UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended:		Commission file number:
December 31, 2006		1-12733

Tower Automotive, Inc.

(Exact name of Registrant as specified in its charter)

Delaware (State of Incorporation)		41-1746238 (I.R.S. Employer Identification No.)
27175 Haggerty Road Novi, Michigan (Address of Principal Executive Offices)		48377 (Zip Code)

Registrant’s telephone number, including area code:
(248) 675-6000

None
(Former Name or Former Address, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $.01 per share

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15d of the Act. Yes o No þ

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

Large accelerated filer o      Accelerated filer o      Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

As of May 31, 2007, 58,640,621 shares of Common Stock of the Registrant were outstanding. As of May 31, 2007, the aggregate market value of the Common Stock of the Registrant (based upon the last reported sale price of the Common Stock at that date on the Pink Sheets), excluding shares owned beneficially by affiliates, was approximately $1,507,177.

Documents Incorporated By Reference
None.

 

 

TOWER AUTOMOTIVE, INC.

ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

				Page
PART I
Item 1.		Business			1
Item 1A.		Risk Factors			12
Item 1B.		Unresolved Staff Comments			15
Item 2.		Properties			16
Item 3.		Legal Proceedings			17
Item 4.		Submission of Matters to a Vote of Security Holders			17
PART II
Item 5.		Market for Registrant’s Common Equity and Related Stockholder Matters			18
Item 6.		Selected Financial Data			19
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 7A.		Quantitative and Qualitative Disclosures about Market Risk			34
Item 8.		Financial Statements and Supplementary Data			35
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			92
Item 9A.		Controls and Procedures			92
Item 9B.		Other Information			93
PART III
Item 10.		Directors and Executive Officers of the Registrant			93
Item 11.		Executive Compensation			97
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			109
Item 13.		Certain Relationships and Related Transactions			110
Item 14.		Principal Accountant Fees and Services			110
PART IV
Item 15.		Exhibits and Financial Statement Schedules			111
Signatures
Certification of Chief Executive Officer Pursuant to Rules 13a-15(e) and 15d-15(e)
Certification of Chief Financial Officer Pursuant to Rules 13a-15(e) and 15d-15(e)
Certification Pursuant to Section 906
Statement of Computation of Ratio of Earnings to Fixed Charges
List of Subsidiaries
Consent
Consent
Certification
Certification
Certification
Certification

 i

PART I

Item 1. Business

Tower Automotive, Inc. and its subsidiaries (collectively referred to as the “Company” or “Tower Automotive”) is a global designer and producer of structural metal components and assemblies used by the major automotive original equipment manufacturers (“OEMs”), including Ford/Volvo, Hyundai/Kia, DaimlerChrysler, Nissan/Renault Volkswagen Group, Toyota, Fiat and BMW. The Company provides broad technical design, engineering and program management capabilities for products that cover the entire body structure of a vehicle, including automotive body structural stampings and assemblies, exposed sheet metal (“Class A”) components, lower vehicle structural stampings and assemblies and suspension components. The Company believes it is one of the largest independent global suppliers of structural components and assemblies to the automotive market (based on net revenues). The Company currently serves 87% of the major automotive OEM’s around the world.

Tower Automotive is one of only a few companies that provide a broad array of structural metal products and services for the automotive sector. These products and services are delivered to our customers on a global basis from 35 production and engineering facilities located in the North America, Europe, Brazil, South Korea, Japan, China and India. As OEMs reduce their supplier bases in efforts to lower costs and improve quality, they are more frequently awarding sole-source contracts to broadly capable suppliers who are able to supply large and complex portions of a vehicle on a global basis, rather than to suppliers that only provide individual component parts. OEMs’ criteria for supplier selection include cost, quality, responsiveness, full-service design and engineering, and program management capabilities. In addition, OEMs increasingly are requiring their suppliers to have the capability to design and manufacture their products in multiple geographic markets. As a supplier with strong OEM relationships, broad capabilities and technologies, scale and global presence, the Company expects to continue to benefit from these trends going forward.

Proceedings under Chapter 11 and Administration of the Bankruptcy Code

On February 2, 2005, Tower Automotive, Inc. and 25 of its United States subsidiaries (collectively, “the Debtors”) each filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (“Bankruptcy Code”) in the United States Bankruptcy Court Southern District of New York (“the “Court”). The cases are jointly consolidated for administrative purposes. The Debtors are operating as debtors-in-possession (“DIP”) pursuant to the Bankruptcy Code. An official committee of unsecured creditors has been appointed.

The Debtors’ liquidity position was adversely affected in late 2004 and early 2005 by customer pricing pressures, North American automotive production cuts, significantly higher raw material costs (primarily steel), high interest costs and the termination of accelerated payment programs of certain customers. An extensive liquidity deficiency and a significant amount of indebtedness, incurred through internal growth and acquisition activity, made the filing necessary.

The objectives of the Chapter 11 filing are to protect and preserve the value of assets and to restructure and improve the Debtors’ financial and operational affairs in order to return to profitability. The Debtors filed a plan of reorganization with the Court on May 1, 2007. The Company is planning on seeking confirmation of its plan of reorganization in July 2007. While the Debtors filed for Chapter 11 to gain relief from significant pre-petition debt levels, the extent to which such relief will be achieved is uncertain at this time.

DIP Financing

In February 2005, the Bankruptcy Court approved a Revolving Credit, Term Loan and Guaranty Agreement, as amended (“DIP Agreement”), between the Company and a national banking institution as agent for the lenders (“Lenders”) and each of the Lenders.

The DIP Agreement provides for a $725 million commitment of debtor-in-possession financing comprised of a revolving credit and letter of credit facility in an aggregate principal amount not to exceed $300 million and a term loan in the aggregate principal amount of $425 million. The proceeds of the term loan have been used to refinance the Debtors’ obligations of amounts outstanding under the pre-petition credit agreement. The proceeds of the revolving credit loans shall be used to fund the working capital requirements of the Debtors during the Chapter 11 proceedings. Obligations under the DIP Agreement are secured by a lien on the assets of the Debtors (such lien shall have first priority with respect to a significant portion of the Debtors’ assets) and by a super-priority administrative expense claim in each of the bankruptcy cases.

The DIP Agreement matures on August 2, 2007; however, the Debtors are obligated to repay all borrowings made pursuant to the DIP Agreement upon substantial consummation of a plan of reorganization of the Debtors that is confirmed pursuant to an order of the Bankruptcy Court.

Going Concern

As indicated above, effective February 2, 2005, the Debtors are operating pursuant to Chapter 11 under the Bankruptcy Code and continuation of the Company as a going concern is contingent upon, among other things, the Debtors’ ability: (i) to comply with the terms and conditions of the Debtor-in-Possession financing agreement described in Note 9 to the Consolidated Financial Statements; (ii) to obtain confirmation of a plan of reorganization under the Bankruptcy Code; (iii) to undertake certain restructuring actions relative to the Company’s operations in North America; (iv) to reduce unsustainable debt and other liabilities and simplify the Company’s complex and restrictive capital structure through the bankruptcy process; (v) to return to profitability; (vi) to generate sufficient cash flow from operations; and (vii) to obtain financing sources to meet the Debtors’ future obligations. These matters raise substantial doubt regarding the Company’s ability to continue as a going concern.

Overview of the Company

Since its inception in April 1993, when the Company was formed to acquire R. J. Tower Corporation, the Company’s revenues have grown rapidly through internal growth and acquisitions on a global basis. From 1993 to 2006, the Company successfully completed 15 acquisitions and established five joint ventures to create the global footprint that characterizes the Company today. As a result of these acquisition activities and significant organic growth, Company revenues have increased from approximately $86 million in 1993 to $2.5 billion in 2006.

Approximately 46% of the Company’s 2006 revenues were generated from sales in North America. The Company supplies products for many car, light truck and sport utility models, including: the Ford Five Hundred/Freestyle, Taurus, Focus, and Ranger and F-Series pickup trucks, Ford Expedition, Explorer, Escape SUVs, Lincoln Navigator and Mercury Mountaineer SUVs, Econoline full size van; Chevrolet Silverado and GMC Sierra pickups; Chrysler Town & Country and Dodge Caravan minivans; Dakota pickup trucks; Jeep Wrangler and Grand Cherokee; Toyota Camry, Avalon, Corolla cars and Tundra and Tacoma pickups; Honda Accord and Element; Nissan Xterra, Pathfinder, Armada SUVs, Infiniti QX56 SUV and Titan, Frontier pickup. Approximately 32% of the Company’s 2006 revenues were generated from sales in Europe, 17% in Asia and 5% in South America. Key vehicle programs include: Volvo S40, V50, C30 and C40; DaimlerChrysler A-Class and Sprinter; BMW 1 & 3 series; VW Golf, Jetta and Toureg and the Porsche Cayenne; Fiat Punto, Stilo, Ducato; Alpha Romeo 147 and 156; Hyundai/Kia Spectra, Cerato, Sportage, Carinival and Sorento; and, Chery Flagcloud, WindCloud and Orient.

The Company makes available, free of charge through our Internet website (www.towerautomotive.com), annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, filed with the Securities Exchange Commission (“SEC”), as soon as reasonably practicable after those reports are filed with the SEC.

Financial information about segments

See Note 14 to the Consolidated Financial Statements contained in Item 8. of this Form 10-K.

Business and operating strategy

Tower Automotive was created through a series of acquisitions of complementary businesses that have allowed the Company to become one of the largest independent global suppliers of structural metal components and assemblies (based on net revenues) with a diverse customer portfolio and a broad scope of product offerings. In the Company’s early years, the growth coincided with an extended period of increased production and consolidation in the automotive industry, resulting in high levels of utilization of the Company’s resources and capacity. Unfortunately, with little post-merger integration across the acquisitions, insufficient operational disciplines and a highly leveraged balance sheet, when automotive production declined relative to prior periods, the Company struggled with profitability in its North American operations.

Starting in 2001 through early 2005, the Company successfully launched a significant backlog of new business, which drove profitability in its international operations and helped strengthen customer relationships. At the same time, the North American region was reorganized, cutting SG&A costs while strengthening engineering resources, reducing excess capacity and eliminating redundant overhead costs. Despite the restructuring activities, developments in late 2004 and early 2005 led to a significant decline in the Company’s liquidity position. These developments included market share and production declines at key North American OEM customers, a rise in steel prices, the termination of accelerated payment programs by certain automakers, higher than anticipated new program launch costs and the continued underperformance of the North American operations. The complex and restrictive capital structure built during the acquisition years presented a strategic challenge as debt service required cash outflows almost as high as ongoing capital expenditures and drove the cost of capital above competitive levels.

The Company’s strengths are its strong diversified customer and geographic portfolio, its global manufacturing footprint, the progress made during the bankruptcy in addressing legacy costs and restructuring underperforming operations, and its leadership in manufacturing and design of complex automotive metal structures. The Company’s current challenge is to restructure its U.S. operations under the protection of Chapter 11 while continuing to support its flourishing international business.

The Company’s key strategies are to consolidate its position as a global metal structures leader, strengthen its financial performance by reorganizing under Chapter 11 protection and emerging successfully, drive operational excellence throughout the company, leverage its scale to realize structural improvements and strengthen organizational depth to support leadership development and succession. Achievements of the last few years include the restructuring of the global manufacturing footprint by closing or selling one third of plants worldwide, including over half of the North American plants, driving operational improvements in productivity, safety and quality, eliminating approximately $20 million in annual cash costs for post retirement medical benefits and freezing pension plans, centralizing purchasing and other selling, general and administrative expense functions and continuing to win new business with key customers.

Initiatives implemented by the Company during 2006 include:

	§		On January 4, 2006, the Company filed a motion in Bankruptcy Court asking the Court to modify its post-retirement medical benefits and to reject its collective bargaining agreements. In March and April 2006, the Company announced that it had reached an agreement in principal with its Milwaukee unions on a variety of issues including postretirement medical benefits and the Company announced it had reached an agreement in principle with its salaried retirees on a variety of issues including postretirement medical benefits.
	§		In February 2006, the Company announced that it would begin discussions with the union to close its Greenville, MI facility and to move the work to other facilities in the U.S. The Company closed this facility in November 2006.
	§		In May 2006, the Company announced its intention to enter into decision bargaining with the union to downsize its Bluffton, OH facility and move work to other facilities in the U.S.

	§		On June 26, 2006, the Company announced that it would phase out production at its Toronto, Ontario aluminum foundry and mini-mill on August 31, 2006.
	§		In August 2006, the Company announced the ratification of revised collective bargaining agreements with the United Auto Workers union and the United Steelworkers union covering hourly employees at the Company’s Bluffton, OH and Elkton, Michigan facilities, as well as a contract extension and severance agreement at the Company’s Clinton, Michigan and Milan, Tennessee facilities, respectively. The tentative agreement announced on July 19, 2006 covered hourly employees at nine of the Company’s North American facilities, but was subsequently modified to govern only the four facilities that ratified the agreement in August. The U.S. Bankruptcy Court overseeing the Company’s Chapter 11 case approved the agreement.
	§		On September 14, 2006, the Company announced that production from its Upper Sandusky, Ohio plant would be consolidated into other Tower facilities in North America as part of its ongoing restructuring plan.
	§		On November 9, 2006, the Company announced that production from its Kendallville, Indiana plant would be consolidated into other Tower facilities in North America.
	§		On December 22, 2006, the Company and Tower Automotive Lansing, LLC completed the sale of the Lansing, Michigan facility and related assets to a designee of General Motors in accordance with the Order of the Bankruptcy Court dated August 10, 2005.

The Company believes these and other initiatives will accelerate reductions in operational costs, allow it to leverage economies of scale and enhance its ability to serve its customers, creditors and shareholders.

Growth Strategy

The Company’s current growth strategy focuses on cadenced, organic growth. Specifically, the Company believes the following strengths play an important role in achieving the organic growth objectives:

	§		Strong customer relationships with key domestic and foreign OEMs;
	§		Broad technical capabilities in vehicle structures;
	§		Scale position as one of the largest independent suppliers of automotive structural components and assemblies; and
	§		Global engineering and manufacturing presence including two established facilities in China.

As a result of these competitive strengths and the efforts to increase organic growth, the Company was awarded programs that launched in 2003-2005, which have helped to further diversify the Company’s customer and geographic base. These programs have resulted in a decrease in the proportion of revenues from the North American operations of Ford Motor Company, General Motors and DaimlerChrysler (Detroit 3) from 64% in 2001 to 41% in 2006.

Industry Trends

The Company’s performance and growth are directly related to certain trends within the automotive market, including the consolidation of the component supply industry and variations in automotive production levels, which are cyclical and depend on general economic conditions and consumer confidence.

The Company’s strategy capitalizes on several important trends in the automotive industry that have benefited Tower Automotive in the past and will continue to benefit it in the future. These trends include:

§

Continuation of Trend to Larger, More Capable Suppliers. In order to lower costs and improve quality, OEMs have continued to reduce their supply bases by awarding sole-source contracts to suppliers who are able to supply greater vehicle content through complex subassemblies. OEMs’ criteria for supplier selection not only include cost, quality and responsiveness, but also design engineering and program management capabilities. As a result, the automotive supply industry has undergone significant

consolidation. Furthermore, a number of suppliers have experienced financial difficulties. These factors have combined to provide an opportunity for further organic growth by obtaining business from smaller or troubled suppliers through providing the scale and broad capabilities that OEMs require.

	§		OEM “Shakeout”. The recent acquisition and consolidation activity among select OEMs has not led to the disadvantage of the smaller OEMs in the industry as certain industry experts previously predicted. Rather, smaller OEMs such as Peugeot, Honda, Hyundai/Kia, BMW and the emerging Chinese automakers have strengthened their position in the industry, while some of the larger OEMs have struggled to successfully integrate acquisitions and manage legacy costs. The Company’s global capabilities have allowed it to continue to serve as a valued supplier to those smaller but growing producers.
	§		General Assemblies. OEMs are increasingly seeking suppliers capable of providing larger structural assemblies. By outsourcing larger structural assemblies, OEMs are able to reduce the costs associated with the design and integration of various components, and improve quality by enabling their suppliers to assemble and test major portions of the vehicle prior to production. It also allows the OEM to avoid the cost of upgrading internal body shops and frees up space for growth or alternative assembly. Tower Automotive has capitalized on the complex assembly sourcing trend among OEMs by offering customers high value-added supply capabilities through a focus on the production of assemblies consisting of multiple component parts that are welded or otherwise fastened together by the Company.
	§		Growth in Emerging Markets. Countries such as China, Korea, Thailand, India and Brazil, and regions such as Eastern Europe, are expected to experience significant growth in vehicle demand and production volumes over the next ten years. In order to best meet these OEM supply requirements, the Company is well-positioned with more than 10 manufacturing facilities, in key emerging markets including Poland, Slovakia, Brazil, Korea, China and a technical center in India.

Products

The Company produces a broad range of structural components and assemblies, many of which are critical to the structural integrity of a vehicle. The Company’s products generally can be classified into the following categories:

Body structures and assemblies

These products form the basic upper body structure of the vehicle and include large metal stampings such as body pillars, roof rails, side sills, parcel shelves and intrusion beams. This category also includes Class A surfaces and assemblies. Class A surfaces include exposed sheet metal components such as body sides, pickup truck box sides, door panels and fenders.

Complex body-in-white assemblies

These products are comprised of multiple components and sub-assemblies welded to form major portions of the vehicle’s body structure. Examples of complex assemblies include front and rear floor pan assemblies and door/pillar assemblies.

Lower vehicle frames and structures

Products such as pickup truck and SUV full frames, automotive engine and rear suspension cradles, floor pan components and cross members form the basic lower body structure of the vehicle. These heavy gauge metal stampings, built using both traditional and hydroforming methods, carry the load of the vehicle, provide crash integrity and are critical to the strength and safety of vehicles.

Chassis modules and systems

Products include axle assemblies and front and rear structural suspension modules/systems. Axle assemblies consist of stamped metal trailing axles, assembled brake shoes, hoses and tie rods. Front and rear structural suspension modules/systems consist of control arms, suspension links, value-added assemblies and powertrain modules. The Company exited the powertrain module business at the end of 2006.

Suspension components

Products include stamped, formed and welded products such as control arms, suspension links, track bars, spring and shock towers, and trailing axles. These suspension components are critical to the ride, handling and noise characteristics of a vehicle.

Other

The Company manufactures a variety of other products including heat shields and other precision stampings for its OEM customers.

The following table summarizes the approximate composition by product category of the Company’s global revenues for the last three years, excluding discontinued operations:

		Years Ended
		December 31,
Product Category		2006				2005				2004
Body structures and assemblies			59	%			51	%			44	%
Complex body-in-white assemblies			13				13				8
Lower vehicle frames and structures			20				27				31
Chassis modules and systems			2				2				6
Suspension components			5				6				9
Other			1				1				2
Total			100	%			100	%			100	%

Market and Customer Overview

North American automotive manufacturing has been dominated by General Motors, Ford and DaimlerChrysler, which are the company’s largest customers in North America. International automakers continue to expand their production capacity in North America, representing approximately 33% of North American production in 2006 versus 31% in 2005.

As a result of past growth strategies, the Company has expanded its penetration of New Domestics as Nissan, Toyota and Honda in North America and its global presence win such customers as Mercedes, Fiat, BMW, Volkswagen Group, Renault/Nissan, Hyundai/Kia and Volvo.

Following is a summary of the global composition of the Company’s key customers for the last three years, excluding discontinued operations:

		Years Ended
		December 31,
Customer		2006				2005				2004
Ford Motor Company			28	%			33	%			38	%
Hyundai/Kia			13				12				11
Renault/Nissan			11				12				6
DaimlerChrysler			10				12				16
Volkswagen Group			9				8				8
Fiat			6				5				4
Toyota			6				5				4
BMW			4				3				2
GM			3				3				3
Honda			2				1				2
Other			8				6				6
Total			100	%			100	%			100	%

Following is a summary of the Company’s sales by geographic region for the last three years, excluding discontinued operations:

		Years Ended
		December 31,
Geographic Category		2006				2005				2004
North America			46	%			61	%			66	%
Europe			32				23				20
Asia			17				13				12
South America			5				3				2
Total			100	%			100	%			100	%

The following table presents an overview of the major models for which the Company supplies products:

				Models		Product Segment
North America
		Ford		§ Five Hundred / Freestyle / Montego		• Complex Assembly
				§ Econoline		• Frame Assembly
		DaimlerChrysler		§ Dakota		• Frame Assembly
		Nissan		§ Frontier / Xterra / Pathfinder		• Frame Assembly & Body Structures
				§ Titan / Armada / Qx56		• Frame Assembly
Europe
		Volvo		§ S40 / V50 / C30		• Complex Assembly
		VW		§ Cayenne / Touareg / Porsche		• Body Structures & Assembly
		BMW		§ 1 / 3 Series		• Body Structures
Asia
		Hyundai		§ Carnival		• Body Structures
				§ Sorento		• Body Structures & Frame Assembly

Most of the Company’s products have a lead time of two to five years from product development to production. Generally, the selling prices of these products are negotiated annually between the Company and its customers.

Sales of the Company’s products to OEMs are made directly by the sales and engineering teams, located at its technical/customer service centers in Novi, Michigan; Yokohama, Japan; Turin, Italy; Bergisch-Gladbach, Germany; Aruja, Brazil; Seoul, Korea; Changchun and Wuhu, China and Hyderabad, India. Through its technical centers, the Company services its OEM customers and manages its continuing programs of product design improvement and development. The Company periodically places engineering colleagues at various customer facilities to facilitate the development of new programs.

The Company’s sales and marketing efforts are designed to create overall awareness of its engineering, program management, manufacturing and assembly expertise, to acquire new business and to provide ongoing customer service. The customer service group is organized into customer-dedicated teams within regions. From time to time, the Company also participates in industry and customer specific trade and technical shows.

Design, Development and Engineering Support

The Company strives to maintain a technological advantage through targeted investment in product development and in advanced engineering capabilities. The Company’s engineering capabilities enable it to design and build high quality, efficient manufacturing systems, processes and equipment and to continuously improve our production processes, systems and equipment. The Company’s manufacturing engineers are located at each of its manufacturing facilities. The Company’s engineering responsibilities range from research and development, advanced product development, product design, testing and initial prototype development to the design and implementation of manufacturing processes.

Because structural parts must be designed at an early stage in the development of new vehicles or model revisions, the Company is given the opportunity to utilize its product and process engineering competencies early in the vehicle planning process. Advanced development and engineering resources create original engineering designs, computer-aided designs, feasibility studies, working prototypes and testing programs to meet customer specifications. The Company’s Hyderabad, India technical center allows for 24 hour engineering capabilities globally, thereby optimizing product design and analysis capabilities and leading to reduced development costs.

Manufacturing

The Company’s manufacturing operations consist primarily of stamping and welding operations, system and modular assembly operations, coating and other ancillary operations.

Stamping involves passing metal through dies in a stamping press to form the metal into three-dimensional parts. The Company produces stamped parts using precision single-stage, progressive and transfer presses, ranging in size from 150 to 4,500 tons, which perform multiple functions to convert raw material into finished products. The

Company continually invests in its press technology to increase flexibility, improve safety and minimize die changeover time.

Stampings that are to be used in assemblies are fed into cell-oriented assembly operations that produce complex, value-added assemblies through the combination of multiple parts that are welded or fastened together. The Company’s assembly operations are performed on either dedicated, high-volume welding/fastening machines or on flexible cell-oriented robotic lines for units with lower volume production runs. The assembly machines attach additional parts, fixtures or stampings to the original metal stampings. In addition to standard production capabilities, the Company’s assembly machines also are able to perform various statistical control functions and identify improper welds and attachments. The Company works continuously with manufacturers of fixed/robotic welding systems to develop faster, more flexible machinery.

The products manufactured by the Company use various grades and thicknesses of steel and aluminum, including high strength hot- and cold-rolled, galvanized, organically coated, stainless and aluminized steel. See “Suppliers and Raw Materials”.

OEMs have established quality rating systems involving rigorous inspections of suppliers’ facilities and operations. Their factory rating programs provide a quantitative measure of a company’s success in improving the quality of its operations. The Company has received quality awards from Ford (Q1) and DaimlerChrysler (Pentastar). In 2006, the Company was the first global metal structures supplier to receive the five star quality award from Hyundai/Kia, its highest quality award. The automotive industry has adopted a quality rating system known as TS-16949. Substantially all of the Company’s existing operating facilities in North America and around the world have received TS-16949 certification in compliance with the automotive industry requirements.

Competition

The Company operates in a highly competitive, fragmented market segment of the automotive supply industry, with a limited number of competitors generating revenues in excess of $200 million each. The number of the Company’s competitors has decreased in recent years and is expected to continue to decline due to supplier consolidation. The Company’s major competitors include: Magna International, Inc. (“Magna”); Martinrea International (substantial successor to the Thyssen-Budd Company); Dana Corporation; Gestamp Automocion; Gruppo Magnetto; Benteler Automotive; Sungwoo; Hwashin; Sewon Tech; Shinyoung; and divisions of OEMs with internal stamping and assembly operations. The Company competes with other competitors in various segments of its product lines and in various geographic markets.

The Company principally competes for new business both at the beginning of the development of new models and upon the redesign of existing models. New-model development generally begins two to five years before the marketing of such models to the public. Once a supplier has been designated to supply parts for a new program, an OEM usually will continue to purchase those parts from the designated producer for the life of the program, although not necessarily for a redesign. Competitive factors in the market for the Company’s products include product quality and reliability, cost, timely delivery, technical expertise and development capability, new product innovation and customer service. In addition, there is substantial and continuing pressure from the OEMs to reduce costs, including the cost of products purchased from outside suppliers such as the Company. Companies must be able to offset pricing givebacks to customers as well as overall economic cost increases with improved productivity to maintain needed profitability levels.

Suppliers and Raw Materials

The primary raw material used to produce the majority of the Company’s products is steel. The Company purchases hot- and cold-rolled, coated, stainless and galvanized steel from a variety of suppliers. The Company employs just-in-time manufacturing and sourcing systems enabling it to meet customer requirements for faster deliveries while minimizing its need to carry significant inventory levels. The price of steel increased significantly during the second half of 2004 compared to recent historical periods. In 2005, steel prices generally leveled off and decreased moderately from their peaks in 2004. In 2006, steel prices rose moderately throughout the first half of the year before decreasing the second half to level off around approximately the same price at the end of 2005. The Company purchases a substantial portion of its steel from certain of its customers through the OEM resale programs. The purchases through customer resale programs have buffered price swings associated with the procurement of steel. The remainder of steel purchasing requirements is met through contracts with steel producers and market

purchases. In some cases, the Company may be unable to either avoid increases in steel prices or pass through any price increases to its customers. Customer agreements generally do not permit an increase in selling prices for increases in the cost of raw material inputs.

Other raw materials purchased by the Company include small- and medium-sized stampings, fasteners, tubing and rubber products, all of which are available from numerous sources.

Colleagues

As of December 31, 2006, the Company had 10,477 colleagues worldwide, of whom approximately 5,800 are covered under collective bargaining agreements: 2,100 in the North American operations and 3,700 in the international operations. These collective bargaining agreements expire at various times through January 2010. In February 2004, the Company entered into a neutrality agreement with the United Auto Workers Union (“UAW”), covering six facilities. The neutrality agreement facilitates the organization of these facilities as it provides for expedited bargaining and requires that the Company take a neutral position in any organizing efforts by the UAW. The Company began negotiations with the unions representing current and retired employees since October 2005 seeking concessions from the bargaining units in the wage rate structure of its membership as well as the benefits offered by the Company including health insurance coverage.

Health insurance coverage for employees and retirees have resulted in significant cost increases for vehicle manufacturers and suppliers for the past several years and put domestic auto makers and suppliers at a significant disadvantage with their foreign based competitors. As part of its Chapter 11 process, the Company sought the approval of the Bankruptcy Court to reject its U.S. union contracts. Subsequent to this approval, the Company was able to reach consensus with its active U.S. unions. This agreement provided the Company with reduced wages, increased health care cost sharing, elimination of future pension service awards, and certain work rule changes at the Milwaukee and Greenville facilities. In exchange, the Company provided plant closure language that limits the Company’s ability to close these plants absent any volume reductions from its customers for the duration of the agreements. While the Company has not experienced any work stoppages since its inception in 1993, a strike or slow-down by one of the Company’s unions could have a material adverse effect on the Company’s business. The continuing challenge for the Company is to maintain its good relations with colleagues while it continues to restructure its North American operations. At the same time, the Company must continue to recruit, retain and motivate qualified personnel at all levels of the Company.

Patents and Trademarks

The Company has a limited number of patents worldwide. By the nature of its business, no single patent or group of patents is material to the Company’s business.

The Company has trademarks pertaining to its name, Tower Automotive®, which are registered in various countries, allowing it to market its products on a global basis. This trademark is widely recognized in the global automotive industry.

Backlog

The Company’s products are not sold on a firm backlog basis. The Company does not believe that its backlog of expected product sales covered by issued purchase orders is a meaningful indicator of future sales since orders may be rescheduled or canceled by its customers at any time. Product sales are dependent upon the number of vehicles that the Company’s customers actually produce as well as the timing of such production.

Seasonality

The Company’s business is somewhat seasonal. The Company typically experiences decreased revenues and operating income during the third quarter of each year due to the impact of scheduled OEM plant shutdowns in July and August for vacations and new model changeovers. Shutdowns by OEMs of approximately one and one-half weeks in December also have a negative impact on revenues and operating income during the fourth quarter of each year and the resulting negative cash flow impact during January of the following year.

Environmental Matters

The Company is required to comply with federal, foreign, state and local laws and regulations governing the protection of the environment and occupational health and safety, including laws regulating the generation, storage, handling, use and transportation of hazardous materials; the emission and discharge of hazardous materials into soil, air or water; and the health and safety of its colleagues. The Company is also required to obtain permits from governmental authorities for certain operations. The Company has taken steps to assist in the compliance with the numerous and sometimes complex regulations, such as holding environmental and safety training sessions for representatives from its domestic facilities. The Company has achieved TS 16949 registration for substantially all of its facilities. The Company conducts third party or internal audits for environmental, health, and safety compliance, and uses outside expertise to assist in the filing of permits and reports when required.

Compliance with federal, state and local provisions relating to the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had a material impact on the Company’s capital expenditures, earnings or competitive position. The Company is not currently aware of any significant liability exposure with respect to laws imposing liability for the cleanup of contaminated property to which it may have sent wastes for disposal.

The Company owns properties, which have been impacted by environmental releases. At some of these properties, the Company is liable for costs associated with investigation and/or remediation of contamination in one or more environmental media. The Company is currently actively involved in investigation and/or remediation at several of these locations. At certain of these locations, costs incurred for environmental investigation and/or remediation are being paid partly or completely out of funds placed into escrow by previous property owners. Nonetheless, total costs associated with remediating environmental contamination at these properties could be substantial and may be material to the Company’s financial condition, results of operations or cash flows. At December 31, 2006 and 2005, the Company had recorded liabilities of $10.2 million and $11.4 million, respectively, for environmental remediation liabilities.

1A. Risk Factors.

The general economic and/or business conditions affecting the automotive industry may adversely impact the Company.

The automotive industry in the United States as a whole is facing a downturn in economic and business conditions. The number of automotive parts suppliers filing for protection under Chapter 11 of the Bankruptcy Code has increased during 2006 and many other companies in the industry have announced significant restructuring plans in order to remain viable. GM, Ford, and DaimlerChrysler are trying to return their North American automotive operations to profitability through a combination of strict cost control, capacity rationalization (plant closings) and the acceleration of new product/technology introductions. Unless they can stem their ongoing market share declines, further production cuts could have a ripple effect throughout the supply chain and impact the profitability of those suppliers most dependent on these domestic manufacturers, including the Company. The Company is dependent on Ford and DaimlerChrysler as two of its largest customers. Revenues from the North American operations of Ford and DaimlerChrysler represented approximately 28% and 10%, respectively, of the Company’s revenues in 2006.

The Company is dependent on the success of key customer platforms.

The Company’s typical contracts with its customers provide for supplying that customer’s requirements for a particular model, rather than manufacturing a specific quantity of components. These contracts range from one year to the life of the platform or model, usually three to ten years, and do not require the purchase by the customer of any minimum number of components. Therefore, the loss of any one of these customers, or a significant reduction in demand for vehicles for which the Company produces components and assemblies, would have a material adverse effect on the Company’s existing and future revenues and net income.

The Company may be adversely impacted by the inability to achieve needed cost reductions.

There is substantial, continuing pressure from the major OEMs to reduce costs, including the cost of products and services purchased from outside suppliers. Repeated spikes in steel prices have become a significant risk factor for many companies in the automotive industry. Suppliers and automakers alike have had difficulty passing on these increased costs to consumers in the current highly competitive environment. Oil and gas prices have reached record highs and the oil price spikes that continued into 2006 have started to have a measurable impact on vehicle purchase behavior. The Company’s inability to pass through increased materials pricing may result in lower profit margins for the Company.

In addition, the Company’s business is very capital intensive. Therefore, profitability is dependent, in part, on the Company’s ability to spread fixed production costs over increasing product sales. If the Company is unable to generate sufficient production cost savings in the future to offset price reductions and any reduction in customer demand for automobiles, the Company’s profitability would be adversely affected. In addition, the Company’s customers often require engineering, design, or production changes. In some circumstances, the Company may not be able to achieve price increases sufficient in amounts to cover the costs of these changes.

Prolonged continuation of the Chapter 11 Cases may harm the Company’s businesses.

The prolonged continuation of the Chapter 11 Cases could adversely affect the Company’s businesses and operations. So long as the Chapter 11 Cases continue, senior management of the Company will be required to spend a significant amount of time and effort dealing with the Company’s reorganization instead of focusing exclusively on business operations. Prolonged continuation of the Chapter 11 Cases will also make it more difficult to attract and retain management and other key personnel necessary for the success and growth of the Company’s businesses. In addition, the longer the Chapter 11 Cases continue, the more likely it is that the Company’s customers and suppliers will lose confidence in the Company’s ability to successfully reorganize their businesses and seek to establish alternative commercial relationships. Furthermore, so long as the Chapter 11 Cases continue, the Company will be required to incur substantial costs for professional fees and other expenses associated with the proceedings. The prolonged continuation of the Chapter 11 Cases may also require the Company to: (i) seek additional financing; (ii) obtain relief from certain covenants contained in the DIP Agreement; and/or (iii) negotiate an extension of the term of the DIP Agreement, either as part of the DIP credit facility or otherwise, in order to

service their debt and other obligations. It may not be possible for the Company to obtain additional financing during the pendency of the Chapter 11 Cases on commercially favorable terms or at all. If the Company was to require additional financing during the Chapter 11 Cases and was unable to obtain the financing on favorable terms or at all, the Company’s chances of successfully reorganizing its businesses may be seriously jeopardized.

The Company may not be able to obtain confirmation of its Chapter 11 plan.

In order to successfully emerge from Chapter 11 bankruptcy protection as a viable entity, the Company must develop, and obtain requisite court and creditor approval of, a viable Chapter 11 Plan of Reorganization (the “Plan”). This process requires the Company to meet certain statutory requirements with respect to adequacy of disclosure with respect to the Plan, soliciting and obtaining creditor acceptances of the Plan, and fulfilling other statutory conditions for confirmation. The Company may not receive the requisite acceptances to confirm the Plan. Even if the requisite acceptances of the Plan are received, the Bankruptcy Court may not confirm the Plan. A dissenting holder of a claim against the Company may challenge the balloting procedures and results as not being in compliance with the Bankruptcy Code. Even if the Bankruptcy Court determined that the balloting procedures and results were appropriate, the Bankruptcy Court could still decline to confirm the Plan if it found that any of the statutory requirements for confirmation had not been met, including that the terms of the Plan are fair and equitable to non-accepting classes. Section 1129 of the Bankruptcy Code set forth the requirements for confirmation and mandates, among other things, a finding by the Bankruptcy Court that (i) the Plan “does not unfairly discriminate” and is “fair and equitable” with respect to any non-accepting classes, (ii) confirmation of the Plan is not likely to be followed by a liquidation or a need for further financial reorganization and (iii) the value of distributions such holders would receive if the Company was liquidated under Chapter 7 of the Bankruptcy Code. The Bankruptcy Court may determine that the Plan does not satisfy one or more of these requirements, in which case it would not be confirmable by the Bankruptcy Court.

If the Plan is not confirmed by the Bankruptcy Court, it is unclear whether the Company would be able to reorganize its businesses and what, if any, distributions holders of claims against the Company ultimately would receive with respect to their claims. If an alternative reorganization could not be agreed upon, it is possible that the Company would have to liquidate its assets, in which case it is likely that holders of claims would receive substantially less favorable treatment than they would receive if the Company was to emerge as a viable entity.

The Company is subject to certain risks associated with its foreign operations.

The Company has significant international operations, specifically in Europe, Asia, and South America. Certain risks are inherent in international operations, including:

	•		Difficulty in enforcing agreements and collecting receivables through certain foreign legal systems;
	•		Foreign customers may have longer payment cycles than customers in the United States;
	•		Tax rates in certain foreign countries may exceed those in the United States, and foreign earnings may be subject to withholding requirements or the imposition of tariffs, exchange controls, or other restrictions;
	•		General economic and political conditions in countries where the Company operates may have an adverse affect on operations in those countries.

The occurrence of any of the foregoing risks could have a significant effect on the Company’s international operations and, as a result, overall revenues and profitability.

The Company’s business may be disrupted by work stoppages and other labor matters.

Many OEMs and their suppliers have unionized work forces. Work stoppages or slow-downs experienced by OEMs or their suppliers could result in slow-downs or closures of assembly plants where the Company’s products are included in assembled vehicles. Also, a number of large Tier I suppliers to the automotive industry are undergoing significant restructuring. These actions create greater uncertainty as to the potential for work stoppages by unionized work forces. In the event that one or more of the Company’s customers or suppliers experiences a material work stoppage, such a work stoppage could have a material adverse effect on the Company’s business.

In addition, a significant number of the Company’s employees are covered under collective bargaining agreements. The Company has been in negotiations with the unions representing current and retired employees since October

2005 seeking concessions from the bargaining units in the wage rate structure of its membership as well as the benefits offered by the Company. Health insurance coverage for employees and retirees has resulted in significant cost increases for vehicle manufacturers and suppliers for the past several years and puts domestic auto makers and suppliers at a significant disadvantage with their foreign based competitors. As part of its Chapter 11 process, the Company sought the approval of the Bankruptcy Court to reject its union contracts. Subsequent to this approval, the Company was able to reach consensus with its active unions. This agreement provided the Company with reduced wages, increased health care cost sharing, elimination of future pension service awards, and certain work rule changes at two of its facilities. In exchange, the Company provided limited plant closure language that limits the Company’s ability to close these plants absent any volume reductions from its customers. While the Company has not experienced any work stoppages since its inception in 1993, a strike or slow-down by one of the Company’s unions could have a material adverse effect on the Company’s business.

The Company’s ability to obtain new program awards.

The automotive component supply industry remains competitive. Despite a number of Chapter 11 filings, some of the Company’s competitors are companies, or divisions or subsidiaries of companies, which are larger and have greater financial and other resources than the Company. In addition, with respect to certain products, the Company competes with divisions of OEM customers. The Company’s products may not be able to compete successfully with the products of these other companies, which could result in the loss of customers and, as a result, decreased revenues and profitability.

The Company principally competes for new business both at the beginning of the development of new models and upon the redesign of existing models by major customers. New model development generally begins two to five years prior to the marketing of such models to the public. The failure to obtain new business on new models or to retain or increase business on redesigned existing models, could adversely affect the Company’s business and financial results. In addition, as a result of the relatively long lead times required for many of the Company’s complex structural components, it may be difficult in the short term for the Company to obtain new sales to replace any unexpected decline in the sale of existing products. Also, the Company may incur significant expense in preparing to meet anticipated customer requirements which may not be recovered for various reasons, including fluctuation in the anticipated volume of production from new and planned supply programs.

Currency exchange rate fluctuations could have an adverse effect on revenues and financial results.

The Company generates a significant portion of its revenues and incurs a significant portion of its expenses in currencies other than U.S. dollars. To the extent the Company is unable to match revenues received in foreign currencies with costs paid in the same currency, exchange rate fluctuations in any such currency could have an adverse effect on revenues and financial results. During times of a strengthening U.S. dollar, the Company reported sales and earnings from international operations would be reduced because the applicable local currency would be translated into fewer U.S. dollars.

The Company may incur material losses as a result of product liability and warranty and recall claims.

Many of the Company’s products are critical to the structural integrity of a vehicle. As such, the Company faces an inherent business risk of exposure to product liability claims in the event that the failure of its products to perform to specifications results, or is alleged to result, in property damage, bodily injury and/or death. In addition, if any Company designed products are, or are alleged to be, defective, the Company may be required to participate in a recall involving those products. Each OEM has its own policy regarding product recalls and other product liability actions relating to its suppliers. However, as suppliers become more integrally involved in the vehicle design process and assume more vehicle assembly functions, OEMs are increasingly looking to suppliers for contribution when faced with product recalls and product liability or warranty claims. Accordingly, the Company may be adversely impacted by product recalls and product liability or warranty claims.

The Company is subject to government regulations, including environmental regulations, and any changes in current regulations may adversely impact the Company.

The automotive industry is regulated by various government bodies and constituencies. The implementation of or changes in the laws, regulations or policies governing the automotive industry that could negatively affect the automotive components supply industry may adversely impact the Company.

1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

The Company’s operations are conducted in both owned and leased facilities. The Company believes that these facilities are suitable and adequate for its activities as currently conducted. The principal facilities in which the Company’s operations are currently conducted are as follows:

		Square				Type of
		Footage				Interest		Description of Use
North American Locations
Elkton, Michigan			1,100,000			Owned		Manufacturing
Milan, Tennessee			531,000	(4)		Leased		Manufacturing
Chicago, Illinois			480,000			Leased		Manufacturing
Granite City, Illinois			458,000	(4)		Leased		Manufacturing
Clinton Township, Michigan			385,000			Leased		Manufacturing
Toronto, Ontario			329,400	(4)		Owned		Manufacturing
Bardstown, Kentucky			300,000			Leased		Manufacturing
Plymouth, Michigan			294,000			Leased		Manufacturing
Smyrna, Tennessee			254,000			Leased		Manufacturing
Bluffton, Ohio			218,000			Leased		Manufacturing
Bellevue, Ohio			200,000			Owned		Manufacturing
Madison, Mississippi			200,000			Leased		Manufacturing
Traverse City, Michigan			170,000			Owned		Manufacturing
Greenville, Michigan			156,000	(4)		Owned		Manufacturing
Auburn, Indiana			132,000			Leased		Manufacturing
Kendallville, Indiana			131,000	(4)		Leased		Manufacturing
Novi, Michigan			113,500			Leased		Corporate Office/Technical Center
Upper Sandusky, Ohio			56,000	(4)		Leased		Manufacturing
Grand Rapids, Michigan			13,600			Leased		Office
Meridian, Mississippi			394,000			Leased		Manufacturing
International Locations
Caserta, Italy (2 locations)			751,000			Owned		Manufacturing
Turin, Italy			455,000			Owned		Manufacturing/Office
Wuhu, Anhui Province, China			455,000			(2)		Manufacturing /Office
Malacky, Slovakia			453,600			Owned		Manufacturing
Zwickau, Germany			409,000			Owned		Manufacturing
Gent, Belgium			376,000			Leased		Manufacturing
Hwaseong-si, Gyeonggi-do, Korea			223,000			Owned		Manufacturing
Sao Paolo, Brazil			193,000			Owned		Manufacturing/Office
Melfi, Italy			190,900			Owned		Manufacturing
Changchun, China			179,200			(1)		Manufacturing
Duisburg, Germany			125,900			Leased		Manufacturing
Kwangju Metropolitan City,
Pyeongdong, Korea			121,000			(3)		Manufacturing
Bergisch-Gladbach, Germany			102,000			Owned		Manufacturing/Technical Center
Shiheung-si, Gyeonggi-do, Korea			100,000			Owned		Manufacturing
Ansan-si, Gyeonggi-do, Korea			70,000			Owned		Manufacturing
Minas Gerais, Brazil			59,000			Owned		Manufacturing
Buchholz, Germany			54,000			Owned		Manufacturing
Opole, Poland			54,000			Owned		Manufacturing
Yeongcheon-si, Korea			50,000			Owned		Manufacturing
Ulsan Metropolitan City, Korea			44,000			Owned		Manufacturing
Gunpo-si, Gyeonggi-do, Korea			36,000			Owned		Office/Technical Center
Hyderabad, India			2,800			Leased		Engineering/Design
Yokohama, Japan			1,000			Leased		Sales/Engineering

The facilities were specifically designed for the manufacturing of the Company’s products. The utilization of such facilities is dependent upon the mix of products produced and the timing of the supply requirements pertaining to product programs with customers.

Item 3. Legal Proceedings.

The Company is subject to various legal actions and claims incidental to its business. Litigation is subject to many uncertainties and the outcome of individual litigated matters is not predictable with assurance. After discussions with counsel, it is the opinion of management that the outcome of such matters will not have a material adverse impact on the Company’s financial position, results of operations or cash flows.

As indicated in Note 2 to the Consolidated Financial Statements and in Item 1, “Business” of this Form 10-K, on February 2, 2005, the Debtors’ filed a voluntary petition for relief under the Bankruptcy Code. The cases are jointly consolidated for administrative purposes as Case No. 05-10578 (ALG). As a result of the commencement of the Chapter 11 proceedings by the Debtors, an automatic stay has been imposed against the commencement or continuation of legal proceedings, pertaining to claims existing as of February 2, 2005, against the Debtors outside of the Bankruptcy Court. Claimants against the Debtors may assert their claims in the Chapter 11 proceedings by filing a proof of claim, to which the Debtors may object and seek a determination from the Bankruptcy Court as to the allowability of the claim. Claimants who desire to liquidate their claims in legal proceedings outside of the Bankruptcy Court will be required to obtain relief from the automatic stay by order of the Bankruptcy Court. If such relief is granted, the automatic stay will remain in effect with respect to the collection of liquidated claim amounts. Generally, all claims against the Debtors that seek a recovery from assets of the Debtors’ estates will be addressed in the Chapter 11 proceedings and paid only pursuant to the terms of a confirmed plan of reorganization. The Company filed its plan of reorganization on May 1, 2007.

See Item 10. “Directors and Executive Officers of the Registrant,” under the caption, “Legal Proceedings,” for additional information on litigation associated with the Company’s bankruptcy involving the Company’s officers and for information on litigation associated with the Company’s operations in Mexico that are conducted through a joint venture, Metalsa, S. de R.L. de C.V. (“Metalsa”) which is 40 percent owned by the Company’s 100% owned Mexican subsidiary (“Tower Mexico”).

Item 4. Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of security holders during the fourth quarter of 2006.

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters.

The Company’s common stock has been traded over the counter on the Pink Sheets Electronic Quotation Service (“Pink Sheets”) maintained by the Pink Sheets LLC under the symbol “TWRAQ,” since February 7, 2005. On February 3, 2005, the New York Stock Exchange (“NYSE”) suspended trading of the Company’s common stock and de-listed its common stock shortly thereafter. The following table sets forth, for the periods indicated, the high and low closing sale prices of the Company’s common stock on the Pink Sheets and on the NYSE as applicable.

		Low				High
2005
First quarter		$	0.18			$	2.69
Second quarter			0.06				0.18
Third quarter			0.06				0.25
Fourth quarter			0.05				0.15
2006
First quarter		$	0.04			$	0.12
Second quarter			0.07				0.16
Third quarter			0.06				0.12
Fourth quarter			0.04				0.10

The last reported sale price of the common stock on May 31, 2007 on the Pink Sheets was $0.04. As of May 31, 2007, there were 1,023 holders of record of the Company’s outstanding common stock.

Dividend policy and restrictions

Since the Company’s formation in April 1993, the Company has never paid any cash dividends. The Company is currently prohibited from paying dividends to shareholders by both the U.S. Bankruptcy Code and the DIP Financing Agreement.

Equity Repurchases

The Company did not repurchase any equity securities during the fourth quarter of 2006.

Item 6. Selected Financial Data.

The following table sets forth the Company’s summary historical consolidated financial data for each of the years in the five-year period ended December 31, 2006, which were derived from the Company’s Consolidated Financial Statements, excluding discontinued operations, where applicable. For additional information on discontinued operations see Note 3 of our Consolidated Financial Statements included under Item 8. of this report.

The Company’s Consolidated Financial Statements as of December 31, 2006 and 2005 and for each of the three years in the period ended December 31, 2006 have been audited by Deloitte & Touche LLP, independent registered public accounting firm. The Consolidated Financial Statements as of December 31, 2006 and 2005 and for each of the years in the three-year period ended December 31, 2006 and the Report of Independent Registered Public Accounting Firm thereon are included elsewhere in this report. The Consolidated Financial Statements as of December 31, 2004, 2003, and 2002, and for the years ended December 31, 2003 and 2002 are not included herein. This selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Company’s Consolidated Financial Statements and Notes to Consolidated Financial Statements, included elsewhere in this report.

		Years Ended December 31,
		(in thousands)
		2006				2005 (1)				2004				2003				2002
Statement of Operations Data:
Revenues		$	2,539,443			$	2,932,209			$	2,828,551			$	2,638,528			$	2,653,967
Cost of sales			2,389,285				2,752,097				2,603,816				2,380,261				2,351,651
Selling, general and administrative expenses			131,517				149,723				145,217				155,500				143,822
Restructuring and asset impairment charges, net			70,503				116,392				(713	)			157,532				61,125
Other income			(742	)			(7,656	)			(967	)			(320	)			—
Goodwill impairment charge (8)			—				—				337,230				—				—
Operating income (loss)			(51,120	)			(78,347	)			(256,032	)			(54,445	)			97,369
Interest expense, net (3)			95,331				101,803				139,968				92,354				70,059
Unrealized gain on derivative			—				—				(3,860	)			—				—
Chapter 11 and related reorganization items			66,224				167,438				—				—				—
Provision (benefit) for income taxes (8)			11,703				16,438				174,798				(49,282	)			7,975
Loss from continuing operations			(206,118	)			(351,867	)			(549,590	)			(119,226	)			19,959
Income (loss) from discontinued operations, net of tax			4,052				(13,653	)			(2,029	)			(5,449	)			(4,779	)
Income (loss) before cumulative effect of change (2) (4)			(202,066	)			(365,520	)			(551,619	)			(124,675	)			15,180
Net (loss)			(202,066	)			(373,372	)			(551,619	)			(124,675	)			(97,606	)
Earnings (loss) per common share before cumulative effect of change:
Basic and diluted:
Earnings (loss) from continuing operations			(3.51	)			(6.00	)			(9.46	)			(2.10	)			0.34
Earnings (loss) from discontinued operations			0.07				(0.23	)			(0.04	)			(0.10	)			(0.08	)
Net earnings (loss) per common share:
Basic and diluted:
Net earnings (loss)			(3.44	)			(6.37	)			(9.50	)			(2.20	)			(1.70	)

		Dec. 31,				Dec. 31,				Dec. 31,				Dec. 31,				Dec. 31,
		2006				2005 (1)				2004				2003				2002
Balance Sheet Data:
Working capital (deficit)		$	(580,535	)		$	38,091			$	(278,432	)		$	(366,904	)		$	(305,466	)
Total assets			2,106,994				2,291,226				2,563,338				2,846,409				2,557,885
Current liabilities not subject to compromise			1,210,402				699,819				1,057,536				1,105,601				822,647
Liabilities subject to compromise			1,284,782				1,284,217				—				—				—
Long-term debt and capital leases, net (5)			163,462				669,131				1,398,108				1,103,657				764,935
Other long-term obligations (6)			111,020				125,682				214,782				223,641				199,477
Mandatorily redeemable trust convertible preferred securities (7)			—				—				—				—				258,750
Stockholders’ investment (deficit)			(662,672	)			(487,623	)			(107,088	)			413,510				512,076

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

Tower Automotive, Inc. produces a broad range of assemblies and modules for vehicle frames, upper body structures and suspension systems for the global automotive industry. Including 100% owned subsidiaries and investments in joint ventures, the Company has production and/or engineering facilities in the United States, Mexico, Germany, Belgium, Italy, Slovakia, Poland, France, Spain, Brazil, India, South Korea, Japan and China.

Since February 2, 2005, Tower Automotive, Inc. and 25 of its U.S. subsidiaries (collectively, the “Debtors”) are operating under Chapter 11 of the Bankruptcy Code. The Debtors sought protection as a result of a deterioration in liquidity early in 2005. This deterioration was the result of the following factors, among others:

	•		Significant capital expenditures and spending on product launch activities;
	•		High interest costs;
	•		Declining gross margins;
	•		Termination of accelerated payment programs by key customers;
	•		Lower production volumes at the Company’s largest customers; and
	•		Significant raw material price increases (primarily steel).

Details regarding the ongoing impact of these items on the Company are included below in “Key Factors Affecting Financial Results”.

Continuation of the Company as a going concern is contingent upon, among other things, the Debtors’ ability to:

	•		Restructure the Company’s North American operations;
	•		Comply with the terms and conditions of the DIP financing agreement described in Note 9 to the Consolidated Financial Statements;
	•		Obtain confirmation of a plan of reorganization under the Bankruptcy Code;
	•		Reduce unsustainable debt and simplify the Company’s complex and restrictive capital structure through the bankruptcy process; and
	•		Obtain financing sources to meet the Debtors’ future obligations.

Details regarding the Company’s plans to restructure its North American operations are included in “Restructuring and Asset Impairments”. Also, see Notes 1, 2 and 9 to the accompanying Consolidated Financial Statements for additional information. These matters raise substantial doubt regarding the Company’s ability to continue as a going concern.

Key Factors Affecting Financial Results

The Company’s results of operations, financial position and cash flows are impacted by various external and internal factors. The following are the factors which have historically had a significant impact on the Company and which the Company believes will continue to have a significant impact in the future.

Capital expenditures

The Company is awarded new business two to five years prior to the launch of the program. During this time, the Company invests significant resources in: product design; dies and tooling, design, testing and fabrication; and design, testing, purchase and installation of the machinery and equipment necessary to manufacture the related products. These activities all require significant liquidity availability prior to generating any revenue from the program.

Program launch execution

The Company’s operating costs are higher during a product launch period relative to when the vehicle has reached normal production volumes. Launch costs, which are included in operating expenses, increased due to the number of product programs in the launch stage during 2006, by approximately $2.5 million in comparison to 2005. During 2005, the Company’s launch activities decreased due to a number of product programs in the launch stage during 2004 going into full production.

Cost reduction programs

The Company’s gross margins have been declining since 1999. High raw material and other costs, including health care, energy, and general inflation have had a negative impact on results of operations and are expected to do so for the foreseeable future. Generally, the Company’s customers require the reduction of selling prices of the Company’s products for each year during the respective lives of such product programs, generally five to seven years. The Company’s ability to improve its profit margins is directly linked to its ability to more than offset these price reductions with reduced operating costs.

To address the deterioration in operating performance, management has initiated plans to, among other things: (a) centralize and standardize processes which were previously performed on a decentralized basis, including purchasing, customer quoting and product costing, product engineering and accounting; (b) rationalize and reduce capital expenditures to more closely align capital spending with expected product returns; (c) use centralization and standardization to leverage cost improvement ideas across the Company’s operating facilities globally; and (d) pursue recoveries of significant steel price increases. If the Company is not successful in implementing these actions, the Company may continue to experience declining gross margins.

Global automotive production and market share

The Company’s financial results are directly impacted by automotive production. In addition, the Company’s operating results are impacted by the commercial success of the vehicles to which the Company supplies as well as the market share of the Company’s customers. The Company’s operations are geographically diverse including a significant presence in Europe and Asia. The Company has a strategic customer portfolio strategy to leverage relationships with key customers across geographic boundaries to diversify its customer base and increase penetration with existing key customers, including the “New Domestics” (Nissan, Toyota and Honda). Since 2000, the proportion of revenue from the “Detroit 3” (the North American operations of Ford, DaimlerChrysler and General Motors) has declined from approximately 66% of revenue in 2002 to 41% of revenue in 2006. The Company expects this trend to continue as a result of its anticipated organic growth outside the U.S. and recent awards to supply the New Domestics in the U.S.

North American vehicle production declined by 3.1% compared to 2005 levels. North American truck production declined by approximately 657,000 units, or 7.0%, during 2006 in comparison to 2005. Conversely, passenger car production increased by 170,000 units or 2.7% compared to 2005 levels. Among major customers of the Company, Ford cut overall production from 2005 by 303,000 units (9.0%) while DaimlerChrysler (“DCC”), cut overall production from 2005 by 144,000 units (5.1%). The declines were primarily due to losses in market share to the New Domestic automakers. From 2005 to 2006, the New Domestics increased their market share by 3.1%, while the Detroit 3 lost 5.9% of market share. This trend is expected to continue in 2007. Production is expected to increase slightly compared to 2006 levels. In addition, relatively high fuel prices are expected to continue to have an adverse impact on North American truck production. The Company’s high concentration of revenues associated with large vehicle platforms exposes the Company to a significant adverse impact from reductions in OEM production levels of these vehicles.

Raw material prices

The Company’s products are manufactured utilizing steel and various purchased steel assemblies. A byproduct of the production process is scrap steel, which is sold. The Company purchases a substantial portion of its steel from its customers through customers’ repurchase programs. The purchases through customers’ repurchase programs have somewhat mitigated the severity of price increases associated with the procurement of steel. In addition, scrap steel sales prices increased in 2004, which somewhat mitigated the increase in steel purchase prices. The remainder of the Company’s steel purchasing requirements is met through contracts with steel producers and market purchases. The Company’s agreements with its customers generally do not permit the Company to increase selling prices for increases in prices of raw material inputs.

The adverse impact of higher steel prices is expected to continue in 2007. Rising steel prices during the year ended December 31, 2006, reduced gross profits by $21.3 million. The Company is pursuing several initiatives to mitigate the impact of such raw material price increases on its results of operations. Such initiatives include moving more steel purchases to customer repurchase programs, pursuing selling price increases from customers and reducing other operating costs, among other initiatives. The Company can provide no assurances that such initiatives will be successful.

Other inflationary factors

For a more detailed description of other factors that have had, or may in the future have, a significant impact on the Company’s business, please refer to “Forward Looking Statements,” “Market Risks” and “Opportunities” contained in this Management’s Discussion and Analysis for insight on opportunities, challenges and risks, such as those presented by known material trends and uncertainties, on which the Company’s management is most focused for both the short term and long term, as well as the actions management is taking to address these opportunities, challenges and risks.

Critical Accounting Policies

The Company’s discussion and analysis of its financial condition and results of operations is based upon its Consolidated Financial Statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these Consolidated Financial Statements requires the Company to make estimates and judgments that affect amounts reported in those statements. The Company has made its best estimates of certain amounts contained in these Consolidated Financial Statements. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities. However, application of the Company’s accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ materially from these estimates. Management believes that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest impact on the Company’s Consolidated Financial Statements.

Use of Estimates — The preparation of Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Generally, matters subject to estimation and judgment include amounts related to accounts receivable realization, inventory obsolescence, unsettled pricing discussions with customers and suppliers, pension and other post-retirement benefit plan assumptions, restructuring reserves, self-insurance accruals, asset valuation reserves and accruals related to environmental remediation costs, asset retirement obligations and income taxes. Actual results may be materially different than estimates recorded in the Consolidated Financial Statements.

Reserves — The Company has recognized accruals in relation to restructuring reserves and purchase accounting reserves, which require the use of estimates and judgment regarding risk, loss exposure and ultimate liability. Reserves for restructuring activities are estimated primarily for activities associated with the discontinuation and consolidation of certain operations of the Company. Reserves for loss contracts are estimated by determining which products are being sold pursuant to loss contracts, the estimated loss per unit and expected sales volumes over the life of each contract. Other reserves are estimated using consistent and appropriate methods based upon estimated risk and loss exposure. Changes to these assumptions and estimates could materially affect the recorded liabilities and related loss.

Revenue Recognition - The Company recognizes revenue as its products are shipped to its customers at which time title and risk of loss passes to the customer. The Company participates in certain customers’ steel repurchase programs. Under these programs, the Company purchases steel directly from a customer’s designated steel supplier for use in manufacturing products for such customer. The Company takes delivery and title to such steel and bears risk of loss and obsolescence. The Company invoices its customers based upon annually negotiated selling prices, which include a component for steel under such repurchase programs. For sales for which the Company participates in a customer’s steel repurchase program, revenue is recognized on the entire amount of such sale, including the component for purchases under that customer’s steel repurchase program. The Company is generally asked to provide annual price reductions by its customers. The Company accrues for such amounts as a reduction of revenue as products are shipped. The Company records adjustments to those accruals in the period in which the pricing is finalized with the customer or if it becomes probable and estimable that pricing negotiated with customers will vary from previous assumptions.

The Company enters into agreements to produce products for its customers at the beginning of a given vehicle program term. Once such agreements are entered into by the Company, fulfillment of the customers’ purchasing requirements is the obligation of the Company for the entire production period of the vehicle programs, which range from three to ten years, and the Company has no provisions to terminate such contracts. In certain instances, the

Company may be committed under existing agreements to supply product to its customers at selling prices that are not sufficient to cover the variable cost to produce such product. In such situations, the Company records a liability for the estimated future amount of such losses. Such losses are recognized at the time that the loss is probable and reasonably estimable and is recorded at the minimum amount necessary to fulfill the Company’s obligations to its customers. Losses are recognized at discounted amounts, which are estimated based upon information available at the time of the estimate, including future production volume estimates, term of the program, selling price and production cost information.

Goodwill – The Company tests goodwill for impairment at least annually and when conditions indicate that impairment may exist. The Company utilizes a third party specialist to perform these tests. A combination of valuation techniques including the discounted cash flow approach and the market multiple approach are utilized. The data utilized by the specialist is subject to significant judgment and assumptions. Estimates of future cash flows are based on internal plans based on recent sales data, independent automotive production volume estimates as well as other assumptions related to the Company’s future cost structure. Future events or changes in business circumstances may result in actual results which are materially different than the information utilized for the impairment test. If changes occur, a significant charge may be required in the Company’s Statement of Operations. In the fourth quarter of 2004, the Company recognized a goodwill impairment charge of $337.2 million in the North American operating unit. This charge was precipitated by declining estimates of forecasted results and cash flows given current economic and market conditions within the automotive supplier industry. The Company recognized no impairment charges for the years ended December 31, 2006 and 2005.

Income Taxes — The Company makes estimates of the amounts to recognize for income taxes in each tax jurisdiction in which the Company operates. This process incorporates an assessment of current taxes payable and/or receivable with temporary differences between the tax bases of assets and liabilities and the corresponding reported amounts in the financial statements. These differences result in deferred tax assets and deferred tax liabilities included in the Company’s Consolidated Balance Sheets. The Company is required to estimate whether recoverability of its deferred tax assets are more likely than not based on forecasts of taxable earnings in each tax jurisdiction. As disclosed in Note 10 to the Consolidated Financial Statements, a large portion of the Company’s deferred tax assets are comprised of net operating loss carryforwards and tax credits. The Company uses historical and projected future operating results, including a review of the eligible carryforward period, tax planning opportunities and other relevant considerations in determining recoverability. Due to the significant judgment involved in determining whether deferred tax assets will be realized, the ultimate resolution of these items may be materially different from the previously estimated outcome. As of December 31, 2006, valuation allowances have been established for all U.S. Federal and state deferred tax assets of the Company.

Impairment and Depreciation of Long-Lived Assets – The Company’s long-lived assets are reviewed for impairment whenever adverse events or changes in circumstances indicate a possible impairment. An impairment loss is recognized when the carrying value of the long-lived assets exceeds its fair value based upon undiscounted future cash flows generated by the asset. Significant judgments and estimates used by management when evaluating long-lived assets for impairment include:

•

Program product volumes and remaining production life for parts produced on the assets being reviewed

	•		Product pricing over the remaining life of the parts including an estimation of future customer price reductions which may be negotiated
	•		Product cost information including an assessment of the success of the Company’s cost reduction activities
	•		Assessments of future alternative application of specific long-lived assets based on awarded programs

In addition, the Company follows its established accounting policy for estimated useful lives of long-lived assets. This policy is based upon significant judgments and estimates as well as historical experience. Actual future experience with those assets may indicate different useful lives resulting in a significant impact on depreciation expense.

Pension and Other Post-Retirement Benefits — The determination of the obligation and expense for pension and other post-retirement benefits is dependent on the selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions are described in Note 12 to the Consolidated Financial Statements and include, among others, the discount rate, expected long-term rate of return on plan assets, as well as expected increases in compensation and healthcare costs. In accordance with generally accepted accounting principles, actual results that differ from these assumptions are accumulated and amortized over future periods and therefore, generally affect the

recognized expense and recorded obligation in such future periods. While the Company believes that its current assumptions are appropriate based on available information, significant differences in the actual experience or significant changes in the assumptions may materially affect the pension and other post-retirement obligations and the future expense.

Pension and other post-retirement costs are calculated based on a number of actuarial assumptions, most notably the discount rates used in the calculation of the Company’s pension benefit obligations of 5.75%, 5.50% and 5.50% and the discount rates used in the calculation of the Company’s post-retirement benefit obligations of 5.75 %, 5.25% and 5.00% as of the Company’s September 30 measurement date in 2006, 2005 and 2004, respectively. The discount rates used by the Company are developed based on a yield curve analysis from a third-party, which calculates the yield to maturity that mirrors the timing and amounts of future benefits.

The expected rate of return on pension plan assets under SFAS No. 87 of 7.25% and 8.50%, respectively, as of December 31, 2006 and 2005 represents the Company’s expected long-term rate of return on plan assets. The rate of return assumptions selected by the Company reflect the Company’s estimate of the average rate of earnings expected on the funds invested or to be invested in order to provide for future participant benefits to be paid out over time. As part of this estimate, the Company reviewed the existing allocation of invested assets against expectations about future performance of similar asset allocations. Future expectations were obtained from readily available public sources, such as Morningstar^®. Expected future returns were adjusted for expectations regarding future investment and other expenses.

Results of Operations

The following management discussion and analysis gives effect to the restatement discussed in Note 1 to the Consolidated Financial Statements.

Year Ended December 31, 2006 Compared to the Year Ended December 31, 2005

Revenues. Revenues decreased by $392.8 million, or 13.4%, during 2006 to $2.5 billion from $2.9 billion during 2005. The decrease is primarily due to lower volume, the impact of two frame programs ending and unfavorable product mix, which decreased revenue by $411.9 million during the 2006 period compared to the 2005 period. In addition, steel price recoveries from certain customers decreased by $17.7 million during the 2006 period compared to the 2005 period. These impacts were partially offset by favorable foreign exchange, which increased revenue by $46.2 million during the 2006 period compared to the 2005 period.

Gross Profit and Gross Margin. Gross margin for 2006 was 5.9% compared to 6.1% for 2005. Gross profit decreased by $30.0 million, or 16.6%, to $150.2 million during 2006 compared to $180.1 million during 2005. The decrease in gross profit was primarily due to the negative impacts of volume/product mix and raw material steel prices in the amount of $81.6 million. Improved operating efficiencies had a positive impact on gross profit totaling $53.6 million for the 2006 period compared to the 2005 period.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased by $18.2 million, or 12.2%, to $131.5 million during 2006 from $149.7 million for 2005. Selling, general and administrative expenses represented 5.2% of revenues during the 2006 and 5.1% during the 2005 period. The $18.2 million decrease resulted primarily from lower compensation costs of $6.4 million, lower professional costs of $5.5 million and declines in other items of $6.3 million.

Other Income. Other income decreased by $6.9 million, or 90.3%, to $0.7 million during 2006 from $7.7 million for 2005. During 2005, a gain on the settlement of a dispute between the Company and a vendor was recorded.

Interest Expense, Net of Interest Income. Interest expense, net of interest income, decreased by $6.5 million, or 6.4%, to $95.3 million in 2006 compared to $101.8 million in 2005. The decline was attributable to: (i) the write-off of deferred financing fees of $16.4 million related to debt associated with the Company’s then-existing credit agreement that was repaid in the first quarter of 2005; (ii) $6.4 million related to debt that has been classified as subject to compromise for which no interest is being accrued effective February 2, 2005; (iii) interest savings of $4.4 million in association with an interest rate swap contract, which matured in September 2005; and (iv) $9.8 million related to other decreases. These decreases were partially offset by: (i) increased interest of $20.2 million related to the Company’s DIP financing facilities; and (ii)$10.3 million related to the Company’s DIP amortization. In

accordance with SOP 90-7, “Reorganization Under the Bankruptcy Code,” interest expense during the Company’s bankruptcy has been recognized only to the extent that it will be paid during the Company’s bankruptcy proceedings or that it is probable that it will be an allowed priority, secured or unsecured claim. Interest expense, net of interest income, recognized by the Company is lower than the Company’s stated contractual interest for the year ended December 31, 2006 by $76.1 million.

Chapter 11 and Related Reorganization Items. Chapter 11 and related reorganization expenses decreased by $101.2 million, or 60.5%, to $66.2 million compared to $167.4 million in 2005. These costs are primarily associated with professional fees related to the Company’s bankruptcy proceedings and lease rejection costs. See Notes 1 and 9 to the Consolidated Financial Statements.

Provision for Income Taxes. The Company recognized income tax expenses of $11.7 million and $16.4 million, respectively, in 2006 and 2005 despite pre-tax losses. The Company recorded income tax expense that resulted from foreign income taxes related to the Company’s international operations and U.S. state taxes. Full valuation allowances were provided for U.S. Federal income tax benefits generated during the 2006 period. These collective income tax provisions include a $1.2 million expense related to international provision to tax return adjustments and were offset by an $9.0 million tax benefit related to the reversal of a valuation allowance for certain tax loss carry-overs. The reversal of the valuation allowance resulted from the reorganization, completed in the 2006 period, at certain of the Company’s international operations. Such reorganization resulted in the ability to utilize tax loss carry-overs in future periods.

Equity in Earnings of Joint Ventures. Equity earnings of joint ventures, net of tax, increased by $7.8 million, or 45.4%, to $24.9 million compared to $17.2 million in 2005. The increase primarily resulted from the Company’s share of earnings from its joint venture interest in Metalsa.

Minority Interest. Minority interest, net of tax, increased by $1.7 million, or 33.7%, to $6.7 million during 2006 from $5.0 million during 2005. The increase resulted from higher earnings at the Company’s joint ventures in China, Tower Golden Ring and WuHu, of $1.1 and $1.0 million, respectively, and was offset from decreased earnings in the Company’s other subsidiaries in which a minority interest is held by approximately $0.4 million.

Cumulative Effect of Accounting Change, Net of Tax. Effective December 31, 2005, the Company recognized a transition charge of $7.9 million in relation to the adoption of FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations”

Year Ended December 31, 2005 Compared to the Year Ended December 31, 2004

Revenues. Revenues increased by $103.7 million, or 3.7%, during 2005 to $2.9 billion from $2.8 billion during 2004. Pricing and favorable foreign exchange effects increased revenues by $9.7 million and $58.3 million, respectively. In addition, steel price recoveries from certain customers exceeded net selling price reductions by $50.1 million. These positive impacts were partially offset by an unfavorable volume/ product mix effect of $13.1 million.

Gross Profit and Gross Margin. Gross margin for 2005 was 6.1% compared to 7.9% for 2004. Gross profit decreased by $44.6 million, or 19.9%, to $180.1 million during 2005 compared to $224.7 million during 2004. The decrease in gross profit resulted primarily from the negative impacts of volume/product mix, steel costs and other economic factors (i.e. higher health care expenses, higher energy costs, general labor rate increases), operating inefficiencies and other miscellaneous items (i.e. asset write offs, inefficiencies associated with plant closings) of $17.3 million, $96.1 million, $19.9 million and $20.7 million, respectively. These negative impacts were partially offset by a significant decline in launch costs, foreign exchange effects, favorable pricing and steel price recoveries from certain customers exceeding net selling price reductions in the amounts of $46.1 million, $4.4 million, $9.7 million and $50.1 million, respectively.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $4.5 million, or 3.1%, to $149.7 million during 2005 from $145.2 million for 2004. Selling, general and administrative expenses represented 5.1% of revenues during both 2005 and 2004. The $4.5 million increase resulted from foreign exchange impacts, general economic factors and other items of $6.9 million, $7.8 million and $1.4 million, respectively. This impact was partially offset by operating efficiencies and cost reductions of $11.6 million.

Other Income. Other income for the year ended December 31, 2005 represents the gain on the settlement of a dispute between the Company and a vendor.

Interest Expense Net of Interest Income. Interest expense, net of interest income, decreased by $38.2 million, or 27.3%, to $101.8 million in 2005 compared to $140.0 million in 2004. The decline was attributable to: (i) $65.0 million related to debt that has been classified as subject to compromise for which no interest is being accrued effective February 2, 2005; (ii) $6.3 million related to interest savings associated with the repayment of 5.0% convertible subordinated notes in May 2004; (iii) interest savings of $4.4 million in association with an interest rate swap contract; and (iv) $4.8 million related to other decreases. These declines were partially offset by: (i) increased interest of $18.8 million related to the Company’s DIP financing facilities; (ii) $7.2 million related to a decrease in capitalized interest during 2005; (iii) higher expenses of $14.9 million in relation to the amortization of deferred financing costs; and (v) $1.4 million of other increases. In accordance with SOP 90-7, “Reorganization Under the Bankruptcy Code,” interest expense during the Company’s bankruptcy has been recognized only to the extent that it will be paid during the Company’s bankruptcy proceedings or that it is probable that it will be an allowed priority, secured or unsecured claim. Interest expense, net of interest income, recognized by the Company is lower than the Company’s stated contractual interest for the year ended December 31, 2005 by $72.4 million.

Chapter 11 and Related Reorganization Items. During the year ended December 31, 2005, Chapter 11 and related reorganization expenses were $167.4 million. These expenses primarily related to professional fees and lease rejection costs associated with the Company’s bankruptcy proceedings. See Note 2 to the Consolidated Financial Statements.

Provision for Income Taxes. The Company recognized provisions for income taxes of $16.4 million and $174.8 million, respectively, in 2005 and 2004 despite pre-tax losses. The provision for income taxes in 2005 resulted from earnings on the Company’s non-US operations and not recognizing the tax benefit of U.S. losses.

Equity in Earnings of Joint Ventures. Equity earnings of joint ventures, net of tax, increased by $3.8 million, or 28.3%, from $13.4 million during 2004 to $17.2 million during 2005. The increase resulted from increased earnings of Metalsa. This increase was partially offset by the elimination of equity earnings from the Company’s ownership interest in Yorozu Corporation, which was sold in March 2004. Equity earnings from Metalsa increased by $5.2 million, while the partial offset attributable to Yorozu was $1.4 million.

Minority Interest. Minority interest, net of tax, decreased by $0.8 million, or 13.2%, to $5.0 million during 2005 from $5.8 million during 2004. The decrease resulted from lower earnings at the Company’s joint venture in China, Tower Golden Ring, of $1.9 million. The effect of this decrease was partially offset by a $1.1 million increase in earnings in the Company’s other subsidiaries in which a minority interest is held.

Cumulative Effect of Accounting Change, Net of Tax. Effective December 31, 2005, the Company recognized a transition charge of $7.9 million in relation to the adoption of FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations”

RESTRUCTURING AND ASSET IMPAIRMENT

The Company has executed various restructuring plans and may execute additional plans in the future to respond to its bankruptcy proceedings, customer sourcing decisions, realignment of manufacturing capacity to prevailing global automotive production and to improve the utilization of remaining facilities. Estimates of restructuring charges are based on information available at the time such charges are recorded. Due to the inherent uncertainty involved in estimating restructuring expenses, actual amounts paid for such activities may differ from amounts initially recorded. Accordingly, the Company may record revisions of previous estimates by adjusting previously established reserves. The Company’s accounting policies, which are consistent with accounting principles generally accepted in the United States, define whether costs are included in restructuring and asset impairment charges or in other captions in the statement of operations. Generally, costs directly associated with exit, consolidation or disposal activities are included in restructuring and asset impairments charges. In addition, asset impairment charges recorded based on the Company’s accounting policies governing recovery of long-lived assets are included in restructuring and asset impairment charges in the statement of operations, regardless of whether such impairment

charges are directly related to a restructuring action. A summary of costs and where they are included in the statement of operations follows.

Cost Type				Caption in the Statement of Operations
1.		Employee severance and termination costs related to disposal, exit or consolidation activities			1.			Restructuring and asset impairment charges
2.		Impairment charges related to disposal, exit or consolidation activities			2.			Restructuring and asset impairment charges
3.		Costs associated with maintaining closed facilities prior to disposition			3.			Restructuring and asset impairment charges
4.		Impairment charges not related to specific disposal, exit or consolidation activities			4.			Restructuring and asset impairment charges
5.		Estimated damages associated with rejected contracts			5.			Chapter 11 and related reorganization items
6.		Gains or losses on disposal of previously impaired assets			6.			Restructuring and asset impairment charges
7.		Gains or losses on disposal of excess assets directly related to a disposal, exit or consolidation activities			7.			Restructuring and asset impairment charges
8.		Gains or losses on disposal of assets in the ordinary course of business.			8.			Cost of goods sold or selling, general and administrative expense
9.		Cost to relocate colleagues and equipment associated with disposal, exit or consolidation activities			9.			Restructuring and asset impairment charges
10.		Cost to train employees related to disposal, exit or consolidation activities			10.			Cost of goods sold
11.		Cost to launch programs relocated as a result of disposal, exit or consolidation activities			11.			Cost of goods sold

During the years ended December 31, 2006 and 2005, the Company recognized restructuring and asset impairment charges, net, related to continuing operations of $70.5 million and $116.4 million, respectively. During the year ended December 31, 2004, restructuring and asset impairment charges, net reflected a reversal of a pension curtailment loss in the amount of $6.3 million, which more than offset restructuring and asset impairment charges of $5.6 million. Details of each significant restructuring action taken by the Company during 2006, 2005 and 2004 are contained in Note 8 to the Consolidated Financial Statements.

DISCONTINUED OPERATIONS

In accordance with SFAS No. 144, discontinued operations include components of entities or entire entities that, through disposal transactions, were eliminated from the ongoing operations of Tower Automotive, Inc. Through the Company’s various restructuring plans, management disposed of Tower Automotive Lansing, LLC, which is classified as discontinued as of December 31, 2006. Where necessary, prior year information has been modified to conform to the current year presentation.

The following summary results of operations information is derived from the business that was sold during 2006: (in thousands)

		Years Ended December 31,
		2006				2005				2004
Revenues		$	316,420			$	351,444			$	350,173
Cost of sales			310,938				350,756				349,225
Gross profit			5,482				688				948
Restructuring and asset impairment charges, net			1,060				13,199				—
Other (income) expense			222				(92	)			967
Operating income (loss)			4,200				(12,419	)			(19	)
Interest expense			950				1,234				2,010
Chapter 11 and related reorganization items			(802	)			—				—
Net income (loss)		$	4,052				(13,653	)		$	(2,029	)

In accordance with EITF 87-24, the Company has elected to allocate interest expense to discontinued operations. At December 31, 2006, 2005 and 2004, the amount of interest expense allocated was $1.0 million, $1.2 million and $2.0 million, respectively.

LIQUIDITY AND CAPITAL RESOURCES

During 2006, the Company’s cash requirements were met through operations and a $725 million commitment of debtor-in-possession financing (“DIP Financing”). At December 31, 2006, the Company had available liquidity in the amount of $162.7 million, which consisted of $64.3 million of cash on hand and $98.6 million available for borrowing under facilities that expire upon the earlier of the Company’s emergence from bankruptcy or in August 2007.

Net cash provided by operating activities was $67.8 million during 2006 compared to net cash utilized of $59.9 million during 2005. While the net loss after excluding non-cash charges increased by $40.4 million, the increase was offset by improved cash flow from working capital items (accounts receivable, inventory, pre-paid tooling and other, accounts payable and accrued liabilities) of $289.9 million. Additionally, during 2005 cash proceeds included $74.0 million related to the proceeds from receivable securitization and cash generated from other assets and liabilities of $47.4 million.

Net cash utilized in investing activities was $73.9 million during 2006 compared to net cash utilized of $152.6 million in 2005. During the first quarter of 2006, the Company sold its Gunpo, South Korea facility and received cash proceeds of approximately $32.7 million. During the fourth quarter of 2006, the Company sold its Lansing, Michigan facility and received cash proceeds of $20.0 million during the fourth quarter of 2006. The Company used cash of $126.6 million for purchases of property, plant and equipment for the year ended December 31, 2006 as compared to $152.6 million in the comparable 2005 period.

At December 31, 2006, the Company had liabilities associated with discontinued operations of $20.5 million, which is expected to be paid in the first half of 2007.

Net cash provided by financing activities was $4.7 million during 2006 compared to $129.3 million in 2005. During 2006, borrowing related to the DIP facility increased by $64.0 million offset by $59.4 million in repayments of the Company’s non-DIP debt. The decrease of $124.6 million in financing activities compared to 2005 is a result of improved cash flows from operating and investing activities of $206.4 million offset by a reduction of cash balances of $83.3 million in 2005.

At December 31, 2006, the Company’s balance sheet reflected working capital of $(580.5) million. In addition, the Company classified approximately $1.3 billion of contractual liabilities as liabilities subject to compromise.

The Company’s business has significant liquidity requirements. In the “Key Factors Affecting Financial Results” section beginning on page 22 is a summary of the factors inherent in the Company’s business which have significant impacts on the Company’s liquidity and results of operations. In addition, a summary of the liquidity factors which forced the Company to seek Chapter 11 bankruptcy protection is included as well as the Company’s plans regarding these matters related to improving liquidity and operating results.

Certain foreign subsidiaries of the Company are subject to restrictions on their ability to dividend or otherwise distribute cash to the Company because they are subject to financing arrangements that restrict them from paying dividends.

Capital expenditures for 2007 are expected to be between $120.0-$142.0 million.

Chapter 11 Impact

Under the terms of the Company’s then-existing credit agreement, the Chapter 11 filing created an event of default. Upon the Chapter 11 filing, the lenders’ obligation to loan additional money to the Company terminated, the outstanding principal of all obligations became immediately due and payable and the Debtors were required to immediately deposit funds into a collateral account to cover the outstanding amounts under the letters of credit issued pursuant to the credit agreement. Outstanding obligations under the credit agreement amounted to $425 million, which was refinanced through the DIP financing described below.

In addition, the Chapter 11 filing created an event of default under the Convertible Debentures, Senior Notes, Senior Euro Notes, and the amount due to the Subordinated Debentures. As a result, such indebtedness became immediately due and payable (see Note 2).

The ability of the creditors of the Debtors to seek remedies to enforce their rights under the credit facilities described above is stayed as a result of the Chapter 11 filing, and the creditors’ rights of enforcement are subject to the applicable provisions of the Bankruptcy Code.

The debt of the Company’s foreign subsidiaries is not subject to compromise in the bankruptcy proceedings as the Company’s operating foreign subsidiaries are not included in the Chapter 11 filing.

DIP Financing

In conjunction with its Chapter 11 filing, the Debtors entered into a DIP Financing Agreement in February 2005. The DIP Agreement provides for a $725 million commitment of debtor-in-possession financing comprised of a revolving credit and letter of credit facility in an aggregate principal amount not to exceed $300 million and a term loan in the aggregate principal amount of $425 million. Additional details regarding the terms and covenants of the DIP Financing Agreement are included in Note 9 to the Consolidated Financial Statements. The proceeds of the term loan have been used to refinance the Debtors’ obligations of amounts outstanding under the Credit Agreement. The proceeds of the revolving credit loans shall be used to fund the working capital requirements of the Debtors’ during the Chapter 11 proceedings. Obligations under the DIP Agreement are secured by a lien on the assets of the Debtors’ (such liens shall have first priority with respect to a significant portion of the Debtors’ assets) and by a super-priority administrative expense claim in each of the bankruptcy cases. The Company believes that the existing DIP Agreement along with cash generated from operations are adequate to provide for its future liquidity needs through the Debtors’ Chapter 11 bankruptcy.

Back-Stop Agreement

The Debtors have entered into a Back-Stop Agreement with a finance company (“Finance Company”). Under the Back-Stop Agreement, in the event any second lien lender under the pre-petition credit agreement wishes to assign its deposits, rights and obligations after the Chapter 11 filing, the Finance Company agrees to take by assignment any such second lien holder’s deposits, rights and obligations in an aggregate amount not to exceed $155 million.

Draws were made against the second lien letters of credit in the amount of $41 million as of December 31, 2006.

Off Balance Sheet Arrangements

See Notes 5, 12 and 15 to the Consolidated Financial Statements for descriptions of the Company’s accounts receivable securitization facility, post retirement plans and operating leases, respectively.

Contractual Obligations and Commercial Commitments

The Company’s contractual obligations and commercial commitments not subject to compromise as of December 31, 2006 are summarized below (in thousands). Payments associated with liabilities subject to compromise have been excluded from the table below, as the Company cannot accurately forecast the future level or timing of payments given the inherent uncertainties associated with the ongoing Chapter 11 process. See Note 2 to the accompanying Consolidated Financial Statements for further disclosure concerning liabilities subject to compromise.

		Payments Due by Period
						Less than												After
Contractual Obligations		Total				1 Year				1- 3 Years				4- 5 Years				5 Years
Long-term debt		$	213,107			$	79,497			$	43,310			$	46,535			$	43,765
Cash interest payments			130,388				68,219				20,209				10,953				31,007
DIP financing			595,000				595,000				—				—				—
Pension contributions			10,000				10,000				—				—				—
Capital and tooling purchase obligations			87,300				87,300				—				—				—
Capital lease obligation			43,890				5,884				17,615				4,004				16,387
Operating leases			191,931				35,366				64,074				32,832				59,659
Total contractual obligations at December 31, 2006		$	1,271,616			$	881,266			$	145,208			$	94,324			$	150,818

The Company’s purchase orders for inventory are “requirements” based, which do not require the Company to purchase minimum quantities. The Company’s commercial commitments included up to $186.4 million of standby letters of credit of which $128.8 million were issued as of December 31, 2006. Draws pertaining to these letters of credit amounted to $41.0 million at December 31, 2006.

Stock Options

Effective January 1, 2006, the Company accounts for stock-based compensation utilizing the fair value approach described in SFAS No. 123 (R), “Share-Based Payment” (“SFAS No. 123 (R)”) as this statement has been amended and revised. On September 20, 2005, the Company fully vested the entire unvested portion of its outstanding stock options. The Company accelerated the vesting of these options because it is the Company’s opinion that expensing the remaining unvested portion of the options in accordance with SFAS No. 123 (R) does not represent the economic cost to the Company given the Company’s Chapter 11 status. Therefore, the adoption of SFAS No. 123 (R) had no material impact on the Company’s financial statements.

Employee Benefit Plans

As of December 31, 2006, the Company adopted the recognition provisions of SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” which requires balance sheet recognition of the over funded or under funded status of pension and post-retirement benefit plans. Under SFAS No. 158, actuarial gains and losses, prior service costs or credits, and any remaining transition assets or obligations that have not been recognized under previous accounting standards must be recognized as accumulated other comprehensive losses, net of tax effects, until they are amortized as a component of net periodic benefit cost.

The incremental effect of adopting SFAS No. 158 on the Company’s financial statements at December 31, 2006 decreased accumulated other comprehensive income by approximately $26.2 million.

MARKET RISK

The Company is exposed to various market risks, including changes in foreign currency exchange rates, interest rates, steel prices and scrap steel prices. Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange rates, interest rates, steel prices and scrap steel prices. The Company’s policy is to not enter into derivatives or other financial instruments for trading or speculative purposes. The Company periodically enters into derivative instruments to manage and reduce the impact of changes in interest rates.

At December 31, 2006, the Company had total debt not subject to compromise in the bankruptcy proceedings of $808.1 million. The debt is composed of fixed rate debt of $116.6 million (14%) and floating rate debt of $724.7 million (86%). The pre-tax earnings and cash flow impact for the next year resulting from a one percentage point increase in interest rates on variable rate debt not subject to compromise would be approximately $7.25 million, holding other variables constant. A one-percentage point increase in interest rates would not materially impact the fair value of the fixed rate debt not subject to compromise.

A portion of the Company’s revenues is derived from manufacturing operations in Europe, Asia and South America. The results of operations and financial position of the Company’s foreign operations are principally measured in their respective currency and translated into U.S. dollars. The effects of foreign currency fluctuations in Europe, Asia and South America are somewhat mitigated by the fact that expenses are generally incurred in the same currency in which revenues are generated. The reported income of these subsidiaries will be higher or lower depending on a weakening or strengthening of the U.S. dollar against the respective foreign currency.

A portion of the Company’s assets are based in its foreign operations and are translated into U.S. dollars at foreign currency exchange rates in effect as of the end of each period, with the effect of such translation reflected as a separate component of stockholders’ investment (deficit). Accordingly, the Company’s consolidated stockholders’ investment (deficit) will fluctuate depending upon the weakening or strengthening of the U.S. dollar against the respective foreign currency.

The Company’s strategy for management of currency risk relies primarily upon conducting its operations in a country’s respective currency and may, from time to time, also involve hedging programs intended to reduce the Company’s exposure to currency fluctuations. Management believes the effect of a 100 basis point movement in foreign currency rates versus the dollar would not materially affect the Company’s financial position, results of operations or cash flows for the periods presented.

The majority of the Company’s product offerings are produced from various types of steel. A byproduct of the production process is scrap steel, which is sold. In general steel prices and scrap steel prices began increasing during early 2004 and still remained high relative to historical levels in 2006. During 2006, steel prices have risen compared to 2005 levels. Continued volatility in steel prices and scrap steel prices is expected to continue in 2007.

OPPORTUNITIES

The Company’s operations are geographically diverse including a significant presence in Europe, Asia and South America. The Company has a customer portfolio strategy to leverage relationships with key customers across geographic boundaries to diversify its customer base and increase penetration with existing key customers, including the “New Domestics” (Nissan, Toyota and Honda).

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

All statements, other than statements of historical fact, included in this Form 10-K or incorporated by reference herein, are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). When used in this Form 10-K, the words “anticipate,” “believe,” “estimate,” “expect,” “intends,” “project,” “plan” and similar expressions, as they relate to the Company, are intended to identify forward-looking statements. Such forward-looking statements are based on the beliefs of the Company’s management as well as on assumptions made

by and information currently available to the Company at the time such statements were made. Various economic and competitive factors could cause actual results to differ materially from those discussed in such forward-looking statements, including factors which are outside the control of the Company, such as risks relating to: (i) confirmation of a plan of reorganization under the Bankruptcy Code, which would allow the Company to reduce unsustainable debt and other liabilities and simplify the Company’s complex and restrictive capital structure; (ii) the Company’s reliance on major customers and selected vehicle platforms; (iii) the cyclicality and seasonality of the automotive market; (iv) the failure to realize the benefits of acquisitions and joint ventures; (v) the Company’s ability to obtain new business on new and redesigned models; (vi) the Company’s ability to achieve the anticipated volume of production from new and planned supply programs; (vii) the general economic or business conditions affecting the automotive industry (which are dependent on consumer spending), either nationally or regionally, being less favorable than expected; (viii) the Company’s failure to develop or successfully introduce new products; (ix) increased competition in the automotive components supply market; (x) unforeseen problems associated with international sales, including gains and losses from foreign currency exchange; (xi) implementation of or changes in the laws, regulations or policies governing the automotive industry that could negatively affect the automotive components supply industry; (xii) changes in general economic conditions in the United States, Europe and Asia; and (xiii) various other factors beyond the Company’s control. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by such cautionary statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

See “Market Risk” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7.

Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Tower Automotive, Inc. Financial Statements		Page (s)
Reports of Independent Registered Public Accounting Firms			36
Consolidated Balance Sheets at December 31, 2006 and 2005			39
Consolidated Statements of Operations for the years ended December 31, 2006, 2005 and 2004			40
Consolidated Statements of Stockholders’ Investment (Deficit) for the years ended December 31, 2006, 2005 and 2004			41
Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004			42
Notes to Consolidated Financial Statements			43

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Tower Automotive, Inc.
Novi, MI

We have audited the accompanying consolidated balance sheets of Tower Automotive, Inc. (Debtor-in-Possession) (the “Company”) and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of operations, stockholders’ investment (deficit), and cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the consolidated financial statements of Metalsa, S. de R.L. (“Metalsa”) and subsidiaries, the Company’s investment in which is accounted for by use of the equity method. The Company’s equity of $251,972,000 and $227,136,000 in Metalsa’s net assets at December 31, 2006 and 2005, respectively, and of $24,321,600, $17,626,400, and $13,833,200 in Metalsa’s net income for each of the three years in the period ended December 31, 2006, are included in the accompanying financial statements. The consolidated financial statements of Metalsa were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Metalsa, is based solely on the report of such other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of the other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of Tower Automotive, Inc. and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, (a) effective December 31, 2006, the Company recognized the funded status of its benefit plans in its consolidated balance sheet to conform with Financial Accounting Standards Board (“FASB”) Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R), and (b) effective December 31, 2005, the Company changed its method of accounting for conditional asset retirement obligations to conform with FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations.

As discussed in Notes 1 and 2 to the consolidated financial statements, Tower Automotive, Inc. and certain subsidiaries have filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The accompanying financial statements do not purport to reflect or provide for the consequences of the bankruptcy proceedings. In particular, such financial statements do not purport to show (a) as to assets, their realizable value on a liquidation basis or their availability to satisfy liabilities; (b) as to prepetition liabilities, the amounts that may be allowed for claims or contingencies, or the status and priority thereof; (c) as to stockholder accounts, the effect of any changes that may be made in the capitalization of the Company; or (d) as to operations, the effect of any changes that may be made in its business.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Notes 1 and 2 to the consolidated financial statements, the Company’s recurring losses from operations, negative working capital, significant amount of indebtedness and stockholders’ deficit raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also discussed in Note 1 to the consolidated financial statements. The consolidated financial statements do not include adjustments that might result from the outcome of this uncertainty.

DELOITTE & TOUCHE LLP

Detroit, Michigan
June 6, 2007

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Managers
Metalsa, S. de R.L.:

We have audited the accompanying consolidated balance sheets of Metalsa, S. de R.L. and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of income, partners’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Metalsa, S. de R.L. and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-years period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

KPMG Cardenas Dosal, S.C.

S/ Jaime Garcia Garciatorres

Jaime Garcia Garciatorres
Monterrey, N.L., Mexico
March 7, 2007

TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except for per share amounts)

		December 31,
		2006				2005
ASSETS
Current Assets:
Cash and cash equivalents		$	64,275			$	65,791
Accounts receivable			339,650				343,816
Inventories			107,186				115,451
Prepaid tooling and other			94,018				185,280
Assets of discontinued operations			24,738				27,572
Total current assets			629,867				737,910
Property, plant and equipment, net			952,942				1,015,805
Investments in joint ventures			253,170				228,634
Goodwill			169,617				153,037
Other assets, net			101,398				130,215
Assets of discontinued operations			—				25,625
Total assets		$	2,106,994			$	2,291,226
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities, not subject to compromise:
Current maturities of long-term debt and capital lease obligations		$	82,849			$	137,509
Current portion of debtor-in-possession borrowings			595,000				—
Accounts payable			345,296				372,200
Accrued liabilities			166,754				168,060
Liabilities of discontinued operations			20,503				22,050
Total current liabilities			1,210,402				699,819
Liabilities subject to compromise			1,284,782				1,284,217
Non-current liabilities, not subject to compromise:
Long-term debt, net of current maturities			133,610				107,823
Debtor-in-possession borrowings			—				531,000
Commitments and contingencies (Notes 1, 2 and 15)
Obligations under capital leases, net of current maturities			29,852				30,308
Other non-current liabilities			111,020				125,682
Total non-current liabilities			274,482				794,813
Stockholders’ deficit:
Preferred stock, par value $1; 5,000 shares authorized; no shares issued or outstanding			—				—
Common stock, par value $.01; 200,000 shares authorized; 66,647 issued and 58,549 outstanding in 2006; 66,627 issued and 58,529 outstanding in 2005			666				666
Additional paid-in capital			682,031				681,102
Accumulated deficit			(1,308,906	)			(1,106,840	)
Deferred compensation plans			—				(6,798	)
Accumulated other comprehensive income (loss)			12,861				(6,429	)
Treasury stock, at cost: 8,098 shares in 2006 and 2005			(49,324	)			(49,324	)
Total stockholders’ deficit			(662,672	)			(487,623	)
Total liabilities and stockholders’ deficit		$	2,106,994			$	2,291,226

The accompanying notes are an integral part of these Consolidated Financial Statements.

TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share amounts)

		Years Ended December 31,
		2006				2005				2004
Revenues		$	2,539,443			$	2,932,209			$	2,828,551
Cost of sales			2,389,285				2,752,097				2,603,816
Gross profit			150,158				180,112				224,735
Selling, general and administrative expenses			131,517				149,723				145,217
Restructuring and asset impairment charges, net			70,503				116,392				(713	)
Other income			(742	)			(7,656	)			(967	)
Goodwill impairment charges			—				—				337,230
Operating loss			(51,120	)			(78,347	)			(256,032	)
Interest expense (Contractual interest of $171,446 in 2006 and $174,170 in 2005)			98,404				103,279				141,735
Interest income			(3,073	)			(1,476	)			(1,767	)
Unrealized gain on derivative			—				¾				(3,860	)
Chapter 11 and related reorganization items			66,224				167,438				¾
Loss before provision for income taxes, equity in earnings of joint ventures and minority interest			(212,675	)			(347,588	)			(392,140	)
Provision for income taxes			11,703				16,438				174,798
Loss before equity in earnings of joint ventures, minority interest and gain on sale of joint venture			(224,378	)			(364,026	)			(566,938	)
Equity in earnings of joint ventures, net of tax			24,938				17,153				13,370
Minority interest, net of tax			(6,678	)			(4,994	)			(5,754	)
Gain on sale of joint venture			—				—				9,732
Loss from continuing operations			(206,118	)			(351,867	)			(549,590	)
Income (loss) from discontinued operations			4,052				(13,653	)			(2,029	)
Loss before cumulative effect of accounting change			(202,066	)			(365,520	)			(551,619	)
Cumulative effect of accounting change, net of tax			—				(7,852	)			¾
Net loss		$	(202,066	)		$	(373,372	)		$	(551,619	)
Basic and diluted earnings (loss) per share:
Loss from continuing operations before effect of change in accounting		$	(3.51	)		$	(6.00	)		$	(9.46	)
Income (loss) from discontinued operations			0.07				(0.23	)			(0.04	)
Cumulative effect of accounting change			—				(0.14	)			—
Net loss		$	(3.44	)		$	(6.37	)		$	(9.50	)
Weighted average basic and diluted shares outstanding			58,659				58,645				58,077

The accompanying notes are an integral part of these Consolidated Financial Statements.

TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ INVESTMENT (DEFICIT)
(amounts in thousands, except share data)

																						Accumulated
																						Other												Total
										Additional								Deferred				Comprehensive												Stockholders’
		Common Stock								Paid-in				Retained				Compensation				Income				Treasury Stock								Investment
		Shares				Amount				Capital				Deficit				Plans				(Loss)				Shares				Amount				(Deficit)
Balance, December 31, 2003			66,133,731			$	661			$	680,608			$	(181,849	)		$	(9,609	)		$	(22,751	)			(8,791,926	)		$	(53,550	)		$	413,510
Exercise of options			23,750				—				72				—				—				—				—				—				72
Sales of stock under Employee Stock Discount Purchase Plan			15,912				—				28				—				—				—				—				—				28
Deferred Income Stock Plan deferrals			—				—				636				—				(636	)			—				—				—				—
Deferred Income Stock Plan forfeitures			—				—				(74	)			—				74				—				—				—				—
Deferred Income Stock Plan distributions			—				—				—				—				1,524				—				—				—				1,524
Deferred profit-sharing funding			—				—				(181	)			—				—				—				693,873				4,226				4,045
Restricted stock grants earned and forfeited			—				—				—				—				1,011				—				—				—				1,011
Restricted stock grant distributions			405,569				5				(5	)			—				—				—				—				—				—
Net loss			—				—				—				(551,619	)			—				—				—				—				—
Other comprehensive income (loss):
Foreign currency translation adjustment			—				—				—				—				—				19,760				—				—				—
Unrealized gain on qualifying cash flow hedges			—				—				—				—				—				8,020				—				—				—
Minimum pension liability			—				—				—				—				—				(3,439	)			—				—
Total comprehensive income			—				—				—				—				—				—				—				—				(527,278	)
Balance, December 31, 2004			66,578,962			$	666			$	681,084			$	(733,468	)		$	(7,636	)		$	1,590				(8,098,053	)		$	(49,324	)		$	(107,088	)
Sales of stock under Employee Stock Discount Purchase Plan			27,645				—				51				—				—				—				—				—				51
Deferred Income Stock Plan forfeitures			—				—				(34	)			—				34				—				—				—				—
Restricted stock grants earned and forfeited			—				—				—				—				804				—				—				—				804
Restricted stock grant distributions			20,000				—				—				—				—				—				—				—				—
Debt conversion to common stock			231				—				1				—				—				—				16				—				1
Net loss			—				—				—				(373,372	)			—				—				—				—				—
Other comprehensive income (loss):
Foreign currency translation adjustment			—				—				—				—				—				(18,340	)			—				—				—
Unrealized gain on qualifying cash flow hedges			—				—				—				—				—				217				—				—				—
Minimum pension liability			—				—				—				—				—				10,104				—				—				—
Total comprehensive income			—				—				—				—				—				—				—				—				(381,391	)
Balance, December 31, 2005			66,626,838			$	666			$	681,102			$	(1,106,840	)		$	(6,798	)		$	(6,429	)			(8,098,037	)		$	(49,324	)		$	(487,623	)
Deferred Income Stock Plan deferrals			20,000				—				—				—				—				—				—				—				—
Restricted stock grants earned and forfeited			—				—				929				—				—				—				—				—				929
Other			—				—				—				—				6,798																6,798
Net loss			—				—				—				(202,066	)			—				—				—				—				—
Other comprehensive income (loss):
Foreign currency translation adjustment			—				—				—				—				—				30,831				—				—				—
Minimum pension liability			—				—				—				—				—				14,684				—				—				—
Total comprehensive income			—				—				—				—				—				—				—				—				(156,551	)
Adoption of the recognition provisions of SFAS No. 158			—				—				—				—				—				(26,225	)			—				—				(26,225	)
Balance, December 31, 2006			66,646,838			$	666			$	682,031			$	(1,308,906	)		$	—			$	12,861				(8,098,037	)		$	(49,324	)		$	(662,672	)