, for example, express expectations or projections about future actions or results that we may anticipate but, due to developments beyond our control, do not materialize. Actual results could differ materially because of issues and uncertainties such as those listed herein, which, among others, should be considered in evaluating our financial outlook. The principal factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, changes in the automotive industry, increased global competitive pressures, our dependence on major customers and third party suppliers and manufacturers, our exposure to foreign currency fluctuations, increasing fuel prices and other factors or conditions described in Item 1A - Risk Factors in Part II of this Quarterly Report on Form 10-Q and in Item 1A - Risk Factors in Part I of our 2008 Annual Report on Form 10-K. We assume no obligation to update publicly any forward-looking statements.

Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and notes thereto.

Executive Overview

We continue to face extremely difficult market conditions in the U.S. auto industry due to the further deterioration of market demand for cars and light trucks in North America during the first quarter of 2009. On April 23, 2009, GM announced extended plant shutdown schedules that will take place primarily in the second quarter of 2009. Certain GM plants will temporarily cease production for as long as nine weeks in this period that normally includes GM's summer shutdown schedule, which typically occurs in early July. The shutdowns will mostly impact plants producing full size pick-up trucks and SUVs, with less downtime at facilities supporting passenger cars and crossover type SUVs. GM's announcement indicated that this plan would eliminate approximately 190,000 vehicles from their North American production schedule in the second quarter and early third quarter of 2009. In addition, there is continuing uncertainty surrounding restructuring options for GM, which may include a bankruptcy filing and additional financing from the U.S. federal government that may impose conditions on its business that adversely impacts demand for our products.

On April 30, 2009, Chrysler, another of our key customers, announced that it had reached an agreement in principle to establish an alliance with Fiat SpA. Chrysler also announced that despite substantial progress in obtaining concessions from many of its lenders, it was unable to avoid the need for a bankruptcy filing. As a result, Chrysler LLC and 24 of its wholly-owned U.S. subsidiaries filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in U.S. Bankruptcy Court for the Southern District of New York.

While we have long term relationships with our customers and our supply arrangements are generally for multi-year periods, the unprecedented recent announcements of North American automotive plant closures and other restructuring activities by our customers have and will continue to have a negative impact on our business. We are unable to quantify the impact on our operating results for the second and third quarters of 2009 until we receive additional details concerning the specific plants and wheel programs affected by these actions. As of the bankruptcy filing date, our total receivable from Chrysler entities in the U.S., Canada and Mexico was $9.8 million. We have applied for the U.S. Department of the Treasury's Auto Supplier Support Program for Chrysler Suppliers, but have not as yet been approved. Additionally, we have not been informed if we have been designated as an "essential supplier" to Chrysler in connection with a Bankruptcy Court motion by Chrysler to make payments to certain suppliers during its reorganization. Accordingly, the collectability of this receivable is still under evaluation and the potential exposure is not currently estimable.

In August 2008, we announced the planned closure of our wheel manufacturing facility located in Pittsburg, Kansas, and workforce reductions in our other North American plants, resulting in the layoff of approximately 665 employees and the elimination of 90 open positions. On January 13, 2009, we also announced the planned closure of our Van Nuys, California wheel manufacturing facility, thereby eliminating an additional 290 jobs. The Kansas facility ceased operations in December 2008 and the California facility is expected to terminate operations in June 2009. These steps were taken in order to rationalize our production capacity after announcements by our major customers of assembly plant closures and sweeping production cuts, particularly in the light truck and SUV platforms.

Due to the deteriorating financial condition of our major customers and others in the automotive industry, we performed impairment analyses on all of our long-lived assets, in accordance with Statement of Financial Accounting Standards (SFAS) No. 144. Our estimated undiscounted cash flow projections exceeded the asset carrying values in all of our wheel manufacturing plants except for our Fayetteville, Arkansas location, as described below. Additionally, because our 50 percent-owned joint venture in Hungary is also affected by these same economic conditions, we performed an analysis of our investment in the joint venture, in accordance with APB No. 18. This analysis also indicated that our investment was not impaired as of March 29, 2009.

Our customers continue to request price reductions as they work through their own financial hurdles. We are engaged in ongoing programs to reduce our own costs through process automation and identification of industry best practices, and we have been successful in substantially mitigating pricing pressures in the past. However, it has become increasingly more difficult to react quickly enough given the continuing pressure for price reductions, reductions in customer orders, and the lengthy transitional periods necessary to reduce labor and other costs. As such, our profit margins will continue to be lower than our historical levels. We will continue to attempt to increase our operating margins from current operating levels by aligning our plant capacity with industry demand and aggressively implementing cost-saving strategies to enable us to meet customer-pricing expectations. However, as we incur costs to implement these strategies, the initial impact on our future financial position, results of operations and cash flow may be negative, the extent to which cannot be predicted. Additionally, even if successfully implemented, these strategies may not be sufficient to offset the impact of on-going pricing pressures and additional reductions in customer demand in future periods.

Overall North American production of passenger cars and light trucks in the first quarter was reported by industry publications as being down approximately 52 percent versus the same period a year ago, with production of passenger cars decreasing 53 percent while production of light trucks and SUVs decreased 51 percent. The U.S. automotive industry continued to be impacted negatively by the lack of available consumer credit, due to the deteriorating U.S. financial markets and overall recessionary economic conditions in the U.S.

Consolidated revenues in the first quarter of 2009 decreased $140.7 million, or 63 percent, to $81.5 million from $222.2 million in the same period a year ago. Wheel sales decreased $139.4 million, or 64 percent, to $79.3 million from $218.7 million in the first quarter a year ago, as our wheel shipments decreased 55 percent to approximately 1.4 million. This was the lowest level of shipments for any quarter since the third quarter of 1992. This shipment decrease and the resulting decline in wheel production profoundly impacted our ability to absorb fixed costs during the quarter, resulting in a gross margin loss of $(14.5) million. The loss from operations for the period was $(28.2) million, compared to an income from operations in 2008 of $3.2 million. The income tax provision of $26.5 million in the current quarter included a valuation allowance of $25.3 million against our deferred tax assets. The net loss after income taxes and equity earnings for the period was $(56.5) million, or $(2.12) per diluted share, compared to a net income in 2008 of $3.2 million, or $0.12 per diluted share.

Results of Operations

Selected data                                                       Thirteen Weeks Ended
                                                                                    March 30,
(Thousands of dollars, except per share amounts)                March 29, 2009         2008

Net sales                                                      $         81,548     $  222,238
Gross profit (loss)                                            $        (14,513 )   $    9,386
Percentage of net sales                                                   -17.8 %          4.2 %
Income (loss) from operations                                  $        (28,198 )   $    3,176
Percentage of net sales                                                   -34.6 %          1.4 %
Net income (loss)                                              $        (56,501 )   $    3,179
Percentage of net sales                                                   -69.3 %          1.4 %
Diluted earnings (loss) per share                              $          (2.12 )   $     0.12

Impairment of Long-Lived Assets and Other Charges

In accordance with SFAS No. 144, we test the recoverability of our long-lived assets whenever events or changes in circumstances indicate that the carrying amount of the assets or assets groups may not be recoverable. Due to the anticipated reduction in vehicle production for the full year 2009 seen during the first quarter, the recent announcements of prolonged plant shutdowns by GM and the initiation of bankruptcy proceedings by Chrysler resulting in the idling of many of their plants during those proceedings, we tested the recoverability of our long-lived assets at all of our facilities. We concluded that the estimated future undiscounted cash flows of our Fayetteville, Arkansas facility would not be sufficient to recover the carrying value of our long-lived assets attributable to that facility. As a result we recorded a pretax asset impairment charge against earnings totaling $8.9 million, reducing the carrying value of certain assets at this facility to their respective estimated fair values.

In January 2009, we announced the planned closure of our wheel manufacturing facility located in Van Nuys, California, in an effort to further reduce costs and more closely align our capacity with sharply lower demand for aluminum wheels by the automobile and light truck manufacturers. The closure, which is expected to be completed by the end of the second quarter of 2009, will result in the layoff of approximately 290 employees. A pretax asset impairment charge against earnings totaling $10.3 million, reducing the carrying value of certain assets at the Van Nuys manufacturing facility to their respective fair values, was recorded in the fourth quarter of 2008, when we concluded that the estimated future undiscounted cash flows of that operation would not be sufficient to recover the carrying value of our long-lived assets attributable to that facility. Severance and other shutdown costs related to this plant closure are estimated to approximate $2.1 million, of which $1.4 million was recorded in the current quarter.

Sales

Consolidated revenues in the first quarter of 2009 decreased $140.7 million, or 63.3 percent, to $81.5 million from $222.2 million in the same period a year ago. Wheel sales decreased $139.4 million, or 63.7 percent, to $79.3 million from $218.7 million in the first quarter a year ago, as our wheel shipments decreased by 54.9 percent. Tooling reimbursement revenues totaled $2.2 million in the first quarter of 2009 and $3.5 million in the first quarter of 2008. The average selling price of our wheels decreased approximately 19 percent in the current quarter due to a 12 percent decrease in the pass-through price of aluminum and a 7 percent decrease in the average selling price due to a shift in sales mix.

As reported by industry publications, North American production of passenger cars and light trucks in the first quarter was down approximately 52 percent compared to the same quarter in the previous year. While our wheel shipments fell 55 percent for the same period. The decline of North American production included a decrease of 53 percent for passenger cars while light trucks fell by 51 percent. During the same period, our shipments of passenger car wheels decreased by 61 percent while light truck wheel shipments decreased by 51 percent.

Our shipments to GM decreased 51 percent to 38 percent of total unit shipments compared to 35 percent in the first quarter of 2008. Light truck wheel shipments to GM decreased 50 percent while shipments of passenger car wheels decreased 54 percent. The major unit shipment decreases were for the GMT800/900 platform, GMC Acadia and Chevy Malibu, while the largest increase was for Pontiac G6. Shipments to Ford decreased 52 percent and were 30 percent of total unit shipments compared to 28 percent a year ago, as light truck wheel shipments decreased 44 percent and shipments of passenger car wheel shipments decreased 65 percent. The major unit shipment decreases were for the Explorer, F Series trucks, and the Mustang, while there were no unit shipment increases. Shipments to Chrysler decreased 47 percent versus the prior year, but increased to 17 percent of total unit shipments during the quarter compared to 14 percent a year ago. Light truck shipments to Chrysler decreased 41 percent, while shipments of passenger car wheels decreased 55 percent. The major decreases in unit shipments were for Sebring and the Dodge Journey, while there were no unit shipment increases. Shipments to international customers decreased 70 percent compared to a year ago, decreasing to 15 percent of total unit shipments from 22 percent a year ago. The principal unit shipment decreases to international customers in the current period compared to a year ago were for Nissan's Frontier and Xterra and the Mazda 6, while the only significant unit shipment increase was for the Toyota Highlander.

Gross Profit (Loss)

Consolidated gross profit (loss) decreased $23.9 million for the first quarter of 2009 to a loss of $(14.5) million, or (17.8) percent of net sales, compared to a profit of $9.4 million, or 4.2 percent of net sales, for the same period a year ago. As indicated above, unit shipments in the first quarter of 2009 decreased 55 percent compared to the same period a year ago.. The sharp decrease in customer requirements resulted in wheel production also decreasing 55 percent compared to the same period a year ago, significantly impacting absorption of plant fixed costs. This, along with the lost margin on the 55 percent decrease in unit shipments contributed to the gross margin of our wheel plants in the first quarter of 2009 decreasing approximately 22.0 percent. Severance costs related to the California plant closure and other workforce reductions during the quarter totaled approximately $2.3 million.

We are continuing to implement action plans to improve operational performance and mitigate the impact of the declines in U.S. auto industry production and the continuing pricing environment in which we now operate. We must emphasize, however, that while we continue to reduce costs through process automation and identification of industry best practices, the pace of auto production declines and global pricing pressures may continue at a rate faster than our progress on achieving cost reductions for an indefinite period of time. This is due to the methodical nature of developing and implementing these cost reduction programs. In addition, although we have a portion of our natural gas requirements covered by fixed-price contracts expiring through 2012, costs may increase to a level that cannot be immediately recouped in selling prices. The impact of these factors on our future financial position, results of operations and cash flows may be negative, to an extent that cannot be predicted, and we may not be able to implement sufficient cost-saving strategies to mitigate any future impact.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the first quarter of 2009 decreased $1.4 million to $4.8 million, or 5.9 percent of net sales, from $6.2 million, or 2.8 percent of net sales, in the same period in 2008. The principal decreases in the first quarter of 2009 were $0.9 million in the provision for doubtful accounts and $0.4 million in salaries and related fringes, due to personnel reductions during later part of 2008 and early 2009.

Equity in Earnings (Loss) of Joint Venture

Equity in earnings of joint venture is represented by our share of the equity earnings of our 50-percent owned joint venture in Hungary, Suoftec. Our share of Suoftec's net loss in the first quarter of 2009 was $(1.0) million compared to income of $2.2 million for the same period in 2008. Including adjustments for the elimination of intercompany profits in inventory, our adjusted equity earnings of this joint venture was a loss of $(0.9) million in the first quarter of 2009 and income of $2.1 million in the first quarter of 2008. A discussion of the joint venture's operating results for the first quarter of 2009 compared to the same period in 2008 follows.

Our joint venture was also negatively impacted by customer restructurings and the economic conditions affecting the automotive industry in Europe. Net sales decreased $25.4 million, or 58 percent, to $18.7 million in the first quarter of 2009 compared to $44.1 million for the same period last year. The decrease in net sales was due to a 49 percent decrease in units shipped, along with a 17 percent decrease in the average selling price in U.S. dollars. However, the average selling price in euros, the functional currency of the joint venture, declined 4 percent and the U.S. dollar/euro exchange rate decreased 13 percent.

Gross profit in the first quarter decreased to a loss of $(1.8) million, or
(9.5) percent of net sales, compared to gross profit of $6.3 million, or 14.2 percent of net sales, for the same quarter of last year. The main contributors to the decrease in gross profit this quarter compared to the same quarter last year were the lost margin on the 49 percent decrease in unit shipments and the inability to absorb fixed costs due to the 51 percent decrease in production. Other items decreasing gross profit in the current period were a higher than normal amount of rework necessary to correct some quality issues, and higher costs for utilities and coatings.

Selling, general and administrative expenses this quarter decreased to $0.5 million from $0.7 million in the same quarter last year. The $0.2 million increase in selling, general and administrative expenses was due principally to the 13 percent decrease in the U.S. dollar/euro exchange rate.

Due principally to the decrease in gross profit explained above, Suoftec's net income decreased to a loss of $(1.9) million in the first quarter of 2009 from an income of $4.5 million in the same quarter last year.

Income Tax (Provision) Benefit

The income tax (provision) benefit on income before income taxes and equity earnings for the three months ended March 29, 2009 was a provision of $(26.5) million, including the $(25.3) million impact of the valuation allowance described below, compared to a provision of $(2.6) million for the same period in 2008.

In the first quarter of 2009, considering all positive and negative evidence available, we have determined that a valuation allowance is required to reduce our U.S. Federal deferred tax asset. Despite the continued progress with our international tax structuring, we no longer believe there is sufficient objectively verifiable evidence to demonstrate that our federal net deferred tax assets will be realized. In addition to the evidence considered in our analysis at the prior year-end, we considered, among other factors, the recent announcements of filing for bankruptcy by Chrysler and prolonged plant closures by GM and Chrysler, as discussed further in Note 3 - Subsequent Events. As a result of these announcements and the continued deterioration in the overall economic environment, we anticipate our 2009 and 2010 sales volumes and our U.S. tax loss for the current year will be worse than was previously projected. In addition, the current volatility of the automotive industry creates significant uncertainty and subjectivity to projections of profitability in future periods. Under these circumstances, SFAS No. 109 imposes a strong presumption that a valuation allowance is required in the absence of objectively verifiable information. Consequently, in considering the weight of all positive and negative evidence available as of the date of our 10-Q filing, we have recorded a valuation allowance of $25.3 million, which is reflected as a charge against income tax expense in the period.

Within the next twelve month period ending March 28, 2010, we anticipate that unrecognized tax benefits in the amount of $11 million will be recognized due to the expiration of statutes of limitations and terminations of examinations.

Financial Condition, Liquidity and Capital Resources

Our sources of liquidity include cash and cash equivalents, net cash provided by operating activities and other external sources of funds. Working capital and the current ratio were $240.0 million and 4.9:1, respectively, at March 29, 2009, versus $257.1 million and 5.1:1 at December 28, 2008. We have no long-term debt. As of March 29, 2009, our cash and cash equivalents totaled $162.9 million compared to $146.9 million at December 28, 2009, and $105.2 million at March 30, 2008. The increase in cash and cash equivalents since March 30, 2008, was due principally to reduced funding requirements of accounts receivable and inventories. For the foreseeable future, we expect all working capital requirements, funds required for investing activities, and cash dividend payments to be funded from internally generated funds or existing cash and cash equivalents. The increase in cash provided by operating activities and in cash and cash equivalents experienced in the first quarter of 2009 may not necessarily be indicative of future results.

Net cash provided by operating activities increased $17.2 million to $22.7 million for the thirteen weeks ended March 29, 2009, compared to $5.5 million provided during the same period a year ago. The change in net income plus the changes in non-cash items decreased net cash provided by operating activities by $(23.8) million. This decrease was offset by the net change in working capital requirements and other operating assets and liabilities, totaling $41.0 million. Funding requirements for accounts receivable decreased $38.8 million, due to the significant decrease in sales during the current quarter compared to the same period a year ago.

The principal investing activity during the thirteen weeks ended March 29, 2009, was funding $2.4 million of capital expenditures. Similar investing activities during the same period a year ago included funding of $3.1 million of capital expenditures. The capital expenditures in both periods were for ongoing improvements to our existing facilities, none of which were individually significant.

Financing activities during the thirteen weeks ended March 29, 2009 and March 30, 2008 consisted primarily of the payment of cash dividends on our common stock totaling $4.3 million in both periods. In addition, $0.2 million of proceeds were received from the exercise of stock options during the thirteen weeks ended March 30, 2008.

Critical Accounting Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to apply significant judgment in making estimates and assumptions that affect amounts reported therein, as well as financial information included in this Management's Discussion and Analysis of Financial Condition and Results of Operations. These estimates and assumptions, which are based upon historical experience, industry trends, terms of various past and present agreements and contracts, and information available from other sources that are believed to be reasonable under the circumstances, form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent through other sources. There can be no assurance that actual results reported in the future will not differ from these estimates, or that future changes in these estimates will not adversely impact our results of operations or financial condition.

New Accounting Standards

In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 141(R), "Business Combinations" (SFAS No. 141(R)). This Statement replaces SFAS No. 141, "Business Combinations" (SFAS No. 141), and defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. This Statement's scope is broader than that of SFAS No. 141, which applied only to business combinations in which control was obtained by transferring consideration. This Statement applies to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of the applicable provisions of SFAS No. 141(R) as of January 1, 2009, did not have an impact on our consolidated results of operations or statement of financial position or disclosures.

In February 2008, the FASB decided to issue a final Staff Position to allow a one-year deferral of adoption of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The FASB also decided to amend SFAS No. 157 to exclude FASB Statement No. 13 and its related interpretive accounting pronouncements that address leasing transactions. We adopted SFAS No. 157 effective January 1, 2009 for nonrecurring fair value measurements of nonfinancial assets and liabilities and have included the required discussion in Note 4 - Impairment of Long-lived Assets and Other Charges.

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities" (SFAS No. 161), an amendment of FASB Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133). This Statement is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity's derivative . . .