##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




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Form 10-Q

|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|          
|           |  | For the quarterly period ended
    October 31, 2004                                         
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to                                             

Commission file number: 000-50303



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Hayes Lemmerz International, Inc.

(Exact name of registrant as specified in its
charter)


|                                                                                            |  |                                      
|------------------------------------------------------------------------------------------- |  | -------------------------------------
|Delaware                                                                                    |  | 32-0072578                           
|(State or other jurisdiction of
    incorporation or organization)                          |  | (IRS Employer
    Identification No.)
|                                                                                           
|15300 Centennial Drive
    Northville, Michigan(Address of principal executive
    offices) |  | 48167(Zip Code)                      

Registrants telephone number, including
area code:

(734) 737-5000


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 whether the registrant is
an accelerated filer (as defined in Rule 12(b)-2 of the
Act).     Yes þ          No o

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has
filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Act subsequent to the
distributions of securities under a plan confirmed by a
court.     Yes þ          No o

The number of shares of common stock outstanding
as of December 9, 2004 was 37,822,962 shares.



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HAYES LEMMERZ INTERNATIONAL, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

|                                                            |  |                                                                                           |    |      |    | 
|----------------------------------------------------------- |  | ----------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                                            |  |                                                                                           |    | Page
|                                                            |  |                                                                                           |    |     
|PART I. FINANCIAL
    INFORMATION                          
|Item 1.                                                     |  | Financial Statements                                                                      |    |      | 2  | 
|                                                            |  | Consolidated Statements of
    Operations                                                 |    |      | 2  | 
|                                                            |  | Consolidated Balance
    Sheets                                                           |    |      | 4  | 
|                                                            |  | Consolidated Statements of
    Cash Flows                                                 |    |      | 5  | 
|                                                            |  | Notes to Consolidated
    Financial Statements                                            |    |      | 6  | 
|Item 2.                                                     |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations |    |      | 36 | 
|Item 3.                                                     |  | Quantitative and Qualitative
    Disclosures about Market Risk                            |    |      | 51 | 
|Item 4.                                                     |  | Controls and Procedures                                                                   |    |      | 52 | 
|PART II. OTHER
    INFORMATION                             
|Item 1.                                                     |  | Legal Proceedings                                                                         |    |      | 53 | 
|Item 2.                                                     |  | Changes in Securities and
    Use of Proceeds                                             |    |      | 53 | 
|Item 3.                                                     |  | Defaults upon Senior
    Securities                                                       |    |      | 53 | 
|Item 4.                                                     |  | Submission of Matters to a
    Vote of Security Holders                                   |    |      | 53 | 
|Item 5.                                                     |  | Other Information                                                                         |    |      | 53 | 
|Item 6.                                                     |  | Exhibits                                                                                  |    |      | 53 | 
|Signatures                                                  |  |                                                                                           | 54 |     
|Amendment No. 4 dated as of November 10, 2004              
|Certification of Curtis J. Clawson, pursuant to Section 302
|Certification of James A. Yost, pursuant to Section 302    
|Certification of Curtis J. Clawson, pursuant to Section 906
|Certification of James A. Yost, pursuant to Section 906    



Unless otherwise indicated, references to the
Company mean Hayes Lemmerz International, Inc., and
its subsidiaries, and references to a fiscal year means the
Companys year commencing on February 1 of that year
and ending January 31 of the following year (e.g., fiscal
2004 means the period beginning February 1, 2004, and
ending January 31, 2005). This report contains forward
looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 with respect to the financial
condition, results of operations, and business of the Company.
All statements other than statements of historical fact we make
in this Quarterly Report are forward-looking. Such
forward-looking statements include, among others, those
statements including the words expect,
anticipate, intend, believe
and similar language. These forward looking statements involve
certain risks and uncertainties. Our actual results may differ
significantly from those projected in the forward-looking
statements. Factors that may cause actual results to differ
materially from those contemplated by such forward looking
statements include, among others: (1) competitive pressure
in the Companys industry; (2) fluctuations in the
price of steel, aluminum and other raw materials;
(3) general economic conditions are less favorable than
expected; (4) the Companys dependence on the
automotive industry (which has historically been cyclical) and
on a small number of major customers for the majority of its
sales; (5) pricing pressure from automotive industry
customers and the potential for re-sourcing of business to
lower-cost providers overseas; (6) changes in the financial
markets affecting the Companys financial structure and the
Companys cost of capital and borrowed money; (7) the
uncertainties inherent in international operations and foreign
currency fluctuations; and (8) the risks described in our
most recent Annual Report on Form 10-K. You are cautioned
not to place undue reliance on the forward-looking statements,
which speak only as of the date of this Quarterly Report on
Form 10-Q. The Company has no duty under the Private
Securities Litigation Reform Act of 1995 to update the forward
looking statements in this Quarterly Report on Form 10-Q
and the Company does not intend to provide such
updates.

1



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES




CONSOLIDATED STATEMENTS OF
OPERATIONS

(Dollars in millions, except per share
amounts)


|                                                  |                                                   |              |       |      |   |   |       |       |  
|------------------------------------------------- | ------------------------------------------------- | ------------ | ----- | ---- | - | - | ----- | ----- | -
|                                                  |                                                   |             
|                                                  |                                                   | Three Months
|                                                  |                                                   | Ended       
|                                                  |                                                   | October 31, 
|                                                  |                                                   |             
|                                                  |                                                   | 2004         |       | 2003
|                                                  |                                                   |              |       |     
|                                                  |                                                   |             
|                                                  |                                                   | (Unaudited) 
|Net sales                                         |                                                   | $            | 556.2 |      |   | $ | 530.9 |      
|Cost of goods sold                                |                                                   |              | 506.1 |      |   |   | 461.6 |      
|                                                  |                                                   |              |       |      |   |   |       |      
|                                                  | Gross profit                                      |              |       | 50.1 |   |   |       | 69.3  |  
|Marketing, general and administrative             |                                                   |              | 39.4  |      |   |   | 33.1  |      
|Asset impairments and other restructuring charges |                                                   |              | 2.9   |      |   |   | 19.6  |      
|Other (income) expense, net                       |                                                   |              | 0.6   |      |   |   | 2.7   |      
|                                                  |                                                   |              |       |      |   |   |       |      
|                                                  | Earnings from operations                          |              |       | 7.2  |   |   |       | 13.9  |  
|Interest expense, net                             |                                                   |              | 10.0  |      |   |   | 16.6  |      
|Other non-operating (income) expense, net         |                                                   |              | 1.1   |      |   |   | 0.2   |      
|                                                  |                                                   |              |       |      |   |   |       |      
|                                                  | Loss before taxes on income and minority interest |              |       | (3.9 | ) |   |       | (2.9  | )
|Income tax provision                              |                                                   |              | 3.7   |      |   |   | 6.1   |      
|                                                  |                                                   |              |       |      |   |   |       |      
|                                                  | Loss before minority interest                     |              |       | (7.6 | ) |   |       | (9.0  | )
|Minority interest                                 |                                                   |              | 1.9   |      |   |   | 1.0   |      
|                                                  |                                                   |              |       |      |   |   |       |      
|                                                  | Net loss                                          |              | $     | (9.5 | ) |   | $     | (10.0 | )
|                                                  |                                                   |              |       |      |   |   |       |      
|Basic and diluted net loss per share              |                                                   | $            | (0.25 | )    |   | $ | (0.33 | )    

See accompanying notes to consolidated financial
statements.

2



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
OPERATIONS

(Dollars in millions, except per share
amounts)


|                                                           |                                                                                                     |             |         |             |   |             |       |       |   |   |         |         |  
|---------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | ----------- | ------- | ----------- | - | ----------- | ----- | ----- | - | - | ------- | ------- | -
|                                                           |                                                                                                     |             |         |            
|                                                           |                                                                                                     | Successor   |         | Predecessor
|                                                           |                                                                                                     |             |         |            
|                                                           |                                                                                                     | Nine Months |         | Five Months |   | Four Months
|                                                           |                                                                                                     | Ended       |         | Ended       |   | Ended      
|                                                           |                                                                                                     | October 31, |         | October 31, |   | May 31,    
|                                                           |                                                                                                     | 2004        |         | 2003        |   | 2003       
|                                                           |                                                                                                     |             |         |             |   |            
|                                                           |                                                                                                     |            
|                                                           |                                                                                                     | (Unaudited)
|Net sales                                                  |                                                                                                     | $           | 1,674.0 |             |   | $           | 859.2 |       |   | $ | 689.8   |        
|Cost of goods sold                                         |                                                                                                     |             | 1,500.5 |             |   |             | 760.5 |       |   |   | 611.3   |        
|                                                           |                                                                                                     |             |         |             |   |             |       |       |   |   |         |        
|                                                           | Gross profit                                                                                        |             |         | 173.5       |   |             |       | 98.7  |   |   |         | 78.5    |  
|Marketing, general and administrative                      |                                                                                                     |             | 123.2   |             |   |             | 58.0  |       |   |   | 41.6    |        
|Asset impairments and other restructuring charges          |                                                                                                     |             | 6.2     |             |   |             | 19.6  |       |   |   | 6.4     |        
|Other (income) expense, net                                |                                                                                                     |             | 1.2     |             |   |             | 4.8   |       |   |   | (1.9    | )      
|Reorganization items                                       |                                                                                                     |             |        |             |   |             |      |       |   |   | 45.0    |        
|Fresh start accounting adjustments                         |                                                                                                     |             |        |             |   |             |      |       |   |   | (63.1   | )      
|                                                           |                                                                                                     |             |         |             |   |             |       |       |   |   |         |        
|                                                           | Earnings from operations                                                                            |             |         | 42.9        |   |             |       | 16.3  |   |   |         | 50.5    |  
|Interest expense, net                                      |                                                                                                     |             | 31.6    |             |   |             | 24.7  |       |   |   | 22.7    |        
|Other non-operating (income) expense                       |                                                                                                     |             | 1.0     |             |   |             | 0.3   |       |   |   |        |        
|Loss on early extinguishment of debt                       |                                                                                                     |             | 12.2    |             |   |             |      |       |   |   |        |        
|                                                           |                                                                                                     |             |         |             |   |             |       |       |   |   |         |        
|                                                           | Earnings (loss) before taxes on income, minority
    interest, extraordinary gain on debt discharge |             |         | (1.9        | ) |             |       | (8.7  | ) |   |         | 27.8    |  
|Income tax provision                                       |                                                                                                     |             | 14.3    |             |   |             | 8.7   |       |   |   | 60.3    |        
|                                                           |                                                                                                     |             |         |             |   |             |       |       |   |   |         |        
|                                                           | Loss before minority interest and extraordinary
    gain on debt discharge                          |             |         | (16.2       | ) |             |       | (17.4 | ) |   |         | (32.5   | )
|Minority interest                                          |                                                                                                     |             | 6.0     |             |   |             | 1.8   |       |   |   | 1.2     |        
|                                                           |                                                                                                     |             |         |             |   |             |       |       |   |   |         |        
|                                                           | Loss before extraordinary gain on debt discharge                                                    |             |         | (22.2       | ) |             |       | (19.2 | ) |   |         | (33.7   | )
|Extraordinary gain on debt discharge, net of tax
    of $0 |                                                                                                     |             |        |             |   |             |      |       |   |   | 1,076.7 |        
|                                                           |                                                                                                     |             |         |             |   |             |       |       |   |   |         |        
|                                                           | Net income (loss)                                                                                   |             | $       | (22.2       | ) |             | $     | (19.2 | ) |   | $       | 1,043.0 |  
|                                                           |                                                                                                     |             |         |             |   |             |       |       |   |   |         |        
|Basic and diluted net loss per share                       |                                                                                                     | $           | (0.59   | )           |   | $           | (0.64 | )     |   |   |         |        

See accompanying notes to consolidated financial
statements.

3



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES




CONSOLIDATED BALANCE SHEETS

(Dollars in millions)


|                                         |                                                                                                                          |                                                                                                                                                |                                            |             |         |         |       |       |         |         | 
|---------------------------------------- | ------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----------- | ------- | ------- | ----- | ----- | ------- | ------- | 
|                                         |                                                                                                                          | October 31,                                                                                                                                    |                                            | January 31,
|                                         |                                                                                                                          | 2004                                                                                                                                           |                                            | 2004       
|                                         |                                                                                                                          |                                                                                                                                                |                                            |            
|                                         |                                                                                                                          |                                                                                                                                               
|                                         |                                                                                                                          | (Unaudited)                                                                                                                                   
|ASSETS                                  
|Current assets:                          |                                                                                                                          |                                                                                                                                                |                                            |             |         |         |       |      
|                                         | Cash and cash equivalents                                                                                                |                                                                                                                                                | $                                          | 27.8        |         |         | $     | 48.5  |        
|                                         | Receivables                                                                                                              |                                                                                                                                                |                                            | 377.5       |         |         |       | 325.5 |        
|                                         | Inventories                                                                                                              |                                                                                                                                                |                                            | 194.6       |         |         |       | 189.3 |        
|                                         | Prepaid expenses and other                                                                                               |                                                                                                                                                |                                            | 18.6        |         |         |       | 29.0  |        
|                                         |                                                                                                                          |                                                                                                                                                |                                            |             |         |         |       |      
|                                         |                                                                                                                          | Total current assets                                                                                                                           |                                            |             | 618.5   |         |       |       | 592.3   |        
|Property, plant and equipment, net       |                                                                                                                          |                                                                                                                                                | 978.1                                      |             |         |         | 966.5 |      
|Goodwill                                 |                                                                                                                          |                                                                                                                                                | 409.3                                      |             |         |         | 416.2 |      
|Intangible assets, net                   |                                                                                                                          |                                                                                                                                                | 230.2                                      |             |         |         | 237.2 |      
|Other assets                             |                                                                                                                          |                                                                                                                                                | 55.1                                       |             |         |         | 85.5  |      
|                                         |                                                                                                                          |                                                                                                                                                |                                            |             |         |         |       |      
|                                         |                                                                                                                          | Total assets                                                                                                                                   |                                            | $           | 2,291.2 |         |       | $     | 2,297.7 |        
|                                         |                                                                                                                          |                                                                                                                                                |                                            |             |         |         |       |      
|LIABILITIES AND STOCKHOLDERS
    EQUITY
|Current liabilities:                     |                                                                                                                          |                                                                                                                                                |                                            |             |         |         |       |      
|                                         | Bank borrowings and other notes                                                                                          |                                                                                                                                                | $                                          | 3.9         |         |         | $     | 14.2  |        
|                                         | Current portion of long-term debt                                                                                        |                                                                                                                                                |                                            | 11.1        |         |         |       | 11.3  |        
|                                         | Accounts payable and accrued liabilities                                                                                 |                                                                                                                                                |                                            | 397.4       |         |         |       | 355.5 |        
|                                         |                                                                                                                          |                                                                                                                                                |                                            |             |         |         |       |      
|                                         |                                                                                                                          | Total current liabilities                                                                                                                      |                                            |             | 412.4   |         |       |       | 381.0   |        
|Long-term debt, net of current portion   |                                                                                                                          |                                                                                                                                                | 638.3                                      |             |         |         | 752.4 |      
|Pension and other long-term liabilities  |                                                                                                                          |                                                                                                                                                | 517.2                                      |             |         |         | 526.5 |      
|Series A Warrants and Series B Warrants  |                                                                                                                          |                                                                                                                                                | 0.7                                        |             |         |         | 8.2   |      
|Redeemable preferred stock of subsidiary |                                                                                                                          |                                                                                                                                                | 11.1                                       |             |         |         | 10.5  |      
|Minority interest                        |                                                                                                                          |                                                                                                                                                | 28.3                                       |             |         |         | 23.2  |      
|Commitments and contingencies            |                                                                                                                          |                                                                                                                                                |                                            |             |         |         |       |      
|Stockholders equity:                    |                                                                                                                          |                                                                                                                                                |                                            |             |         |         |       |      
|                                         | Preferred stock, 1,000,000 shares
    authorized, none issued or outstanding at October 31, 2004
    or January 31, 2004 |                                                                                                                                                |                                            |            |         |         |       |      |        
|                                         | Common stock, par value $0.01 per share:                                                                                 |                                                                                                                                                |                                            |             |         |         |       |       |        
|                                         |                                                                                                                          | 100,000,000 shares authorized; 37,818,114
    and 30,000,000 issued and outstanding at October 31, 2004
    and January 31, 2004, respectively |                                            |             | 0.4     |         |       |       | 0.3     |        
|                                         | Additional paid in capital                                                                                               |                                                                                                                                                |                                            | 670.0       |         |         |       | 548.2 |        
|                                         | Accumulated deficit                                                                                                      |                                                                                                                                                |                                            | (68.7       | )       |         |       | (46.5 | )      
|                                         | Accumulated other comprehensive income                                                                                   |                                                                                                                                                |                                            | 81.5        |         |         |       | 93.9  |        
|                                         |                                                                                                                          |                                                                                                                                                |                                            |             |         |         |       |      
|                                         |                                                                                                                          | Total stockholders equity                                                                                                                     |                                            |             | 683.2   |         |       |       | 595.9   |        
|                                         |                                                                                                                          |                                                                                                                                                |                                            |             |         |         |       |      
|                                         |                                                                                                                          |                                                                                                                                                | Total liabilities and stockholders equity |             | $       | 2,291.2 |       |       | $       | 2,297.7 | 
|                                         |                                                                                                                          |                                                                                                                                                |                                            |             |         |         |       |      

See accompanying notes to consolidated financial
statements.

4



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES




CONSOLIDATED STATEMENTS OF CASH
FLOWS

(Dollars in millions)


|                                                                 |                                                                                                         |                                                                                                     |                                                  |             |       |             |       |       |       |       |       |         |          |       |  
|---------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | ------------------------------------------------ | ----------- | ----- | ----------- | ----- | ----- | ----- | ----- | ----- | ------- | -------- | ----- | -
|                                                                 |                                                                                                         |                                                                                                     |                                                  |            
|                                                                 |                                                                                                         | Successor                                                                                           |                                                  | Predecessor
|                                                                 |                                                                                                         |                                                                                                     |                                                  |            
|                                                                 |                                                                                                         | Nine Months                                                                                         |                                                  | Five Months |       | Four Months
|                                                                 |                                                                                                         | Ended                                                                                               |                                                  | Ended       |       | Ended      
|                                                                 |                                                                                                         | October 31,                                                                                         |                                                  | October 31, |       | May 31,    
|                                                                 |                                                                                                         | 2004                                                                                                |                                                  | 2003        |       | 2003       
|                                                                 |                                                                                                         |                                                                                                     |                                                  |             |       |            
|                                                                 |                                                                                                         |                                                                                                    
|                                                                 |                                                                                                         | (Unaudited)                                                                                        
|Cash flows from operating activities:                            |                                                                                                         |                                                                                                     |                                                  |             |       |             |       |       |       |       |       |        
|                                                                 | Net income (loss)                                                                                       |                                                                                                     | $                                                | (22.2       | )     |             | $     | (19.2 | )     |       | $     | 1,043.0 |         
|                                                                 | Adjustments to reconcile net income (loss) to net
    cash provided by (used for) operating activities: |                                                                                                     |                                                  |             |       |             |       |       |       |       |       |         |         
|                                                                 |                                                                                                         | Depreciation and amortization                                                                       |                                                  |             | 128.3 |             |       |       | 67.1  |       |       |         | 46.4     |      
|                                                                 |                                                                                                         | Amortization of deferred financing fees                                                             |                                                  |             | 2.8   |             |       |       | 1.4   |       |       |         | 1.6      |      
|                                                                 |                                                                                                         | Interest income resulting from fair value
    adjustment of Series A Warrants and Series B Warrants |                                                  |             | (7.5  | )           |       |       | (2.6  | )     |       |         |         |      
|                                                                 |                                                                                                         | Change in deferred income taxes                                                                     |                                                  |             | (11.2 | )           |       |       | (6.9  | )     |       |         | 52.6     |      
|                                                                 |                                                                                                         | Asset impairments and other restructuring charges                                                   |                                                  |             | 6.2   |             |       |       | 19.6  |       |       |         | 6.4      |      
|                                                                 |                                                                                                         | Minority interest                                                                                   |                                                  |             | 6.0   |             |       |       | 1.8   |       |       |         | 1.2      |      
|                                                                 |                                                                                                         | Subsidiary preferred stock dividends                                                                |                                                  |             | 0.6   |             |       |       | 0.3   |       |       |         |         |      
|                                                                 |                                                                                                         | Compensation expense related to restricted stock
    units                                          |                                                  |             | 4.9   |             |       |       | 2.1   |       |       |         |         |      
|                                                                 |                                                                                                         | Loss on extinguishment of debt                                                                      |                                                  |             | 12.2  |             |       |       |      |       |       |         |         |      
|                                                                 |                                                                                                         | (Gain) loss on sale of assets and businesses                                                        |                                                  |             |      |             |       |       | 0.3   |       |       |         | (0.4     | )    
|                                                                 |                                                                                                         | Changes in operating assets and liabilities:                                                        |                                                  |             |       |             |       |       |       |       |       |         |          |      
|                                                                 |                                                                                                         |                                                                                                     | Receivables                                      |             |       | (51.0       | )     |       |       | (22.9 | )     |         |          | (13.7 | )
|                                                                 |                                                                                                         |                                                                                                     | Inventories                                      |             |       | (4.7        | )     |       |       | 14.5  |       |         |          | (4.0  | )
|                                                                 |                                                                                                         |                                                                                                     | Prepaid expenses and other                       |             |       | 3.1         |       |       |       | 4.0   |       |         |          | 5.2   |  
|                                                                 |                                                                                                         |                                                                                                     | Accounts payable and accrued liabilities         |             |       | 35.8        |       |       |       | 29.2  |       |         |          | (6.9  | )
|                                                                 | Chapter 11 items:                                                                                       |                                                                                                     |                                                  |             |       |             |       |       |       |       |       |         |         
|                                                                 |                                                                                                         | Reorganization items                                                                                |                                                  |             |      |             |       |       |      |       |       |         | 45.0     |      
|                                                                 |                                                                                                         | Fresh start accounting adjustments                                                                  |                                                  |             |      |             |       |       |      |       |       |         | (63.1    | )    
|                                                                 |                                                                                                         | Extraordinary gain on debt discharge                                                                |                                                  |             |      |             |       |       |      |       |       |         | (1,076.7 | )    
|                                                                 |                                                                                                         | Interest accrued on Credit Agreement                                                                |                                                  |             |      |             |       |       |      |       |       |         | 16.9     |      
|                                                                 |                                                                                                         | Payments related to Chapter 11 Filings                                                              |                                                  |             | (1.1  | )           |       |       | (34.2 | )     |       |         | (22.4    | )    
|                                                                 |                                                                                                         |                                                                                                     |                                                  |             |       |             |       |       |       |       |       |        
|                                                                 |                                                                                                         |                                                                                                     | Cash provided by operating activities            |             |       | 102.2       |       |       |       | 54.5  |       |         |          | 31.1  |  
|                                                                 |                                                                                                         |                                                                                                     |                                                  |             |       |             |       |       |       |       |       |        
|Cash flows from investing activities:                            |                                                                                                         |                                                                                                     |                                                  |             |       |             |       |       |       |       |       |        
|                                                                 | Purchase of property, plant, equipment and tooling                                                      |                                                                                                     |                                                  | (109.2      | )     |             |       | (41.1 | )     |       |       | (26.3   | )       
|                                                                 | Purchase of equipment previously leased                                                                 |                                                                                                     |                                                  |            |       |             |       |      |       |       |       | (23.6   | )       
|                                                                 | Proceeds from sale of assets                                                                            |                                                                                                     |                                                  | 0.6         |       |             |       | 0.8   |       |       |       | 0.8     |         
|                                                                 |                                                                                                         |                                                                                                     |                                                  |             |       |             |       |       |       |       |       |        
|                                                                 |                                                                                                         |                                                                                                     | Cash used for investing activities               |             |       | (108.6      | )     |       |       | (40.3 | )     |         |          | (49.1 | )
|                                                                 |                                                                                                         |                                                                                                     |                                                  |             |       |             |       |       |       |       |       |        
|Cash flows from financing activities:                            |                                                                                                         |                                                                                                     |                                                  |             |       |             |       |       |       |       |       |        
|                                                                 | Change in borrowings under DIP Facility                                                                 |                                                                                                     |                                                  |            |       |             |       |      |       |       |       | (49.9   | )       
|                                                                 | Changes in bank borrowings and credit facility                                                          |                                                                                                     |                                                  | 2.8         |       |             |       | (11.9 | )     |       |       | (9.8    | )       
|                                                                 | Repayment of notes payable issued in connection
    with purchases of businesses                        |                                                                                                     |                                                  | (13.1       | )     |             |       |      |       |       |       | (2.0    | )       
|                                                                 | Repayment of long-term debt                                                                             |                                                                                                     |                                                  | (8.2        | )     |             |       | (74.0 | )     |       |       |        |         
|                                                                 | Net proceeds from issuance of common stock                                                              |                                                                                                     |                                                  | 117.0       |       |             |       |      |       |       |       |        |         
|                                                                 | Proceeds from (redemption of) New Senior Notes,
    net of                                              |                                                                                                     |                                                  |             |       |             |       |       |       |       |       |         |         
|                                                                 |                                                                                                         | discount and related fees                                                                           |                                                  |             | (96.7 | )           |       |       |      |       |       |         | 242.8    |      
|                                                                 | Proceeds from (redemption of) New Term Loan, net
    of related fees                                    |                                                                                                     |                                                  | (16.0       | )     |             |       | (1.1  | )     |       |       | 436.1   |         
|                                                                 | Prepetition Lenders Payment amount                                                                     |                                                                                                     |                                                  |            |       |             |       |      |       |       |       | (477.3  | )       
|                                                                 | Payment to holders of Old Senior Notes                                                                  |                                                                                                     |                                                  |            |       |             |       |      |       |       |       | (13.0   | )       
|                                                                 |                                                                                                         |                                                                                                     |                                                  |             |       |             |       |       |       |       |       |        
|                                                                 |                                                                                                         |                                                                                                     | Cash provided by (used for) financing activities |             |       | (14.2       | )     |       |       | (87.0 | )     |         |          | 126.9 |  
|                                                                 |                                                                                                         |                                                                                                     |                                                  |             |       |             |       |       |       |       |       |        
|Effect of exchange rate changes on cash and cash
    equivalents |                                                                                                         |                                                                                                     | (0.1                                             | )           |       |             | 2.7   |       |       |       | 4.1   |        
|                                                                 |                                                                                                         |                                                                                                     |                                                  |             |       |             |       |       |       |       |       |        
|                                                                 | Increase (decrease) in cash and cash equivalents                                                        |                                                                                                     |                                                  | (20.7       | )     |             |       | (70.1 | )     |       |       | 113.0   |         
|Cash and cash equivalents at beginning of period                 |                                                                                                         |                                                                                                     | 48.5                                             |             |       |             | 179.1 |       |       |       | 66.1  |        
|                                                                 |                                                                                                         |                                                                                                     |                                                  |             |       |             |       |       |       |       |       |        
|Cash and cash equivalents at end of period                       |                                                                                                         | $                                                                                                   | 27.8                                             |             |       | $           | 109.0 |       |       | $     | 179.1 |        
|                                                                 |                                                                                                         |                                                                                                     |                                                  |             |       |             |       |       |       |       |       |        
|Supplemental data:                                               |                                                                                                         |                                                                                                     |                                                  |             |       |             |       |       |       |       |       |        
|                                                                 | Cash paid for interest                                                                                  |                                                                                                     |                                                  | 34.0        |       |             |       | 10.3  |       |       |       | 5.8     |         
|                                                                 | Cash paid for income taxes                                                                              |                                                                                                     |                                                  | 15.7        |       |             |       | 15.5  |       |       |       | 2.9     |         

See accompanying notes to consolidated financial
statements.

5



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


Nine Months Ended October 31, 2004, Five
Months Ended October 31, 2003 and


Four Months Ended May 31, 2003


(Unaudited)




|        |                                                                              
|------- | -----------------------------------------------------------------------------
|Note 1. | Description of Business, Chapter 11
    Filings and Emergence from Chapter 11

These financial statements should be read in
conjunction with the financial statements included in the
Companys Annual Report on Form 10-K for the fiscal
year ended January 31, 2004 as filed with the Securities
and Exchange Commission (SEC) on April 12, 2004.



| |                        
| | -----------------------
| | Description of Business

Unless otherwise indicated, references to
Company mean Hayes Lemmerz International, Inc. and
its subsidiaries and references to fiscal year means the
Companys year commencing on February 1 of that year and
ending on January 31 of the following year (i.e., fiscal
2004 refers to the period beginning February 1, 2004
and ending January 31, 2005, fiscal 2003 refers
to the period beginning February 1, 2003 and ending
January 31, 2004).

The Company is a leading supplier of wheels,
wheel-end attachments, aluminum structural components and
automotive brake components. The Company is the worlds
largest manufacturer of automotive wheels. In addition, the
Company also designs and manufactures wheels and brake
components for commercial highway vehicles, and powertrain
components and aluminum non-structural components for the
automotive, commercial highway, heating and general equipment
industries.



| |                   
| | ------------------
| | Chapter 11 Filings

On December 5, 2001, Hayes Lemmerz
International, Inc. (Old Hayes), 30 of its
wholly-owned domestic subsidiaries and one wholly-owned Mexican
subsidiary (collectively, the Debtors) filed
voluntary petitions for reorganization relief (the
Chapter 11 Filings or the Filings)
under Chapter 11 of the Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware (the
Bankruptcy Court).

On December 16, 2002, certain of the Debtors
filed a proposed joint plan of reorganization with the
Bankruptcy Court. On April 9, 2003, the Debtors filed a
modified first amended joint plan of reorganization (the
Plan of Reorganization) which received the requisite
support from creditors authorized to vote thereon. The following
five Debtors were not proponents of the Plan of Reorganization
and are not subject to the terms thereof: HLI Netherlands
Holdings, Inc., CMI Quaker Alloy, Inc., Hayes Lemmerz Funding
Company, LLC, Hayes Lemmerz Funding Corporation, and Hayes
Lemmerz International Import, Inc. (collectively, the
Non-reorganizing Debtors).

The Plan of Reorganization provided for the
cancellation of the existing common stock of the Company and the
issuance of cash, new common stock in the reorganized Company
and other property to certain creditors of the Company in
respect of certain classes of claims. The Plan of Reorganization
was confirmed by an order of the Bankruptcy Court on
May 12, 2003, which order has become final and
non-appealable.



| |                              
| | -----------------------------
| | Emergence from
    Chapter 11

On June 3, 2003 (the Effective
Date), Hayes Lemmerz International, Inc. and each of the
27 Debtors proposing the Plan of Reorganization emerged from
Chapter 11 proceedings pursuant to the Plan of
Reorganization, which was confirmed by an order of the
Bankruptcy Court on May 12, 2003, which order has become
final and non-appealable. The Non-reorganizing Debtors were not
proponents of the Plan of Reorganization and are not subject to
the terms thereof. On June 3, 2003, the Bankruptcy Court
entered an order dismissing the Chapter 11 Filings of the
Non-reorganizing Debtors.

6



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Pursuant to the Plan of Reorganization, the
Company caused the formation of (i) a new holding company,
HLI Holding Company, Inc., a Delaware corporation
(HoldCo), (ii) HLI Parent Company, Inc., a
Delaware corporation and a wholly owned subsidiary of HoldCo
(ParentCo), and (iii) HLI Operating Company,
Inc, a Delaware corporation and a wholly owned subsidiary of
ParentCo (HLI). On the Effective Date,
(i) HoldCo was renamed Hayes Lemmerz International, Inc.
(New Hayes), (ii) New Hayes contributed to
ParentCo 30,0000,000 shares of its common stock, par value
$.01 per share (the New Common Stock), and
957,447 series A warrants and 957,447 series B
warrants to acquire New Common Stock of New Hayes (the
Series A Warrants and Series B
Warrants, respectively), (iii) ParentCo in turn
contributed such shares of New Common Stock and Series A
Warrants and Series B Warrants to HLI and
(iv) pursuant to an Agreement and Plan of Merger, dated as
of June 3, 2003 (the Merger Agreement), between
the Company and HLI, the Company was merged with and into HLI
(the Merger), with HLI continuing as the surviving
corporation.

Pursuant to the Plan of Reorganization and as a
result of the Merger, all of the issued and outstanding shares
of common stock, par value $.01 per share, of the Company
(the Old Common Stock), and any other outstanding
equity securities of the Company, including all options and
warrants, were cancelled. The holders of the existing voting
common stock of the Company immediately before confirmation did
not receive any voting shares of the emerging entity or any
other consideration under the Plan of Reorganization as a result
of their ownership interests of the Predecessor. This
represented a complete change of control in the ownership of the
Company. Promptly following the Merger, HLI distributed to
certain holders of allowed claims, under the terms of the Plan
of Reorganization, an amount in cash, the New Common Stock, the
Series A Warrants, the Series B Warrants and the
Preferred Stock (as defined below). Prior to the Merger, the Old
Common Stock was registered pursuant to Section 12(g) of
the Securities Exchange Act of 1934, as amended (the
Exchange Act). In reliance on Rule 12g-3(a) of
the Exchange Act, by virtue of the status of New Hayes as a
successor issuer to the Company, the New Common Stock is deemed
registered under Section 12(g) of the Exchange Act. The
Company filed a Form 15 with the SEC to terminate the
registration of the Old Common Stock under the Exchange Act.

Pursuant to the terms of the Plan of
Reorganization, HLI issued 100,000 shares of Preferred
Stock, par value $1.00, of HLI (the Preferred Stock)
to the holders of certain allowed claims. In accordance with the
terms of the Preferred Stock, the shares of Preferred Stock are,
at the holders option, exchangeable into a number of fully
paid and nonassessable shares of New Common Stock equal to
(i) the aggregate liquidation preference of the shares of
Preferred Stock so exchanged ($100 per share plus all
accrued and unpaid dividends thereon (whether or not declared)
to the exchange date) divided by (ii) 125% of the
Emergence Share Price. As determined pursuant to the
terms of the Plan of Reorganization, the Emergence Share Price
is $18.50.

In connection with the Debtors emergence
from Chapter 11, on the Effective Date, HLI entered into a
$550.0 million senior secured credit facility, as amended
by Amendment No. 1 and Waiver to Credit Agreement, dated
October 16, 2003 and Amendment No. 2 and Waiver to the
Credit Agreement dated February 6, 2004, by Amendment
No. 3 dated May 6, 2004, by Waiver to the Credit
Agreement dated June 1, 2004 and by Amendment No. 4,
Waiver and Consent to Credit Agreement dated November 10,
2004 (as amended, the New Credit Facility). The New
Credit Facility consists of a $450.0 million six-year
amortizing term loan (the New Term Loan) and a
five-year $100.0 million revolving credit facility (the
Revolving Credit Facility). In addition, HLI issued
on the Effective Date an aggregate of $250.0 million
principal amount of 10 1/2% senior notes due 2010 (the
New Senior Notes). The proceeds from the initial
$450.0 million of borrowings under the New Credit Facility
and the net proceeds from the New Senior Notes were used to make
payments required under the Plan of Reorganization, including
the repayment of the Companys DIP Facility and a payment
of $477.3 million to certain prepetition lenders, to pay
related transaction costs and to refinance certain debt.

7



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                     
| | --------------------
| | Reorganization Items

Reorganization items as reported in the
consolidated statements of operations included herein are
comprised of income, expense and loss items that were realized
or incurred by the Debtors as a direct result of the
Companys decision to reorganize under Chapter 11.
During the four months ended May 31, 2003 reorganization
items were as follows (dollars in millions):

|                                                  |       |             |      |      | 
|------------------------------------------------- | ----- | ----------- | ---- | ---- | 
|                                                  |       | Predecessor
|                                                  |       |            
|                                                  |       | Four Months
|                                                  |       | Ended      
|                                                  |       | May 31,    
|                                                  |       | 2003       
|                                                  |       |            
|Critical employee retention plan provision        |       | $           | 11.7 |     
|Professional fees directly related to the filings |       |             | 30.8 |     
|Creditors Trust obligation                       |       |             | 2.0  |     
|Other                                             |       |             | 0.5  |     
|                                                  |       |             |      |     
|                                                  | Total |             | $    | 45.0 | 
|                                                  |       |             |      |     

On May 30, 2002, the Bankruptcy Court
entered an order approving, among other things, the critical
employee retention plan (the CERP) filed with the
Bankruptcy Court in February 2002 which was designed to
compensate certain critical employees in order to assure their
retention and availability during the Companys
restructuring. The plan has two components which
(i) rewarded critical employees who remained with the
Company (and certain affiliates of the Company who are not
directly involved in the restructuring) during and through the
completion of the restructuring (the Retention
Bonus) and (ii) provided additional incentives to a
more limited group of the most senior critical employees if the
enterprise value upon completing the restructuring exceeded an
established baseline (the Restructuring Performance
Bonus).

Thirty-five percent, or approximately
$3.0 million, of the Retention Bonus was paid on
October 1, 2002. The remaining portion of the Retention
Bonus of approximately $5.9 million was paid on
June 13, 2003. Further, the Restructuring Performance Bonus
provided under the CERP was paid after the consummation of the
restructuring as discussed below.

Based on the Companys compromise total
enterprise value of $1,250.0 million as confirmed by the
Bankruptcy Court, the aggregate amount of the Restructuring
Performance Bonus is $12.1 million. Of the aggregate
$12.1 million, approximately $6.0 million was paid in
cash on July 1, 2003, and approximately $2.0 million
was paid on August 28, 2003 as determined by the
Companys Board of Directors. The remaining portion of the
Restructuring Performance Bonus was paid in 215,935 shares
of restricted units of New Hayes on July 28, 2003. Pursuant
to provisions contained in the CERP, the restricted units will
vest as follows, subject to the participants continued
employment:



| |   |                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------
| |  | one half of the restricted units vested on
    June 3, 2004, the first anniversary of the Effective Date,
    and;
|
| |  | one half of the restricted units will vest on the
    second anniversary of the Effective Date.                   

Cash payments with respect to other
reorganization items consisted primarily of professional fees
and cure payments and were approximately $20.3 million and
$21.2 million during the five months ended October 31,
2003 and the four months ended May 31, 2003, respectively.



|        |                                                       
|------- | ------------------------------------------------------
|Note 2. | Basis of Presentation and Stock-Based
    Compensation



| |                      
| | ---------------------
| | Basis of Presentation

As discussed in Note 1, the Company filed a
voluntary petition for reorganization relief under
Chapter 11 of the Bankruptcy Code in December 2001 and
emerged from Chapter 11 on June 3, 2003. Upon emergence

8



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

from Chapter 11, the Company implemented
fresh start accounting principles (see Note 3, Fresh
Start Accounting) pursuant to American Institute of
Certified Public Accountants (AICPA) Statement of
Position 90-7, Financial Reporting by Entities in
Reorganization under the Bankruptcy Code
(SOP 90-7). SOP 90-7 requires the
segregation of liabilities subject to compromise by the
Bankruptcy Court as of the bankruptcy filing date, and
identification of all transactions and events that are directly
associated with the reorganization of the Predecessor. As a
result of the application of fresh start accounting on
May 31, 2003, and in accordance with SOP 90-7, the
post-emergence financial results of the Company for the period
ending October 31, 2004 and the period ended
October 31, 2003 are presented as the Successor
and the pre-emergence financial results of the Company for the
period ending May 31, 2003 are presented as the
Predecessor. Comparative financial statements do not
straddle the emergence date because in effect the Successor
Company represents a new entity. Per share and share information
for the Predecessor Company for all periods presented on the
consolidated statement of operations have been omitted as such
information is deemed to be not meaningful.

The Companys unaudited interim consolidated
financial statements do not include all of the disclosures
required by accounting principles generally accepted in the
United States of America for annual financial statements. In the
opinion of management, all adjustments considered necessary for
a fair presentation of the interim period results have been
included. Operating results for the interim periods presented in
fiscal 2004 are not necessarily indicative of the results that
may be expected for the full fiscal year ending January 31,
2005.

Certain prior period amounts have been
reclassified to conform to the current year presentation.



| |                         
| | ------------------------
| | Stock-Based Compensation

The Company accounts for its stock-based
compensation in accordance with the provisions of Accounting
Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and
related interpretations. As such, compensation expense is
recorded on the date of grant only if the current market price
of the underlying stock exceeds the exercise price. The Company
follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation, and discloses pro forma net
income (loss) and pro forma earnings (loss) per share as if
employee stock option grants were treated as compensation
expense using the fair-value-based method defined in
SFAS No. 123.

In December 2002, the Financial Accounting
Standards Board (FASB) issued
SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, an amendment
of FASB Statement No. 123. This Statement amends
SFAS No. 123 to provide alternative methods of
transition for a voluntary change to the fair value method of
accounting for stock-based employee compensation. In addition,
SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements.

9



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

If compensation expense had been determined based
on the fair value at the grant date consistent with the method
prescribed in SFAS No. 123, the Companys net
loss and loss per share amounts would have been adjusted to the
pro forma amounts below (Dollars in millions):

|                                  |             |              |   |             |   |             |   |       |   |  |   |       |  
|--------------------------------- | ----------- | ------------ | - | ----------- | - | ----------- | - | ----- | - |  | - | ----- | -
|                                  |             | Three Months |   | Nine Months |   | Five Months
|                                  |             | Ended        |   | Ended       |   | Ended      
|                                  |             | October 31,  |   | October 31, |   | October 31,
|                                  |             | 2004         |   | 2004        |   | 2003       
|                                  |             |              |   |             |   |            
|Net loss:                         |             |              |   |             |   |             |   |       |   |  |   |      
|                                  | As reported |              | $ | (9.5        | ) |             | $ | (22.2 | ) |  | $ | (19.2 | )
|                                  | Pro forma   |              |   | (10.5       | ) |             |   | (26.5 | ) |  |   | (21.2 | )
|Basic and diluted loss per share: |             |              |   |             |   |             |   |       |   |  |   |      
|                                  | As reported |              | $ | (0.25       | ) |             | $ | (0.59 | ) |  | $ | (0.64 | )
|                                  | Pro forma   |              |   | (0.28       | ) |             |   | (0.71 | ) |  |   | (0.71 | )

As of the Effective Date, all options under the
Predecessor Companys stock option plans were cancelled and
those plans were terminated. Accordingly, no pro forma net
income (loss) or pro forma earnings (loss) per share have been
presented for any of the stock options granted under those
terminated plans.

The Company recognized $4.9 million of
compensation expense related to restricted stock units during
the nine months ended October 31, 2004.



|        |                       
|------- | ----------------------
|Note 3. | Fresh Start Accounting

Pursuant to SOP 90-7, the accounting for the
effects of the Companys reorganization occurred once the
Plan of Reorganization was confirmed by the Bankruptcy Court and
there were no remaining contingencies material to completing the
implementation of the plan. The fresh start accounting
principles pursuant to SOP 90-7 provide, among other
things, for the Company to determine the value to be assigned to
the equity of the reorganized Company as of a date selected for
financial reporting purposes. As discussed in Note 1, the
Debtors emerged from Chapter 11 on June 3, 2003, and
the Company has selected May 31, 2003 for financial
reporting purposes as the date to implement fresh start
accounting principles.

Pursuant to SOP 90-7, the results of
operations of the Company ended May 31, 2003 include
(i) a pre-emergence extraordinary gain of
$1,076.7 million resulting from the discharge of debt and
other liabilities under the Plan of Reorganization;
(ii) pre-emergence charges to earnings of
$25.9 million recorded as Reorganization items related to
certain costs and expenses resulting from the Plan of
Reorganization becoming effective; and (iii) a
pre-emergence pre-tax gain of $63.1 million
($17.1 million, net of tax) resulting from the aggregate
remaining changes to the net carrying value of the
Companys pre-emergence assets and liabilities to reflect
the fair values under fresh start accounting.

The Companys compromise total enterprise
value is $1,250.0 million, with a total value for common
equity of $544.4 million, excluding the estimated fair
value of the Preferred Stock and the Series A Warrants and
Series B Warrants issued on the Effective Date. The
Preferred Stock is classified as a liability in the consolidated
balance sheet and referred to as redeemable preferred stock of
subsidiary. Under fresh start accounting, the compromise total
enterprise value has been allocated to the Companys assets
based on their respective fair values in conformity with the
purchase method of accounting for business combinations in
accordance with SFAS No. 141, Business
Combinations; any portion not attributed to specific
tangible or identified intangible assets has been recorded as an
indefinite-lived intangible asset referred to as
reorganization value in excess of amounts allocable to
identifiable assets and reported as goodwill. The
valuations required to determine the fair value of certain of
the Companys assets as presented below represent the
results of the valuation procedures performed by the
Companys valuation specialist at May 31, 2003.

10



---



##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------
| | Valuation of Compromise Total Enterprise
    Value and Reorganization Value in Excess of Amounts Allocable to
    Identifiable Assets (Goodwill)

The compromise total enterprise value
(reorganization value) represents the amount of resources
available, or that become available, for the satisfaction of
post-petition liabilities and allowed claims, as negotiated
between the Debtors and the creditors (the interested
parties). This value along with other terms of the Plan of
Reorganization were determined only after extensive arms-length
negotiations amongst the interested parties. Each interested
party developed its view of what the value should be based
primarily upon expected future cash flows of the business after
emergence from Chapter 11, discounted at rates reflecting
perceived business and financial risks. This value is viewed as
the fair value of the entity before considering liabilities and
approximates the amount a willing buyer would pay for the assets
of the Company immediately after restructuring.

The amount of reorganization value in excess of
amounts allocated to identifiable assets (goodwill) is a
function of compromise total enterprise value. While the Company
believes that the compromise total enterprise value approximates
fair value, differences between the methodology used in testing
for goodwill impairment and the negotiated value could adversely
impact the Companys future results of operations.

The consolidated balance sheet presented below
gives effect to the Plan of Reorganization and the application
of fresh start accounting at May 31, 2003

11



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

REORGANIZED CONDENSED CONSOLIDATED BALANCE
SHEET

May 31, 2003


(Dollars in millions)


|                                                   |                                          |                                      |                                                          |               |          |              |          |             |         |           |   |        |      |   |        |        |        |       |       |       |         |         | 
|-------------------------------------------------- | ---------------------------------------- | ------------------------------------ | -------------------------------------------------------- | ------------- | -------- | ------------ | -------- | ----------- | ------- | --------- | - | ------ | ---- | - | ------ | ------ | ------ | ----- | ----- | ----- | ------- | ------- | 
|                                                   |                                          | Predecessor                          |                                                          | Discharge of  |          | Cancellation |          |             |         | Successor
|                                                   |                                          | May 31,                              |                                                          | Debt and Exit |          | of Old       |          | Fresh Start |         | May 31,  
|                                                   |                                          | 2003                                 |                                                          | Financing     |          | Equity       |          | Adjustments |         | 2003     
|                                                   |                                          |                                      |                                                          |               |          |              |          |             |         |          
|                                                   |                                          |                                     
|                                                   |                                          | (Unaudited)                         
|ASSETS                                            
|Current assets:                                    |                                          |                                      |                                                          |               |          |              |          |             |         |           |   |        |      |   |        |        |        |       |       |      
|                                                   | Cash and cash equivalents                |                                      | $                                                        | 89.3          |          |              | $        | 89.8        | (a)     |           | $ |       |      |   | $      |       |        |       | $     | 179.1 |        
|                                                   | Receivables                              |                                      |                                                          | 299.9         |          |              |          |            |         |           |   |       |      |   |        |       |        |       |       | 299.9 |        
|                                                   | Inventories                              |                                      |                                                          | 186.0         |          |              |          |            |         |           |   |       |      |   |        | 5.2    | (j)    |       |       | 191.2 |        
|                                                   | Prepaid expenses and other               |                                      |                                                          | 27.0          |          |              |          | 1.3         | (b)     |           |   |       |      |   |        | (7.8   | )(k)   |       |       | 20.5  |        
|                                                   |                                          |                                      |                                                          |               |          |              |          |             |         |           |   |        |      |   |        |        |        |       |       |      
|                                                   |                                          | Total current assets                 |                                                          |               | 602.2    |              |          |             | 91.1    |           |   |        |     |   |        |        | (2.6   | )     |       |       | 690.7   |        
|Property, plant and equipment, net                 |                                          |                                      | 959.7                                                    |               |          |              | 54.0     | (c)         |         |           |  |        |      |   | (95.3  | )(l)   |        |       | 918.4 |      
|Old goodwill                                       |                                          |                                      | 198.3                                                    |               |          |              |         |             |         |           |  |        |      |   | (198.3 | )(m)   |        |       |      |      
|New goodwill                                       |                                          |                                      |                                                         |               |          |              |         |             |         |           |  |        |      |   | 390.9  | (n)    |        |       | 390.9 |      
|Intangible assets                                  |                                          |                                      | 103.8                                                    |               |          |              |         |             |         |           |  |        |      |   | 121.9  | (o)    |        |       | 225.7 |      
|Other assets                                       |                                          |                                      | 60.9                                                     |               |          |              | 19.9     | (d)         |         |           |  |        |      |   | 0.4    | (k)(l) |        |       | 81.2  |      
|                                                   |                                          |                                      |                                                          |               |          |              |          |             |         |           |   |        |      |   |        |        |        |       |       |      
|                                                   |                                          | Total assets                         |                                                          | $             | 1,924.9  |              |          | $           | 165.0   |           |   | $      |     |   |        | $      | 217.0  |       |       | $     | 2,306.9 |        
|                                                   |                                          |                                      |                                                          |               |          |              |          |             |         |           |   |        |      |   |        |        |        |       |       |      
|                                                  
|LIABILITIES AND STOCKHOLDERS EQUITY
    (DEFICIT)
|Current liabilities:                               |                                          |                                      |                                                          |               |          |              |          |             |         |           |   |        |      |   |        |        |        |       |       |      
|DIP facility                                       |                                          | $                                    | 59.7                                                     |               |          | $            | (59.7    | )(e)        |         | $         |  |        |      | $ |       |        |        | $     |      |      
|                                                   | Bank borrowings and other notes          |                                      |                                                          | 13.0          |          |              |          |            |         |           |   |       |      |   |        |       |        |       |       | 13.0  |        
|                                                   | Current portion of long-term debt        |                                      |                                                          | 39.6          |          |              |          | 4.5         | (f)     |           |   |       |      |   |        |       |        |       |       | 44.1  |        
|                                                   | Accounts payable and accrued liabilities |                                      |                                                          | 303.8         |          |              |          | 33.6        | (g)     |           |   |       |      |   |        | 9.1    | (k)(p) |       |       | 346.5 |        
|                                                   |                                          |                                      |                                                          |               |          |              |          |             |         |           |   |        |      |   |        |        |        |       |       |      
|                                                   |                                          | Total current liabilities            |                                                          |               | 416.1    |              |          |             | (21.6   | )         |   |        |     |   |        |        | 9.1    |       |       |       | 403.6   |        
|Long-term debt, net of current portion             |                                          |                                      | 62.0                                                     |               |          |              | 31.0     | (f)         |         |           |  |        |      |   |       |        |        |       | 93.0  |      
|New Term Loan                                      |                                          |                                      |                                                         |               |          |              | 445.5    | (f)         |         |           |  |        |      |   |       |        |        |       | 445.5 |      
|New Senior Notes, net of discount                  |                                          |                                      |                                                         |               |          |              | 248.5    | (f)         |         |           |  |        |      |   |       |        |        |       | 248.5 |      
|Pension and other long-term liabilities            |                                          |                                      | 343.5                                                    |               |          |              | 0.5      | (g)         |         |           |  |        |      |   | 195.5  | (k)(p) |        |       | 539.5 |      
|Series A Warrants and Series B Warrants            |                                          |                                      |                                                         |               |          |              | 9.3      | (f)         |         |           |  |        |      |   |       |        |        |       | 9.3   |      
|Redeemable preferred stock of subsidiary           |                                          |                                      |                                                         |               |          |              | 10.0     | (f)         |         |           |  |        |      |   |       |        |        |       | 10.0  |      
|Minority interest                                  |                                          |                                      | 17.8                                                     |               |          |              |         |             |         |           |  |        |      |   | (4.7   | )(q)   |        |       | 13.1  |      
|Liabilities subject to compromise                  |                                          |                                      | 2,153.4                                                  |               |          |              | (2,153.4 | )(h)        |         |           |  |        |      |   |       |        |        |       |      |      
|Commitments and contingencies                      |                                          |                                      |                                                          |               |          |              |          |             |         |           |   |        |      |   |        |        |        |       |       |      
|Stockholders equity (deficit):                    |                                          |                                      |                                                          |               |          |              |          |             |         |           |   |        |      |   |        |        |        |       |       |      
|                                                   | New Common Stock                         |                                      |                                                          |              |          |              |          | 0.3         | (f)     |           |   |       |      |   |        |       |        |       |       | 0.3   |        
|                                                   | New additional paid-in capital           |                                      |                                                          |              |          |              |          | 544.1       | (f)     |           |   |       |      |   |        |       |        |       |       | 544.1 |        
|                                                   | Old Common Stock                         |                                      |                                                          | 0.3           |          |              |          |            |         |           |   | (0.3   | )(i) |   |        |       |        |       |       |      |        
|                                                   | Old additional paid in capital           |                                      |                                                          | 235.1         |          |              |          |            |         |           |   | (235.1 | )(i) |   |        |       |        |       |       |      |        
|                                                   | Old common stock in treasury at cost     |                                      |                                                          | (25.7         | )        |              |          |            |         |           |   | 25.7   | (i)  |   |        |       |        |       |       |      |        
|                                                   | Accumulated deficit                      |                                      |                                                          | (1,201.8      | )        |              |          | 1,050.8     | (h)     |           |   | 209.7  | (i)  |   |        | (58.7  | )(m)   |       |       |      |        
|                                                   | Accumulated other comprehensive loss     |                                      |                                                          | (75.8         | )        |              |          |            |         |           |   |       |      |   |        | 75.8   | (m)    |       |       |      |        
|                                                   |                                          |                                      |                                                          |               |          |              |          |             |         |           |   |        |      |   |        |        |        |       |       |      
|                                                   |                                          | Total stockholders equity (deficit) |                                                          |               | (1,067.9 | )            |          |             | 1,595.2 |           |   |        |     |   |        |        | 17.1   |       |       |       | 544.4   |        
|                                                   |                                          |                                      |                                                          |               |          |              |          |             |         |           |   |        |      |   |        |        |        |       |       |      
|                                                   |                                          |                                      | Total liabilities and stockholders equity
    (deficit) |               | $        | 1,924.9      |          |             | $       | 165.0     |   |        | $    |  |        |        | $      | 217.0 |       |       | $       | 2,306.9 | 
|                                                   |                                          |                                      |                                                          |               |          |              |          |             |         |           |   |        |      |   |        |        |        |       |       |      

12



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Adjustments reflected in the reorganized
condensed consolidated balance sheet are as follows:



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Represents adjustment to reflect a portion of the
    proceeds from the New Senior Notes and the New Credit Facility,
    net of a $13.0 million cash payment to former holders of
    the Companys 11 7/8% senior notes due 2006 (the
    Old Senior Notes).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(b) |  | Represents escrowed property taxes and insurance
    required in connection with exit financing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(c) |  | Represents capitalization of $54.0 million
    of assets resulting from repayment or refinancing of certain
    synthetic leases.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(d) |  | Represents recognition of debt issuance costs
    recorded as other assets consisting of fees and expenses of the
    New Credit Facility of $13.9 million, and fees and expenses
    of the New Senior Notes of $6.0 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(e) |  | Represents repayment of the DIP Facility on the
    Effective Date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(f) |  | Represents new capitalization structure after
    giving effect to the Plan of Reorganization. The Company
    recorded the Series A Warrants and Series B Warrants
    at fair value. The Company also determined that its
    Series A Warrants and Series B Warrants met the
    criteria for classification as liabilities. As such they will be
    measured at fair value at each reporting period with changes in
    fair value recognized in interest expense. The Company also has
    recorded the redeemable preferred stock at fair value which
    equals the stated liquidation preference. The fair value of the
    redeemable preferred stock was $10.0 million and the
    Series A Warrants and Series B Warrants fair value was
    approximately $9.3 million at emergence. The Series A
    Warrants and Series B Warrants were valued utilizing the
    Black-Scholes model that requires the estimation of several
    variables in the formula. The redeemable preferred stock of
    subsidiary was valued using a market/ capitalization
    approach that capitalizes the dividend stream of similar
    instruments issued by a comparative group using capitalization
    rates that reflect prevailing market yields. The use of this
    approach provides a range of possible fair values. This range
    was evaluated by the Company before it selected a capitalization
    rate of 8.0% which approximated the mean rate of the comparative
    group. The use of different valuation techniques could have
    resulted in different conclusions of the fair value of these
    instruments.
|   
|(g) |  | Represents accrual or settlement of short- and
    long-term liabilities upon emergence under the Plan of
    Reorganization as follows (Dollars in millions):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|                                                                                                           |                                                                                                          |   |       |      | 
|---------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | - | ----- | ---- | 
|Accrual of contingent professional fees                                                                    |                                                                                                          | $ | 8.5   |     
|Accrual of the portion of the Restructuring
    Performance Bonus component of the CERP to be paid in cash |                                                                                                          |   | 9.0   |     
|Accrual of obligation to fund the Creditors
    Trust                                                     |                                                                                                          |   | 1.5   |     
|Payment of accrued professional fees                                                                       |                                                                                                          |   | (13.1 | )   
|Payment of accrued interest on the DIP Facility                                                            |                                                                                                          |   | (0.4  | )   
|Deferral of cure payments for assumed contracts
    and other priority and administrative claims           |                                                                                                          |   | 19.2  |     
|Accrual of state tax liability for restructuring
    transactions upon emergence                           |                                                                                                          |   | 6.5   |     
|Other accrued liabilities incurred upon emergence                                                          |                                                                                                          |   | 2.9   |     
|                                                                                                           |                                                                                                          |   |       |     
|                                                                                                           | Net adjustment to accounts payable, accrued
    liabilities, and pension and other long-term liabilities |   | $     | 34.1 | 
|                                                                                                           |                                                                                                          |   |       |     

13



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |  |                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|(h) |  | Represents the elimination of pre-petition
    liabilities discharged under the Plan of Reorganization as
    follows (dollars in millions):

|                                                                                                                                                                                                    |                                                                                                                                                                                                                                                   |                                       |         |        |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------- | ------- | ------ | ------- | 
|Liabilities subject to compromise                                                                                                                                                                   |                                                                                                                                                                                                                                                   | $                                     | 2,153.4 |       
|Form of settlement:                                                                                                                                                                                 |                                                                                                                                                                                                                                                   |                                       |         |       
|                                                                                                                                                                                                    | Issuance of New Common Stock of HoldCo                                                                                                                                                                                                            |                                       |         | (544.4 | )      
|                                                                                                                                                                                                    | Issuance of New Preferred Stock of HLI                                                                                                                                                                                                            |                                       |         | (10.0  | )      
|                                                                                                                                                                                                    | Issuance of Series A Warrants and
    Series B Warrants                                                                                                                                                                                           |                                       |         | (9.3   | )      
|                                                                                                                                                                                                    | Repayment of remaining Old Senior Note proceeds                                                                                                                                                                                                   |                                       |         | (13.0  | )      
|                                                                                                                                                                                                    | Prepetition Lenders Payment Amount                                                                                                                                                                                                               |                                       |         | (477.3 | )      
|                                                                                                                                                                                                    | Amounts reclassified to accounts payable and
    accrued liabilities for certain estimated cure payments with
    respect to assumption of prepetition executory contracts and
    unexpired leases, and other priority and administrative claims |                                       |         | (22.7  | )      
|                                                                                                                                                                                                    |                                                                                                                                                                                                                                                   |                                       |         |       
|                                                                                                                                                                                                    |                                                                                                                                                                                                                                                   | Gain on discharge of debt             |         |        | 1,076.7 | 
|Accrual of estimated contingent professional
    fees, cash portion of the Restructuring Performance Bonus,
    Creditors Trust obligation and tax expense related to
    restructuring activities |                                                                                                                                                                                                                                                   |                                       | (25.9   | )     
|                                                                                                                                                                                                    |                                                                                                                                                                                                                                                   |                                       |         |       
|                                                                                                                                                                                                    |                                                                                                                                                                                                                                                   | Net adjustment to accumulated deficit |         | $      | 1,050.8 | 
|                                                                                                                                                                                                    |                                                                                                                                                                                                                                                   |                                       |         |       



|    |  |                                                                                                                                                                                                                                                                                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i) |  | Represents cancellation of Old Common Stock under
    fresh start accounting.                                                                                                                                                                                                                                                                     
|   
|(j) |  | Represents adjustment to reflect the increase in
    the fair value of inventory under fresh start accounting.
    Work-in-process and finished goods were valued at the expected
    selling price less costs to complete, selling and disposal cost
    and a normal profit. Raw materials and supplies were valued
    using the cost approach.
|   
|(k) |  | Represents the adjustment of deferred tax assets
    and liabilities resulting from fair value adjustments under
    fresh start accounting as follows (dollars in millions):                                                                                                                                                                     

|                                         |                |   |       |       |  
|---------------------------------------- | -------------- | - | ----- | ----- | -
|Prepaid expenses and other               |                | $ | (7.8  | )    
|Other assets                             |                |   | 4.5   |      
|Accounts payable and accrued liabilities |                |   | (2.4  | )    
|Pension and other long-term liabilities  |                |   | (46.3 | )    
|                                         |                |   |       |      
|                                         | Net adjustment |   | $     | (52.0 | )
|                                         |                |   |       |      



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(l) |  | Primarily represents net adjustments to reflect
    the decrease of property, plant, equipment and tooling to fair
    value under fresh start accounting based on results of valuation
    procedures performed by the Companys valuation specialist.
    The valuation methodologies employed included the use of the
    market value and replacement cost approach for personal property
    and the use of the cost, income and sales comparison approaches
    for real property.
|   
|(m) |  | Represents elimination of pre-emergence goodwill,
    equity accounts and retained earnings under fresh start
    accounting.                                                                                                                                                                                                                                                                                                                                                           
|   
|(n) |  | Represents new goodwill resulting from the excess
    of reorganization value over the amounts allocable to the fair
    value of identifiable assets and liabilities.                                                                                                                                                                                                                                                                                                                  

14



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The allocation of compromise enterprise value and
goodwill was as follows (dollars in millions):

|                     |                                               |                                   |   |         |         | 
|-------------------- | --------------------------------------------- | --------------------------------- | - | ------- | ------- | 
|Assets:              |                                               |                                   |   |        
|                     | Current assets                                |                                   | $ | 690.7   |        
|                     | Property, plant and equipment                 |                                   |   | 918.4   |        
|                     | Goodwill                                      |                                   |   | 390.9   |        
|                     | Intangible assets                             |                                   |   | 225.7   |        
|                     | Other assets                                  |                                   |   | 81.2    |        
|Liabilities:         |                                               |                                   |   |        
|                     | Current liabilities                           |                                   |   | 403.6   |        
|                     | Other long-term liabilities                   |                                   |   | 1,358.9 |        
|                     |                                               |                                   |   |        
|                     |                                               | New common equity                 |   |         | 544.4   | 
|Assumed obligations: |                                               |                                   |   |        
|                     | New Term Loan, including current portion      |                                   |   | 450.0   |        
|                     | New Senior Notes, net of discount             |                                   |   | 248.5   |        
|                     | Series A Warrants and Series B Warrants       |                                   |   | 9.3     |        
|                     | Redeemable preferred stock of subsidiary      |                                   |   | 10.0    |        
|                     | Other assumed obligations, net of excess cash |                                   |   | (12.2   | )      
|                     |                                               |                                   |   |        
|                     |                                               | Total compromise enterprise value |   | $       | 1,250.0 | 
|                     |                                               |                                   |   |        



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(o) |  | Represents adjustment of $121.9 million to
    reflect the fair value of identified intangible assets based on
    results of valuation procedures performed by the Companys
    valuation specialist. See Note 6 for additional disclosure
    regarding the category of intangibles and a description of the
    valuation methodology.                                                                                                         
|   
|(p) |  | Primarily reflects the additional liability of
    $155.2 million under fresh-start accounting for any pension
    and retiree medical plan costs as determined by the
    Companys actuaries. This net additional liability had been
    deferred pre-emergence in accordance with Statement of Financial
    Accounting Standards (SFAS) Nos. 87 and 106.
    The actuarial assumptions used in computing the liabilities were
    as follows:

|                              |                                |                |  |               |   |          |  |      |   |  |  |         |  
|----------------------------- | ------------------------------ | -------------- |  | ------------- | - | -------- |  | ---- | - |  |  | ------- | -
|                              |                                |                |  |              
|                              |                                | North American |  | International
|                              |                                | Plans          |  | Plans        
|                              |                                |                |  |              
|                              |                                | Pension        |  | Other         |   | Pension 
|                              |                                | Benefits       |  | Benefits      |   | Benefits
|                              |                                |                |  |               |   |         
|Weighted average assumptions: |                                |                |  |               |   |          |  |      |   |  |  |        
|                              | Discount Rate                  |                |  | 5.75          | % |          |  | 5.75 | % |  |  | 5.0-5.5 | %
|                              | Expected return on plan assets |                |  | 8.0           | % |          |  | N/A  |   |  |  | 5.0     | %
|                              | Rate of compensation increase  |                |  | 4.75          | % |          |  | N/A  |   |  |  | 2.1     | %



|    |  |                                                                                                                     
|--- |  | --------------------------------------------------------------------------------------------------------------------
|(q) |  | Reflects the adjustment to minority interest as a
    result of fair value adjustments under fresh start accounting.

15



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|        |            
|------- | -----------
|Note 4. | Inventories

The major classes of inventory are as follows
(dollars in millions):

|                         |       |             |      |             |  |   |      |       | 
|------------------------ | ----- | ----------- | ---- | ----------- |  | - | ---- | ----- | 
|                         |       | October 31, |      | January 31,
|                         |       | 2004        |      | 2004       
|                         |       |             |      |            
|Raw materials            |       | $           | 51.2 |             |  | $ | 48.3 |      
|Work-in-process          |       |             | 41.2 |             |  |   | 42.2 |      
|Finished goods           |       |             | 58.4 |             |  |   | 61.8 |      
|Spare parts and supplies |       |             | 43.8 |             |  |   | 37.0 |      
|                         |       |             |      |             |  |   |      |      
|                         | Total |             | $    | 194.6       |  |   | $    | 189.3 | 
|                         |       |             |      |             |  |   |      |      



|        |                              
|------- | -----------------------------
|Note 5. | Property, Plant and Equipment

The major classes of property, plant and
equipment are as follows (dollars in millions):

|                         |                                    |             |         |             |  |   |         |       | 
|------------------------ | ---------------------------------- | ----------- | ------- | ----------- |  | - | ------- | ----- | 
|                         |                                    | October 31, |         | January 31,
|                         |                                    | 2004        |         | 2004       
|                         |                                    |             |         |            
|Land                     |                                    | $           | 45.3    |             |  | $ | 42.4    |      
|Buildings                |                                    |             | 224.4   |             |  |   | 212.5   |      
|Machinery and equipment  |                                    |             | 894.3   |             |  |   | 793.7   |      
|Capital lease assets     |                                    |             | 8.4     |             |  |   | 8.4     |      
|                         |                                    |             |         |             |  |   |         |      
|                         |                                    |             | 1,172.4 |             |  |   | 1,057.0 |      
|Accumulated depreciation |                                    |             | (194.3  | )           |  |   | (90.5   | )    
|                         |                                    |             |         |             |  |   |         |      
|                         | Property, plant and equipment, net |             | $       | 978.1       |  |   | $       | 966.5 | 
|                         |                                    |             |         |             |  |   |         |      



|        |                                     
|------- | ------------------------------------
|Note 6. | Goodwill and Other Intangible Assets

Goodwill and other intangible assets consist of
the following (dollars in millions):

|                                 |                                      |                  |       |                  |  |          |       |          |   |              |       |          |  |   |       |       |  |   |       |      |   |   |       |       | 
|-------------------------------- | ------------------------------------ | ---------------- | ----- | ---------------- |  | -------- | ----- | -------- | - | ------------ | ----- | -------- |  | - | ----- | ----- |  | - | ----- | ---- | - | - | ----- | ----- | 
|                                 |                                      |                  |       |                 
|                                 |                                      | October 31, 2004 |       | January 31, 2004
|                                 |                                      |                  |       |                 
|                                 |                                      | Gross            |       |                  |  | Net      |       | Gross    |   |              |       | Net     
|                                 |                                      | Carrying         |       | Accumulated      |  | Carrying |       | Carrying |   | Accumulated  |       | Carrying
|                                 |                                      | Amount           |       | Amortization     |  | Amount   |       | Amount   |   | Amortization |       | Amount  
|                                 |                                      |                  |       |                  |  |          |       |          |   |              |       |         
|Amortized intangible assets:     |                                      |                  |       |                  |  |          |       |          |   |              |       |          |  |   |       |       |  |   |       |      |   |   |       |      
|                                 | Customer relationships and contracts |                  | $     | 167.3            |  |          | $     | (11.9    | ) |              | $     | 155.4    |  |   | $     | 169.3 |  |   | $     | (5.8 | ) |   | $     | 163.5 | 
|                                 | Unpatented technology                |                  |       | 41.5             |  |          |       | (7.9     | ) |              |       | 33.6     |  |   |       | 36.7  |  |   |       | (4.6 | ) |   |       | 32.1  | 
|                                 |                                      |                  |       |                  |  |          |       |          |   |              |       |          |  |   |       |       |  |   |       |      |   |   |       |      
|                                 |                                      | $                | 208.8 |                  |  | $        | (19.8 | )        |   | $            | 189.0 |          |  | $ | 206.0 |       |  | $ | (10.4 | )    |   | $ | 195.6 |      
|                                 |                                      |                  |       |                  |  |          |       |          |   |              |       |          |  |   |       |       |  |   |       |      |   |   |       |      
|Non amortized intangible assets: |                                      |                  |       |                  |  |          |       |          |   |              |       |          |  |   |       |       |  |   |       |      |   |   |       |      
|                                 | Tradenames                           |                  | $     | 41.2             |  |          |       |          |   |              |       |          |  |   | $     | 41.6  |  |   |       |      |   |   |       |       | 
|                                 | Goodwill                             |                  | $     | 409.3            |  |          |       |          |   |              |       |          |  |   | $     | 416.2 |  |   |       |      |   |   |       |       | 

The Company expects that ongoing amortization
expense will approximate between $10.0 million and
$13.0 million in each of the next five fiscal years.

16



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The changes in the net carrying amount of
goodwill by segment for the nine months ended October 31,
2004 were as follows (dollars in millions):

|                                                 |  |            |       |            |  |       |   |       |  |   |   |  |  |   |       |  
|------------------------------------------------ |  | ---------- | ----- | ---------- |  | ----- | - | ----- |  | - | - |  |  | - | ----- | -
|                                                 |  | Automotive |       |            |  |       |   |      
|                                                 |  | Wheels     |       | Components |  | Other |   | Total
|                                                 |  |            |       |            |  |       |   |      
|Balance as of January 31, 2004                   |  | $          | 416.2 |            |  | $     |  |       |  | $ |  |  |  | $ | 416.2 |  
|Effects of currency translation                  |  |            | (12.2 | )          |  |       |  |       |  |   |  |  |  |   | (12.2 | )
|Acquisitions and purchase accounting adjustments |  |            | 5.3   |            |  |       |  |       |  |   |  |  |  |   | 5.3   |  
|                                                 |  |            |       |            |  |       |   |       |  |   |   |  |  |   |       |  
|Balance as of October 31, 2004                   |  | $          | 409.3 |            |  | $     |  |       |  | $ |  |  |  | $ | 409.3 |  
|                                                 |  |            |       |            |  |       |   |       |  |   |   |  |  |   |       |  



|        |                                                      
|------- | -----------------------------------------------------
|Note 7. | Asset Impairments and Other Restructuring
    Charges

The Company recorded asset impairment losses and
other restructuring charges of $6.2 million for the nine
months ended October 31, 2004 and $19.6 million and
$6.4 million for the Successor five months ended
October 31, 2003 and Predecessor four months ended
May 31, 2003, respectively.

Asset impairments and other restructuring charges
by segment are as follows (dollars in millions):

|                                               |       |                                    |     |            |  |       |      |       |  |   |   |   |  |   |     |     | 
|---------------------------------------------- | ----- | ---------------------------------- | --- | ---------- |  | ----- | ---- | ----- |  | - | - | - |  | - | --- | --- | 
|                                               |       |                                   
|                                               |       | Successor                         
|                                               |       |                                   
|                                               |       |                                   
|                                               |       | Nine Months Ended October 31, 2004
|                                               |       |                                   
|                                               |       | Automotive                         |     |           
|                                               |       | Wheels                             |     | Components |  | Other |      | Total
|                                               |       |                                    |     |            |  |       |      |      
|Facility closure costs                         |       | $                                  | 1.0 |            |  | $     | (0.2 | )     |  | $ |  |   |  | $ | 0.8 |    
|Impairment of machinery, equipment and tooling |       |                                    | 0.7 |            |  |       |     |       |  |   |  |   |  |   | 0.7 |    
|Severance and other restructuring costs        |       |                                    | 4.1 |            |  |       | 0.6  |       |  |   |  |   |  |   | 4.7 |    
|                                               |       |                                    |     |            |  |       |      |       |  |   |   |   |  |   |     |    
|                                               | Total |                                    | $   | 5.8        |  |       | $    | 0.4   |  |   | $ |  |  |   | $   | 6.2 | 
|                                               |       |                                    |     |            |  |       |      |       |  |   |   |   |  |   |     |    

|                                               |       |                                    |      |            |  |       |     |       |  |   |   |   |  |   |      |      | 
|---------------------------------------------- | ----- | ---------------------------------- | ---- | ---------- |  | ----- | --- | ----- |  | - | - | - |  | - | ---- | ---- | 
|                                               |       |                                   
|                                               |       | Successor                         
|                                               |       |                                   
|                                               |       |                                   
|                                               |       | Five Months Ended October 31, 2003
|                                               |       |                                   
|                                               |       | Automotive                         |      |           
|                                               |       | Wheels                             |      | Components |  | Other |     | Total
|                                               |       |                                    |      |            |  |       |     |      
|Impairment of manufacturing facilities         |       | $                                  |     |            |  | $     | 0.8 |       |  | $ |  |   |  | $ | 0.8  |     
|Impairment of machinery, equipment and tooling |       |                                    | 12.1 |            |  |       | 6.7 |       |  |   |  |   |  |   | 18.8 |     
|                                               |       |                                    |      |            |  |       |     |       |  |   |   |   |  |   |      |     
|                                               | Total |                                    | $    | 12.1       |  |       | $   | 7.5   |  |   | $ |  |  |   | $    | 19.6 | 
|                                               |       |                                    |      |            |  |       |     |       |  |   |   |   |  |   |      |     

|                                               |       |                                |     |            |  |       |     |       |  |   |   |   |  |   |     |     | 
|---------------------------------------------- | ----- | ------------------------------ | --- | ---------- |  | ----- | --- | ----- |  | - | - | - |  | - | --- | --- | 
|                                               |       |                               
|                                               |       | Predecessor                   
|                                               |       |                               
|                                               |       |                               
|                                               |       | Four Months Ended May 31, 2003
|                                               |       |                               
|                                               |       | Automotive                     |     |           
|                                               |       | Wheels                         |     | Components |  | Other |     | Total
|                                               |       |                                |     |            |  |       |     |      
|Impairment of manufacturing facilities         |       | $                              | 0.5 |            |  | $     | 0.1 |       |  | $ |  |   |  | $ | 0.6 |    
|Impairment of machinery, equipment and tooling |       |                                | 1.5 |            |  |       | 3.3 |       |  |   |  |   |  |   | 4.8 |    
|Facility closure costs                         |       |                                | 0.9 |            |  |       |    |       |  |   |  |   |  |   | 0.9 |    
|Severance and other restructuring costs        |       |                                | 0.1 |            |  |       |    |       |  |   |  |   |  |   | 0.1 |    
|                                               |       |                                |     |            |  |       |     |       |  |   |   |   |  |   |     |    
|                                               | Total |                                | $   | 3.0        |  |       | $   | 3.4   |  |   | $ |  |  |   | $   | 6.4 | 
|                                               |       |                                |     |            |  |       |     |       |  |   |   |   |  |   |     |    

17



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                         
| | ------------------------
| | Impairment of Facilities

In the third quarter of fiscal 2003, the Company
recorded an estimated asset impairment loss of $0.8 million
on the Wabash, Indiana building, which was written down to fair
value based on expected proceeds from the sale of such building.

During the first quarter of fiscal 2003, the
Predecessor Company recorded asset impairment losses of
$0.6 million to write down the fair value of its
Petersburg, Michigan facility and its Thailand greenfield site
based on current real estate market conditions. The Thailand
greenfield site was sold by the Company in August 2003 and the
Petersburg, Michigan Facility was sold during the first quarter
of 2004.



| |                                                   
| | --------------------------------------------------
| | Impairment of Machinery, Equipment and
    Tooling

In October of fiscal 2004, the Company recorded
impairment losses of $0.7 million due primarily to a change
in managements plan for the future use of idled machinery,
equipment and production tooling related to the closure of its
Howell manufacturing facility. Such investments in fixed assets
were written down to fair value.

In the third quarter of fiscal 2003, the Company
recorded estimated impairment losses of $18.8 million on
machinery, equipment and production tooling at its Gainesville,
Georgia, La Mirada, California and Wabash, Indiana
manufacturing facilities. Such investments in fixed assets were
written down to fair value.

In May 2003, the Predecessor Company recorded
asset impairment losses of $1.6 million on certain
machinery and equipment in its Components segment due primarily
to a change in managements plan for the future use of
idled machinery and equipment. Such investments in fixed assets
were written down to fair value.

During the first quarter of fiscal 2003, the
Company recorded asset impairment losses of $1.5 million on
certain machinery and equipment in its Automotive Wheels segment
and $1.7 million in its Components segment due primarily to
a change in managements plan for the future use of idled
machinery and equipment. Such investments in fixed assets were
written down to fair value.



| |                  
| | -----------------
| | Facility Closures

On April 1, 2004, the Company announced the
closure of its Howell, Michigan manufacturing facility. As part
of managements on-going rationalization initiatives, the
decision to close the Howell facility was based on improving
capacity utilization and overall efficiency of the Company.
Production of the aluminum wheels manufactured at the facility
has been transferred to other manufacturing facilities in the
United States. During the nine months ended October 31,
2004, the Company has recorded $1.0 million of facility
closure costs. The Company anticipates that it will incur and
recognize additional restructuring and other closure costs of
approximately $2.5 million during the remainder of fiscal
2004 and into fiscal 2005, primarily related to lease
terminations, plant decommissioning and maintenance subsequent
to the shutdown date.

In conjunction with the sale of its Petersburg,
Michigan facility in the first quarter of fiscal 2004, the
Company reversed $0.2 million in facility closure costs
that had previously been accrued.

During the first four months of fiscal 2003, the
Predecessor Company recognized additional restructuring charges
of $0.9 million related to the closure of its Bowling
Green, Kentucky facility. These charges relate to additional
plant closure costs and terminated employee health care
benefits. Of these and other closure costs previously
recognized, substantially all have been paid out by
July 31, 2004. The Company expects to incur and record an
additional $0.3 million in decommissioning costs related to
the Bowling Green facility closure during the remainder of
fiscal 2004.

18



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                            
| | -------------------------------------------
| | Severance and Other Restructuring
    Costs

During the nine months ended October 31,
2004, the Company has recorded $3.3 million of severance
and other restructuring charges related to the Howell facility
closure. Also in the third quarter of fiscal 2004 the Company
recorded severance charges related to the rationalization of its
South African facility of $0.8 million and
$0.6 million of severance charges related to the
rationalization of its suspension operations.



| |                                              
| | ---------------------------------------------
| | Facility Exit Cost and Severance
    Accruals

The following table describes the activity in the
balance sheet accounts affected by the severance and other
restructuring charges noted above during the nine months ended
October 31, 2004 (dollars in millions):

|                    |  |             |     |               |  |                  |     |             |  |   |      |   |  |   |     | 
|------------------- |  | ----------- | --- | ------------- |  | ---------------- | --- | ----------- |  | - | ---- | - |  | - | --- | 
|                    |  |             |     | Severance     |  |                  |     |            
|                    |  | January 31, |     | and Other     |  | Cash Payments    |     | October 31,
|                    |  | 2004        |     | Restructuring |  | and Effects of   |     | 2004       
|                    |  | Accrual     |     | Charges       |  | Foreign Currency |     | Accrual    
|                    |  |             |     |               |  |                  |     |            
|Facility exit costs |  | $           | 1.7 |               |  | $                | 1.5 |             |  | $ | (2.9 | ) |  | $ | 0.3 | 
|Severance           |  |             | 1.0 |               |  |                  | 4.7 |             |  |   | (4.6 | ) |  |   | 1.1 | 
|                    |  |             |     |               |  |                  |     |             |  |   |      |   |  |   |     | 
|                    |  | $           | 2.7 |               |  | $                | 6.2 |             |  | $ | (7.5 | ) |  | $ | 1.4 | 
|                    |  |             |     |               |  |                  |     |             |  |   |      |   |  |   |     | 



|        |     
|------- | ----
|Note 8. | Debt



| |                                   
| | ----------------------------------
| | Bank Borrowing and Other
    Notes

Bank borrowings and other notes of
$3.9 million as of October 31, 2004 consist primarily
of short-term credit facilities of the Companys foreign
subsidiaries. Bank borrowings and other notes of
$14.2 million at January 31, 2004 consist primarily of
short-term credit facilities of the Companys foreign
subsidiaries, as well as notes payable of $1.1 million and
$10.5 million issued in conjunction with the Companys
acquisition of an additional 35% ownership interest in its
Turkish joint venture and acquisition of an aluminum wheel plant
formerly operated as part of the Companys Mexican joint
venture, respectively.



| |               
| | --------------
| | Long-Term Debt

Long-term debt consists of the following (dollars
in millions):

|                                                                                                                                                          |                                        |             |       |             |  |   |       |       | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------- | ----------- | ----- | ----------- |  | - | ----- | ----- | 
|                                                                                                                                                          |                                        | October 31, |       | January 31,
|                                                                                                                                                          |                                        | 2004        |       | 2004       
|                                                                                                                                                          |                                        |             |       |            
|Various foreign bank and government loans
    maturing through 2006, weighted average interest rates of 5.7%
    at October 31, 2004 and January 31, 2004 |                                        | $           | 24.1  |             |  | $ | 28.6  |      
|New Term Loan maturing 2009, weighted average
    interest rate of 5.8% and 5.0% at October 31, 2004 and
    January 31, 2004, respectively               |                                        |             | 428.4 |             |  |   | 447.8 |      
|10 1/2% New Senior Notes, net of discount of
    $0.8 million and $1.4 million at October 31, 2004
    and January 31, 2004, respectively, due 2010       |                                        |             | 161.7 |             |  |   | 248.6 |      
|Mortgage note payable                                                                                                                                     |                                        |             | 22.3  |             |  |   | 22.5  |      
|Capital lease obligations                                                                                                                                 |                                        |             | 12.9  |             |  |   | 16.2  |      
|                                                                                                                                                          |                                        |             |       |             |  |   |       |      
|                                                                                                                                                          | Total long-term debt                   |             |       | 649.4       |  |   |       | 763.7 | 
|Less current portion of long-term debt                                                                                                                    |                                        |             | 11.1  |             |  |   | 11.3  |      
|                                                                                                                                                          |                                        |             |       |             |  |   |       |      
|                                                                                                                                                          | Long-term debt, net of current portion |             | $     | 638.3       |  |   | $     | 752.4 | 
|                                                                                                                                                          |                                        |             |       |             |  |   |       |      

19



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

As discussed in Note 1, the Debtors emerged
from Chapter 11 on June 3, 2003. In connection with
the Debtors emergence on the Effective Date, HLI entered
into a $550.0 million senior secured credit facility, which
was subsequently amended on October 16, 2003 by Amendment
No. 1 and Waiver to Credit Agreement, on February 6,
2004 by Amendment No. 2 and Waiver to the Credit Agreement,
on May 6, 2004 by Amendment No. 3, on June 1,
2004 by Waiver to the Credit Agreement and on November 10,
2004 by Amendment No. 4, Waiver and Consent to Credit
Agreement to, among other things, reduce the interest rate on
the term loan portion of the senior secured credit facility by
100 basis points, (as amended, the New Credit
Facility). The New Credit Facility consists of a
$450.0 million six-year amortizing term loan (the New
Term Loan) and a five-year $100.0 million revolving
credit facility (the Revolving Credit Facility). In
addition, HLI issued on the Effective Date an aggregate of
$250.0 million principal amount of 10 1/2% senior
notes due 2010 (the New Senior Notes). The proceeds
from the initial $450.0 million of borrowings under the New
Credit Facility and the net proceeds from the New Senior Notes
were used to make payments required under the Plan of
Reorganization, including the repayment of the Companys
DIP Facility and a payment of $477.3 million to certain
prepetition lenders, to pay related transaction costs and to
refinance certain debt.

As of October 31, 2004, there were no
outstanding borrowings and $18.7 million in letters of
credit issued under the Revolving Credit Facility. The amount
available to borrow under the Revolving Credit Facility at
October 31, 2004 was approximately $81.3 million.



| |                                      
| | -------------------------------------
| | Early Repayment of Long-Term
    Debt

On February 11, 2004, the Company closed on
a primary offering of 7,720,970 shares of its common stock
for net proceeds of $117.0 million. On March 12, 2004,
the Company used a portion of the net proceeds to redeem
$87.5 million aggregate principal amount, plus accrued and
unpaid interest thereon, of its outstanding New Senior Notes at
a redemption price of 110.5%. This redemption resulted in a loss
on early extinguishment of $11.8 million during the first
quarter of fiscal 2004, including $2.6 million related to
original issue discount and debt issuance costs on the redeemed
portion of the New Senior Notes.

The Company also used a portion of the primary
stock offering proceeds to prepay $16.0 million, plus
accrued and unpaid interest thereon, of its New Term Loan on
February 12, 2004. Upon prepayment, the Company recognized
a loss on early extinguishment of $0.4 million related to
debt issuance costs on the prepaid portion of the New Term Loan.

20



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|        |                       
|------- | ----------------------
|Note 9. | Employee Benefit Plans

The 2004 and 2003 amounts shown below reflect the
defined benefit pension and other postretirement benefit expense
for each period (dollars in millions):

|                                   |  |                      |      |             |  |                     |      |             |  |                  |  |  |  |             |      |             |  |   |     |  |  |  |  |  |  |   |     |  |  |   |     |  |  |  |  | 
|---------------------------------- |  | -------------------- | ---- | ----------- |  | ------------------- | ---- | ----------- |  | ---------------- |  |  |  | ----------- | ---- | ----------- |  | - | --- |  |  |  |  |  |  | - | --- |  |  | - | --- |  |  |  |  | 
|                                   |  |                      |      |             |  |                     |      |            
|                                   |  | North American Plans |      |             |  | International Plans |      |            
|                                   |  |                      |      |             |  |                     |      |            
|                                   |  |                      |      |             |  |                     |      |             |  |                  |  | 
|                                   |  | Pension Benefits     |      |             |  | Other Benefits      |      |             |  | Pension Benefits |  | 
|                                   |  |                      |      |             |  |                     |      |             |  |                  |  | 
|                                   |  | Three                |      | Three       |  |                     |      | Three       |  | Three            |  |  |  | Three       |      | Three       |  |  
|                                   |  | Months               |      | Months      |  |                     |      | Months      |  | Months           |  |  |  | Months      |      | Months      |  |  
|                                   |  | Ended                |      | Ended       |  |                     |      | Ended       |  | Ended            |  |  |  | Ended       |      | Ended       |  |  
|                                   |  | October 31,          |      | October 31, |  |                     |      | October 31, |  | October 31,      |  |  |  | October 31, |      | October 31, |  |  
|                                   |  | 2004                 |      | 2003        |  |                     |      | 2004        |  | 2003             |  |  |  | 2004        |      | 2003        |  |  
|                                   |  |                      |      |             |  |                     |      |             |  |                  |  |  |  |             |      |             |  |  
|Service cost                       |  | $                    | 0.1  |             |  | $                   | 0.1  |             |  |                  |  |  |  | $           |     |             |  | $ |    |  |  |  |  |  |  | $ | 0.2 |  |  | $ | 0.5 |  |  |  |  | 
|Interest cost                      |  |                      | 2.8  |             |  |                     | 2.8  |             |  |                  |  |  |  |             | 2.7  |             |  |   | 2.9 |  |  |  |  |  |  |   | 1.9 |  |  |   | 1.9 |  |  |  |  | 
|Expected return on plan assets     |  |                      | (2.4 | )           |  |                     | (2.3 | )           |  |                  |  |  |  |             |     |             |  |   |    |  |  |  |  |  |  |   | 0.1 |  |  |   | 0.1 |  |  |  |  | 
|Amortization of prior service cost |  |                      |     |             |  |                     |     |             |  |                  |  |  |  |             |     |             |  |   |    |  |  |  |  |  |  |   | 0.1 |  |  |   |    |  |  |  |  | 
|Amortization of net (gain)/ loss   |  |                      |     |             |  |                     |     |             |  |                  |  |  |  |             | (0.3 | )           |  |   |    |  |  |  |  |  |  |   |    |  |  |   |    |  |  |  |  | 
|                                   |  |                      |      |             |  |                     |      |             |  |                  |  |  |  |             |      |             |  |   |     |  |  |  |  |  |  |   |     |  |  |   |     |  |  |  |  | 
|Net periodic benefit cost          |  | $                    | 0.5  |             |  | $                   | 0.6  |             |  |                  |  |  |  | $           | 2.4  |             |  | $ | 2.9 |  |  |  |  |  |  | $ | 2.3 |  |  | $ | 2.5 |  |  |  |  | 
|                                   |  |                      |      |             |  |                     |      |             |  |                  |  |  |  |             |      |             |  |   |     |  |  |  |  |  |  |   |     |  |  |   |     |  |  |  |  | 

|                                   |  |                      |      |                     |  |                  |      |             |  |             |      |             |  |             |      |             |  |         |     |  |  |   |     |  |  |   |     |  |  |   |     |  |  |   |     | 
|---------------------------------- |  | -------------------- | ---- | ------------------- |  | ---------------- | ---- | ----------- |  | ----------- | ---- | ----------- |  | ----------- | ---- | ----------- |  | ------- | --- |  |  | - | --- |  |  | - | --- |  |  | - | --- |  |  | - | --- | 
|                                   |  |                      |      |                    
|                                   |  | North American Plans |      | International Plans
|                                   |  |                      |      |                    
|                                   |  |                      |      |                     |  |                 
|                                   |  | Pension Benefits     |      | Other Benefits      |  | Pension Benefits
|                                   |  |                      |      |                     |  |                 
|                                   |  |                      |      |                     |  |                  |      |             |  |             |      |            
|                                   |  | Successor            |      | Predecessor         |  | Successor        |      | Predecessor |  | Successor   |      | Predecessor
|                                   |  |                      |      |                     |  |                  |      |             |  |             |      |            
|                                   |  | Nine                 |      | Five                |  | Four             |      | Nine        |  | Five        |      | Four        |  | Nine        |      | Five        |  | Four   
|                                   |  | Months               |      | Months              |  | Months           |      | Months      |  | Months      |      | Months      |  | Months      |      | Months      |  | Months 
|                                   |  | Ended                |      | Ended               |  | Ended            |      | Ended       |  | Ended       |      | Ended       |  | Ended       |      | Ended       |  | Ended  
|                                   |  | October 31,          |      | October 31,         |  | May 31,          |      | October 31, |  | October 31, |      | May 31,     |  | October 31, |      | October 31, |  | May 31,
|                                   |  | 2004                 |      | 2003                |  | 2003             |      | 2004        |  | 2003        |      | 2003        |  | 2004        |      | 2003        |  | 2003   
|                                   |  |                      |      |                     |  |                  |      |             |  |             |      |             |  |             |      |             |  |        
|Service cost                       |  | $                    | 0.2  |                     |  | $                | 0.2  |             |  | $           | 0.2  |             |  | $           | 0.1  |             |  | $       |    |  |  | $ |    |  |  | $ | 0.6 |  |  | $ | 0.6 |  |  | $ | 0.3 | 
|Interest cost                      |  |                      | 8.4  |                     |  |                  | 4.6  |             |  |             | 3.9  |             |  |             | 9.2  |             |  |         | 4.9 |  |  |   | 4.0 |  |  |   | 5.8 |  |  |   | 3.2 |  |  |   | 2.3 | 
|Expected return on plan assets     |  |                      | (7.2 | )                   |  |                  | (3.8 | )           |  |             | (3.1 | )           |  |             |     |             |  |         |    |  |  |   |    |  |  |   | 0.2 |  |  |   | 0.1 |  |  |   |    | 
|Amortization of prior service cost |  |                      |     |                     |  |                  |     |             |  |             | 0.1  |             |  |             |     |             |  |         |    |  |  |   | 0.1 |  |  |   | 0.3 |  |  |   |    |  |  |   | 0.1 | 
|Amortization of net (gain)/ loss   |  |                      |     |                     |  |                  |     |             |  |             | 0.9  |             |  |             | (0.6 | )           |  |         |    |  |  |   | 1.9 |  |  |   |    |  |  |   |    |  |  |   | 0.1 | 
|                                   |  |                      |      |                     |  |                  |      |             |  |             |      |             |  |             |      |             |  |         |     |  |  |   |     |  |  |   |     |  |  |   |     |  |  |   |     | 
|Net periodic benefit cost          |  | $                    | 1.4  |                     |  | $                | 1.0  |             |  | $           | 2.0  |             |  | $           | 8.7  |             |  | $       | 4.9 |  |  | $ | 6.0 |  |  | $ | 6.9 |  |  | $ | 3.9 |  |  | $ | 2.8 | 
|                                   |  |                      |      |                     |  |                  |      |             |  |             |      |             |  |             |      |             |  |         |     |  |  |   |     |  |  |   |     |  |  |   |     |  |  |   |     | 

During the first nine months of fiscal 2004 the
Company contributed $5.0 million in cash to its North
American pension plans and expects to contribute an additional
$0.7 million during the fourth quarter of fiscal 2004.

The Medicare Prescription Drug, Improvement and
Modernization Act, which was signed into law on December 8,
2003, expanded Medicare to include, for the first time, coverage
for prescription drugs. The Company sponsors retiree welfare
programs and has determined that this legislation reduces the
Companys costs for some of these programs. In accordance
with guidance from the FASB, the Company has adopted the
provisions of FSP 106-2 in the third quarter of 2004 and
has elected to recognize the effect of the subsidy
retroactively. The reduction in interest costs related to the
third quarter of fiscal 2004 was $0.2 million and the
increased amortization of net gain for the same period was
$0.2 million. The reduction in the Companys
accumulated postretirement benefit obligation was approximately
$13.3 million.

21



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|         |               
|-------- | --------------
|Note 10. | Loss Per Share

Basic loss per share is calculated by dividing
net loss by the weighted average number of common shares
outstanding. Weighted average shares outstanding include vested
restricted stock units granted under the Companys
long-term incentive plan. Diluted loss per share is computed by
dividing net loss by the diluted weighted average shares
outstanding. Diluted weighted average shares assume the exercise
of stock options and warrants, so long as they are not
anti-dilutive.

Shares outstanding were as follows (shares in
thousands):

|                                        |  |             |        |             |  |             |        |             |  |  |        |  |  |  |        | 
|--------------------------------------- |  | ----------- | ------ | ----------- |  | ----------- | ------ | ----------- |  |  | ------ |  |  |  | ------ | 
|                                        |  | Three       |        | Three       |  | Nine        |        | Five       
|                                        |  | Months      |        | Months      |  | Months      |        | Months     
|                                        |  | Ended       |        | Ended       |  | Ended       |        | Ended      
|                                        |  | October 31, |        | October 31, |  | October 31, |        | October 31,
|                                        |  | 2004        |        | 2003        |  | 2004        |        | 2003       
|                                        |  |             |        |             |  |             |        |            
|Weighted average shares outstanding     |  |             | 37,807 |             |  |             | 30,015 |             |  |  | 37,508 |  |  |  | 30,009 | 
|Dilutive effect of options and warrants |  |             |       |             |  |             |       |             |  |  |       |  |  |  |       | 
|                                        |  |             |        |             |  |             |        |             |  |  |        |  |  |  |        | 
|Diluted shares outstanding              |  |             | 37,807 |             |  |             | 30,015 |             |  |  | 37,508 |  |  |  | 30,009 | 
|                                        |  |             |        |             |  |             |        |             |  |  |        |  |  |  |        | 

For the three and nine month periods ended
October 31, 2004 and the three and five month periods ended
October 31, 2003, all options and warrants were excluded
from the calculation of diluted loss per share as the effect was
anti-dilutive due to the net losses reflected for such periods.



|         |                            
|-------- | ---------------------------
|Note 11. | Comprehensive Income (Loss)

The components of comprehensive income (loss) are
as follows (dollars in millions):

|                                                                              |                                   |             |       |             |   |             |       |      |   |   |         |         | 
|----------------------------------------------------------------------------- | --------------------------------- | ----------- | ----- | ----------- | - | ----------- | ----- | ---- | - | - | ------- | ------- | 
|                                                                              |                                   |             |       |            
|                                                                              |                                   | Successor   |       | Predecessor
|                                                                              |                                   |             |       |            
|                                                                              |                                   | Nine Months |       | Five Months |   | Four Months
|                                                                              |                                   | Ended       |       | Ended       |   | Ended      
|                                                                              |                                   | October 31, |       | October 31, |   | May 31,    
|                                                                              |                                   | 2004        |       | 2003        |   | 2003       
|                                                                              |                                   |             |       |             |   |            
|Net income (loss)                                                             |                                   | $           | (22.2 | )           |   | $           | (19.2 | )    |   | $ | 1,043.0 |        
|Currency translation adjustments                                              |                                   |             | (12.4 | )           |   |             | 18.7  |      |   |   | 31.4    |        
|Elimination of Predecessor equity accounts under
    fresh start accounting   |                                   |             |      |             |   |             |      |      |   |   | 75.8    |        
|Reclassification adjustment for amount included
    in fresh start adjustment |                                   |             |      |             |   |             |      |      |   |   | (75.8   | )      
|                                                                              |                                   |             |       |             |   |             |       |      |   |   |         |        
|                                                                              | Total comprehensive income (loss) |             | $     | (34.6       | ) |             | $     | (0.5 | ) |   | $       | 1,074.4 | 
|                                                                              |                                   |             |       |             |   |             |       |      |   |   |         |        



|         |                
|-------- | ---------------
|Note 12. | Taxes on Income

Income tax expense was $3.7 million for the
three months ended October 31, 2004, $14.3 million for
the nine months ended October 31, 2004, $6.1 million
for the Successor three months ended October 31, 2003,
$8.7 million for the Successor five months ended
October 31, 2003 and $60.3 million for the Predecessor
four months ended May 31, 2003. The expense related to
Successor periods was the result of tax related to operations in
foreign jurisdictions as well as various states. The expense
related to Predecessor periods was the result of recording
deferred tax liabilities related to fresh start accounting
adjustments in foreign jurisdictions, state taxes related to the
merger between the Predecessor and HLI, and tax related to
operations in foreign jurisdictions as well as various states.
The income tax rate varies from the United States statutory
income tax rate due primarily to losses in the United States
without recognition of a corresponding income tax benefit.

22



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company has determined that a valuation
allowance is required against all net deferred tax assets in the
United States and certain deferred tax assets in foreign
jurisdictions. As such, there was no United States federal
income tax benefit recorded against current losses.

On October 22, 2004 The American Jobs
Creation Act of 2004 (the Act) was signed into law by the
President. This Act provides for a special one-time tax
deduction of 85.0% of certain foreign earnings that are
repatriated to a U.S. taxpayer, provided certain criteria
are met. The Company has not yet completed its analysis of the
impact of the Act mainly due to the lack of clarification on
certain provisions within the Act. Once such clarification is
provided, the Company anticipates completing the analysis in a
timely manner. The potential amount considered for repatriation,
if any, and the resulting income tax impact, have not been
determined.



|         |                      
|-------- | ---------------------
|Note 13. | Common Stock Offering

On February 11, 2004, the Company closed on
a primary offering of 7,720,970 shares of common stock, and
a secondary offering of 2 million shares of its common
stock. The Company used the net proceeds of $117.0 million
that it received from the primary offering to redeem
$87.5 million aggregate principal amount, plus accrued and
unpaid interest thereon, of its outstanding New Senior Notes on
March 12, 2004, to prepay $16.0 million, plus accrued
and unpaid interest thereon, of its New Term Loan on
February 12, 2004, and for general corporate purposes. (See
Note 8.)



|         |                      
|-------- | ---------------------
|Note 14. | Cumulative Adjustment

In September 2004, an employee reported certain
accounting irregularities at the Companys facility in
Cadillac, Michigan, which produces cast suspension components.
An investigation was conducted by outside legal counsel under
the direction of the Audit Committee. Based on that
investigation, the Company determined that certain amounts had
been improperly recorded as assets on the Companys
consolidated balance sheets rather than treated as expenses on
the Companys consolidated statements of operations,
resulting in an understatement of the Companys net loss in
fiscal 2003 of approximately $0.9 million and no net change
to the Companys net loss in the first six months of fiscal
2004. Since the impact to the fiscal 2003 annual and quarterly
reporting periods and fiscal 2004 first half financial
statements was not material in any individual reporting period,
the Company recorded a cumulative adjustment (additional
expense) of approximately $0.9 million in the third quarter
of 2004 to reflect the proper accounting treatment.

The investigation conducted by outside legal
counsel found that a former employee was responsible for the
improper accounting entries at that Cadillac facility, which
resulted in the financial impacts noted below. The Company
terminated the employee responsible. The investigation found no
evidence that there were similar issues at other facilities in
the business unit.

23



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The expenses, properly recorded in the respective
periods, would have impacted net loss during fiscal 2003 and
first half 2004 as follows (dollars in millions, except per
share amounts):

|               |                                     |           |   |                    |   |  |   |       |  
|-------------- | ----------------------------------- | --------- | - | ------------------ | - |  | - | ----- | -
|               |                                     |           |   | Impact On         
|               |                                     | Impact On |   | Basic and Diluted 
|Interim Period |                                     | Net Loss  |   | Net Loss Per Share
|               |                                     |           |   |                   
|Predecessor    |                                     |           |   |                    |   |  |   |      
|               | Three Months Ended April 30, 2003   |           | $ |                   |   |  | $ |      |  
|               | One Month Ended May 31, 2003        |           | $ | (0.1               | ) |  | $ |      |  
|               | Four Months Ended May 31, 2003      |           | $ | (0.1               | ) |  | $ |      |  
|Successor      |                                     |           |   |                    |   |  |   |      
|               | Two Months Ended July 31, 2003      |           | $ | (0.4               | ) |  | $ | (0.01 | )
|               | Three Months Ended October 31, 2003 |           | $ | (0.1               | ) |  | $ |      |  
|               | Three Months Ended January 1, 2004  |           | $ | (0.3               | ) |  | $ | (0.01 | )
|               | Eight Months Ended January 1, 2004  |           | $ | (0.8               | ) |  | $ | (0.02 | )
|              
|               | Three Months Ended April 30, 2004   |           | $ | 0.1                |   |  | $ |      |  
|               | Three Months Ended July 31, 2004    |           | $ | (0.1               | ) |  | $ |      |  
|               | Six Months Ended July 31, 2004      |           | $ |                   |   |  | $ |      |  



|         |                  
|-------- | -----------------
|Note 15. | Segment Reporting

The Company is organized based primarily on
markets served and products produced. Under this organization
structure, the Companys operating segments have been
aggregated into three reportable segments: Automotive Wheels,
Components, and Other. The Other category includes Commercial
Highway products, the corporate office and elimination of
intercompany activities, none of which meet the requirements of
being classified as an operating segment. Earnings (loss) from
operations excluding fresh start accounting adjustments and
reorganization items is used as a non-GAAP measure of the
Companys primary profitability measure because it excludes
fresh start accounting adjustments and reorganization items
which do not represent normal operating performance of the
Company, as these items relate only to the Companys
Chapter 11 Filings and emergence.

The following tables present revenues and other
financial information by business segment (dollars in millions):

|                                                  |  |                                    |         |            |  |       |       |       |  |   |       |  |  |   |         |  
|------------------------------------------------- |  | ---------------------------------- | ------- | ---------- |  | ----- | ----- | ----- |  | - | ----- |  |  | - | ------- | -
|                                                  |  |                                   
|                                                  |  | Successor                         
|                                                  |  |                                   
|                                                  |  |                                   
|                                                  |  | Nine Months Ended October 31, 2004
|                                                  |  |                                   
|                                                  |  | Automotive                         |         |           
|                                                  |  | Wheels                             |         | Components |  | Other |       | Total
|                                                  |  |                                    |         |            |  |       |       |      
|Net sales                                         |  | $                                  | 1,019.5 |            |  | $     | 532.1 |       |  | $ | 122.4 |  |  | $ | 1,674.0 |  
|Earnings (loss) from operations                   |  |                                    | 46.7    |            |  |       | (7.7  | )     |  |   | 3.9   |  |  |   | 42.9    |  
|Asset impairments and other restructuring charges |  |                                    | (5.8    | )          |  |       | (0.4  | )     |  |   |      |  |  |   | (6.2    | )
|Total assets                                      |  |                                    | 1,656.6 |            |  |       | 545.9 |       |  |   | 88.7  |  |  |   | 2,291.2 |  

24



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HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                  |  |                                    |       |            |  |       |       |       |  |   |      |   |  |   |       |  
|------------------------------------------------- |  | ---------------------------------- | ----- | ---------- |  | ----- | ----- | ----- |  | - | ---- | - |  | - | ----- | -
|                                                  |  |                                   
|                                                  |  | Successor                         
|                                                  |  |                                   
|                                                  |  |                                   
|                                                  |  | Five Months Ended October 31, 2003
|                                                  |  |                                   
|                                                  |  | Automotive                         |       |           
|                                                  |  | Wheels                             |       | Components |  | Other |       | Total
|                                                  |  |                                    |       |            |  |       |       |      
|Net sales                                         |  | $                                  | 509.4 |            |  | $     | 299.4 |       |  | $ | 50.4 |   |  | $ | 859.2 |  
|Earnings (loss) from operations                   |  |                                    | 19.1  |            |  |       | 3.4   |       |  |   | (6.2 | ) |  |   | 16.3  |  
|Asset impairments and other restructuring charges |  |                                    | (12.1 | )          |  |       | (7.5  | )     |  |   |     |   |  |   | (19.6 | )

|                                                  |  |                                |       |            |  |       |       |       |  |   |       |   |  |   |         |  
|------------------------------------------------- |  | ------------------------------ | ----- | ---------- |  | ----- | ----- | ----- |  | - | ----- | - |  | - | ------- | -
|                                                  |  |                               
|                                                  |  | Predecessor                   
|                                                  |  |                               
|                                                  |  |                               
|                                                  |  | Four Months Ended May 31, 2003
|                                                  |  |                               
|                                                  |  | Automotive                     |       |           
|                                                  |  | Wheels                         |       | Components |  | Other |       | Total
|                                                  |  |                                |       |            |  |       |       |      
|Net sales                                         |  | $                              | 403.5 |            |  | $     | 248.1 |       |  | $ | 38.2  |   |  | $ | 689.8   |  
|Earnings (loss) from operations                   |  |                                | 85.4  |            |  |       | 37.2  |       |  |   | (72.1 | ) |  |   | 50.5    |  
|Asset impairments and other restructuring charges |  |                                | (3.0  | )          |  |       | (3.4  | )     |  |   |      |   |  |   | (6.4    | )
|Reorganization items                              |  |                                | (0.1  | )          |  |       | 0.2   |       |  |   | (45.1 | ) |  |   | (45.0   | )
|Fresh start adjustments                           |  |                                | 57.9  |            |  |       | 27.7  |       |  |   | (22.5 | ) |  |   | 63.1    |  
|Extraordinary gain on debt discharge              |  |                                | 81.1  |            |  |       | 58.3  |       |  |   | 937.3 |   |  |   | 1,076.7 |  

|             |  |                        |         |            |  |       |       |       |  |   |       |  |  |   |         | 
|------------ |  | ---------------------- | ------- | ---------- |  | ----- | ----- | ----- |  | - | ----- |  |  | - | ------- | 
|             |  |                       
|             |  | Successor             
|             |  |                       
|             |  |                       
|             |  | As of January 31, 2004
|             |  |                       
|             |  | Automotive             |         |           
|             |  | Wheels                 |         | Components |  | Other |       | Total
|             |  |                        |         |            |  |       |       |      
|Total assets |  | $                      | 1,490.6 |            |  | $     | 542.4 |       |  | $ | 264.7 |  |  | $ | 2,297.7 | 

25



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|         |                                                 
|-------- | ------------------------------------------------
|Note 16. | Condensed Consolidating Financial
    Statements

The following condensed consolidating financial
statements present the financial information required with
respect to those entities which guarantee certain debt of the
Company.

The condensed consolidating financial statements
are presented on the equity method. Under this method, the
investments in subsidiaries are recorded at cost and adjusted
for the Companys share of the subsidiaries
cumulative results of operations, capital contributions,
distributions and other equity changes. The principal
elimination entries eliminate investments in subsidiaries and
intercompany balances and transactions.



| |                                                    
| | ---------------------------------------------------
| | Guarantor and Nonguarantor Financial
    Statements

As further discussed in Notes 1 and 8,
in connection with the Plan of Reorganization, HLI issued
$250.0 million aggregate principal amount of the New Senior
Notes. The New Senior Notes are guaranteed by New Hayes and
ParentCo (collectively, the Parent) and
substantially all of New Hayes domestic subsidiaries
(other than HLI as the issuer of the New Senior Notes)
(collectively, the Guarantor Subsidiaries). None of
New Hayes foreign subsidiaries have guaranteed the New
Senior Notes, nor have two of New Hayes domestic
subsidiaries owned by foreign subsidiaries of New Hayes
(collectively, the Nonguarantor Subsidiaries).

26



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF
OPERATIONS

SUCCESSOR COMPANY

For the Nine Months Ended October 31,
2004


(Dollars in millions)


|                                                                   |                                                                  |             |      |        |   |              |       |              |   |              |       |       |   |   |       |       |  |   |       |      |  |   |         |       |  
|------------------------------------------------------------------ | ---------------------------------------------------------------- | ----------- | ---- | ------ | - | ------------ | ----- | ------------ | - | ------------ | ----- | ----- | - | - | ----- | ----- |  | - | ----- | ---- |  | - | ------- | ----- | -
|                                                                   |                                                                  |             |      |        |   | Guarantor    |       | Nonguarantor |   |              |       |      
|                                                                   |                                                                  | Parent      |      | Issuer |   | Subsidiaries |       | Subsidiaries |   | Eliminations |       | Total
|                                                                   |                                                                  |             |      |        |   |              |       |              |   |              |       |      
|                                                                   |                                                                  |            
|                                                                   |                                                                  | (Unaudited)
|Net sales                                                          |                                                                  | $           |     |        |   | $            | 2.3   |              |   | $            | 797.1 |       |   | $ | 895.6 |       |  | $ | (21.0 | )    |  | $ | 1,674.0 |      
|Cost of goods sold                                                 |                                                                  |             |     |        |   |              | 17.7  |              |   |              | 738.5 |       |   |   | 765.3 |       |  |   | (21.0 | )    |  |   | 1,500.5 |      
|                                                                   |                                                                  |             |      |        |   |              |       |              |   |              |       |       |   |   |       |       |  |   |       |      |  |   |         |      
|                                                                   | Gross profit (loss)                                              |             |      |       |   |              |       | (15.4        | ) |              |       | 58.6  |   |   |       | 130.3 |  |   |       |     |  |   |         | 173.5 |  
|Marketing, general and administrative                              |                                                                  |             |     |        |   |              | (1.7  | )            |   |              | 68.2  |       |   |   | 56.7  |       |  |   |      |      |  |   | 123.2   |      
|Equity in (earnings) losses of subsidiaries
    and joint ventures |                                                                  |             | 29.7 |        |   |              | (12.8 | )            |   |              | 2.6   |       |   |   |      |       |  |   | (19.5 | )    |  |   |        |      
|Asset impairments and other restructuring charges                  |                                                                  |             |     |        |   |              | (0.1  | )            |   |              | 5.3   |       |   |   | 1.0   |       |  |   |      |      |  |   | 6.2     |      
|Other expense (income), net                                        |                                                                  |             |     |        |   |              | (1.5  | )            |   |              | 0.2   |       |   |   | 1.0   |       |  |   | 1.5   |      |  |   | 1.2     |      
|                                                                   |                                                                  |             |      |        |   |              |       |              |   |              |       |       |   |   |       |       |  |   |       |      |  |   |         |      
|                                                                   | Earnings (loss) from operations                                  |             |      | (29.7  | ) |              |       | 0.7          |   |              |       | (17.7 | ) |   |       | 71.6  |  |   |       | 18.0 |  |   |         | 42.9  |  
|Interest (income) expense, net                                     |                                                                  |             | (7.5 | )      |   |              | 17.6  |              |   |              | 0.2   |       |   |   | 21.3  |       |  |   |      |      |  |   | 31.6    |      
|Other non-operating (income) expense                               |                                                                  |             |     |        |   |              | 0.6   |              |   |              |      |       |   |   | 0.4   |       |  |   |      |      |  |   | 1.0     |      
|Loss on early extinguishment of debt                               |                                                                  |             |     |        |   |              | 12.2  |              |   |              |      |       |   |   |      |       |  |   |      |      |  |   | 12.2    |      
|                                                                   |                                                                  |             |      |        |   |              |       |              |   |              |       |       |   |   |       |       |  |   |       |      |  |   |         |      
|                                                                   | Earnings (loss) before taxes on income and
    minority interest |             |      | (22.2  | ) |              |       | (29.7        | ) |              |       | (17.9 | ) |   |       | 49.9  |  |   |       | 18.0 |  |   |         | (1.9  | )
|Income tax provision                                               |                                                                  |             |     |        |   |              |      |              |   |              | 1.4   |       |   |   | 12.9  |       |  |   |      |      |  |   | 14.3    |      
|                                                                   |                                                                  |             |      |        |   |              |       |              |   |              |       |       |   |   |       |       |  |   |       |      |  |   |         |      
|                                                                   | Earnings (loss) before minority interest                         |             |      | (22.2  | ) |              |       | (29.7        | ) |              |       | (19.3 | ) |   |       | 37.0  |  |   |       | 18.0 |  |   |         | (16.2 | )
|Minority interest                                                  |                                                                  |             |     |        |   |              |      |              |   |              |      |       |   |   | 6.0   |       |  |   |      |      |  |   | 6.0     |      
|                                                                   |                                                                  |             |      |        |   |              |       |              |   |              |       |       |   |   |       |       |  |   |       |      |  |   |         |      
|                                                                   | Net income (loss)                                                |             | $    | (22.2  | ) |              | $     | (29.7        | ) |              | $     | (19.3 | ) |   | $     | 31.0  |  |   | $     | 18.0 |  |   | $       | (22.2 | )
|                                                                   |                                                                  |             |      |        |   |              |       |              |   |              |       |       |   |   |       |       |  |   |       |      |  |   |         |      

27



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF
OPERATIONS

SUCCESSOR COMPANY

For the Five Months Ended October 31,
2003


(Dollars in millions)


|                                                                   |                                                                                                        |             |      |        |   |              |      |              |   |              |       |       |   |   |       |      |  |   |       |      |  |   |       |       |  
|------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------ | ----------- | ---- | ------ | - | ------------ | ---- | ------------ | - | ------------ | ----- | ----- | - | - | ----- | ---- |  | - | ----- | ---- |  | - | ----- | ----- | -
|                                                                   |                                                                                                        |             |      |        |   | Guarantor    |      | Nonguarantor |   |              |       |      
|                                                                   |                                                                                                        | Parent      |      | Issuer |   | Subsidiaries |      | Subsidiaries |   | Eliminations |       | Total
|                                                                   |                                                                                                        |             |      |        |   |              |      |              |   |              |       |      
|                                                                   |                                                                                                        |            
|                                                                   |                                                                                                        | (Unaudited)
|Net sales                                                          |                                                                                                        | $           |     |        |   | $            | 1.9  |              |   | $            | 463.0 |       |   | $ | 412.7 |      |  | $ | (18.4 | )    |  | $ | 859.2 |      
|Cost of goods sold                                                 |                                                                                                        |             |     |        |   |              | 8.4  |              |   |              | 419.0 |       |   |   | 351.5 |      |  |   | (18.4 | )    |  |   | 760.5 |      
|                                                                   |                                                                                                        |             |      |        |   |              |      |              |   |              |       |       |   |   |       |      |  |   |       |      |  |   |       |      
|                                                                   | Gross profit (loss)                                                                                    |             |      |       |   |              |      | (6.5         | ) |              |       | 44.0  |   |   |       | 61.2 |  |   |       |     |  |   |       | 98.7  |  
|Marketing, general and administrative                              |                                                                                                        |             |     |        |   |              | 6.2  |              |   |              | 28.2  |       |   |   | 23.6  |      |  |   |      |      |  |   | 58.0  |      
|Equity in (earnings) losses of subsidiaries
    and joint ventures |                                                                                                        |             | 21.8 |        |   |              | 19.9 |              |   |              | 1.0   |       |   |   |      |      |  |   | (42.7 | )    |  |   |      |      
|Asset impairments and other restructuring charges                  |                                                                                                        |             |     |        |   |              |     |              |   |              | 19.6  |       |   |   |      |      |  |   |      |      |  |   | 19.6  |      
|Other expense (income), net                                        |                                                                                                        |             |     |        |   |              | 0.3  |              |   |              | (0.4  | )     |   |   | 4.9   |      |  |   |      |      |  |   | 4.8   |      
|                                                                   |                                                                                                        |             |      |        |   |              |      |              |   |              |       |       |   |   |       |      |  |   |       |      |  |   |       |      
|                                                                   | Earnings (loss) from operations                                                                        |             |      | (21.8  | ) |              |      | (32.9        | ) |              |       | (4.4  | ) |   |       | 32.7 |  |   |       | 42.7 |  |   |       | 16.3  |  
|Interest (income) expense, net                                     |                                                                                                        |             | (2.6 | )      |   |              | (7.6 | )            |   |              | 23.2  |       |   |   | 11.7  |      |  |   |      |      |  |   | 24.7  |      
|                                                                   |                                                                                                        |             |      |        |   |              |      |              |   |              |       |       |   |   |       |      |  |   |       |      |  |   |       |      
|                                                                   | Earnings (loss) before subsidiary preferred stock
    dividends, taxes on income and minority interest |             |      | (19.2  | ) |              |      | (25.3        | ) |              |       | (27.6 | ) |   |       | 21.0 |  |   |       | 42.7 |  |   |       | (8.4  | )
|Subsidiary preferred stock dividends                               |                                                                                                        |             |     |        |   |              | 0.3  |              |   |              |      |       |   |   |      |      |  |   |      |      |  |   | 0.3   |      
|                                                                   |                                                                                                        |             |      |        |   |              |      |              |   |              |       |       |   |   |       |      |  |   |       |      |  |   |       |      
|                                                                   | Earnings (loss) before taxes on income and
    minority interest                                       |             |      | (19.2  | ) |              |      | (25.6        | ) |              |       | (27.6 | ) |   |       | 21.0 |  |   |       | 42.7 |  |   |       | (8.7  | )
|Income tax provision                                               |                                                                                                        |             |     |        |   |              |     |              |   |              | 1.1   |       |   |   | 7.6   |      |  |   |      |      |  |   | 8.7   |      
|                                                                   |                                                                                                        |             |      |        |   |              |      |              |   |              |       |       |   |   |       |      |  |   |       |      |  |   |       |      
|                                                                   | Earnings (loss) before minority interest                                                               |             |      | (19.2  | ) |              |      | (25.6        | ) |              |       | (28.7 | ) |   |       | 13.4 |  |   |       | 42.7 |  |   |       | (17.4 | )
|                                                                   |                                                                                                        |             |      |        |   |              |      |              |   |              |       |       |   |   |       |      |  |   |       |      |  |   |       |      
|Minority interest                                                  |                                                                                                        |             |     |        |   |              |     |              |   |              |      |       |   |   | 1.8   |      |  |   |      |      |  |   | 1.8   |      
|                                                                   |                                                                                                        |             |      |        |   |              |      |              |   |              |       |       |   |   |       |      |  |   |       |      |  |   |       |      
|                                                                   | Net income (loss)                                                                                      |             | $    | (19.2  | ) |              | $    | (25.6        | ) |              | $     | (28.7 | ) |   | $     | 11.6 |  |   | $     | 42.7 |  |   | $     | (19.2 | )
|                                                                   |                                                                                                        |             |      |        |   |              |      |              |   |              |       |       |   |   |       |      |  |   |       |      |  |   |       |      

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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF
OPERATIONS

PREDECESSOR COMPANY

For the Four Months Ended May 31,
2003


(Dollars in millions)


|                                                                   |                                                                                                        |             |        |              |   |              |        |              |   |       |        |       |  |   |        |        |   |   |         |         |  
|------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------ | ----------- | ------ | ------------ | - | ------------ | ------ | ------------ | - | ----- | ------ | ----- |  | - | ------ | ------ | - | - | ------- | ------- | -
|                                                                   |                                                                                                        |             |        | Guarantor    |   | Nonguarantor |        |              |   |      
|                                                                   |                                                                                                        | Parent      |        | Subsidiaries |   | Subsidiaries |        | Eliminations |   | Total
|                                                                   |                                                                                                        |             |        |              |   |              |        |              |   |      
|                                                                   |                                                                                                        |            
|                                                                   |                                                                                                        | (Unaudited)
|Net sales                                                          |                                                                                                        | $           | 61.0   |              |   | $            | 330.3  |              |   | $     | 307.0  |       |  | $ | (8.5   | )      |   | $ | 689.8   |        
|Cost of goods sold                                                 |                                                                                                        |             | 61.3   |              |   |              | 297.6  |              |   |       | 260.9  |       |  |   | (8.5   | )      |   |   | 611.3   |        
|                                                                   |                                                                                                        |             |        |              |   |              |        |              |   |       |        |       |  |   |        |        |   |   |         |        
|                                                                   | Gross profit (loss)                                                                                    |             |        | (0.3         | ) |              |        | 32.7         |   |       |        | 46.1  |  |   |        |       |   |   |         | 78.5    |  
|Marketing, general and administrative                              |                                                                                                        |             | 5.5    |              |   |              | 19.1   |              |   |       | 18.5   |       |  |   | (1.5   | )      |   |   | 41.6    |        
|Equity in (earnings) losses of subsidiaries
    and joint ventures |                                                                                                        |             | (132.1 | )            |   |              | (7.9   | )            |   |       | (0.1   | )     |  |   | 140.1  |        |   |   |        |        
|Asset impairments and other restructuring charges                  |                                                                                                        |             | 0.3    |              |   |              | 4.9    |              |   |       | 1.2    |       |  |   |       |        |   |   | 6.4     |        
|Other expense (income), net                                        |                                                                                                        |             | (0.3   | )            |   |              | (1.4   | )            |   |       | (1.0   | )     |  |   | 0.8    |        |   |   | (1.9    | )      
|Fresh Start accounting adjustments                                 |                                                                                                        |             |       |              |   |              | 253.4  |              |   |       | (316.5 | )     |  |   |       |        |   |   | (63.1   | )      
|Reorganization items                                               |                                                                                                        |             | 13.3   |              |   |              | 31.7   |              |   |       |       |       |  |   |       |        |   |   | 45.0    |        
|                                                                   |                                                                                                        |             |        |              |   |              |        |              |   |       |        |       |  |   |        |        |   |   |         |        
|                                                                   | Earnings (loss) from operations                                                                        |             |        | 113.0        |   |              |        | (267.1       | ) |       |        | 344.0 |  |   |        | (139.4 | ) |   |         | 50.5    |  
|Interest expense, net                                              |                                                                                                        |             | 2.8    |              |   |              | 16.4   |              |   |       | 3.5    |       |  |   |       |        |   |   | 22.7    |        
|                                                                   |                                                                                                        |             |        |              |   |              |        |              |   |       |        |       |  |   |        |        |   |   |         |        
|                                                                   | Earnings (loss) before taxes on income, minority
    interest and extraordinary gain on debt discharge |             |        | 110.2        |   |              |        | (283.5       | ) |       |        | 340.5 |  |   |        | (139.4 | ) |   |         | 27.8    |  
|Income tax provision                                               |                                                                                                        |             | (0.3   | )            |   |              | 7.4    |              |   |       | 53.2   |       |  |   |       |        |   |   | 60.3    |        
|                                                                   |                                                                                                        |             |        |              |   |              |        |              |   |       |        |       |  |   |        |        |   |   |         |        
|                                                                   | Earnings (loss) before minority interest and
    extraordinary gain on debt discharge                  |             |        | 110.5        |   |              |        | (290.9       | ) |       |        | 287.3 |  |   |        | (139.4 | ) |   |         | (32.5   | )
|Minority interest                                                  |                                                                                                        |             |       |              |   |              |       |              |   |       | 1.2    |       |  |   |       |        |   |   | 1.2     |        
|                                                                   |                                                                                                        |             |        |              |   |              |        |              |   |       |        |       |  |   |        |        |   |   |         |        
|Earnings (loss) before extraordinary gain on debt
    discharge    |                                                                                                        |             | 110.5  |              |   |              | (290.9 | )            |   |       | 286.1  |       |  |   | (139.4 | )      |   |   | (33.7   | )      
|Extraordinary gain on debt discharge                               |                                                                                                        |             | 932.5  |              |   |              | 142.9  |              |   |       | 1.3    |       |  |   |       |        |   |   | 1,076.7 |        
|                                                                   |                                                                                                        |             |        |              |   |              |        |              |   |       |        |       |  |   |        |        |   |   |         |        
|                                                                   | Net income (loss)                                                                                      |             | $      | 1,043.0      |   |              | $      | (148.0       | ) |       | $      | 287.4 |  |   | $      | (139.4 | ) |   | $       | 1,043.0 |  
|                                                                   |                                                                                                        |             |        |              |   |              |        |              |   |       |        |       |  |   |        |        |   |   |         |        

29



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONDENSED CONSOLIDATING BALANCE
SHEETS

SUCCESSOR COMPANY

As of October 31, 2004


(Dollars in millions)


|                                         |                                            |             |       |        |  |              |         |              |   |              |       |       |  |   |       |         |  |   |          |          |   |   |       |         | 
|---------------------------------------- | ------------------------------------------ | ----------- | ----- | ------ |  | ------------ | ------- | ------------ | - | ------------ | ----- | ----- |  | - | ----- | ------- |  | - | -------- | -------- | - | - | ----- | ------- | 
|                                         |                                            |             |       |        |  | Guarantor    |         | Nonguarantor |   |              |       |      
|                                         |                                            | Parent      |       | Issuer |  | Subsidiaries |         | Subsidiaries |   | Eliminations |       | Total
|                                         |                                            |             |       |        |  |              |         |              |   |              |       |      
|                                         |                                            |            
|                                         |                                            | (Unaudited)
|Cash and cash equivalents                |                                            | $           |      |        |  | $            | (19.8   | )            |   | $            |      |       |  | $ | 47.6  |         |  | $ |         |          |   | $ | 27.8  |        
|Receivables                              |                                            |             |      |        |  |              | 0.1     |              |   |              | 150.3 |       |  |   | 227.1 |         |  |   |         |          |   |   | 377.5 |        
|Inventories                              |                                            |             |      |        |  |              | 6.1     |              |   |              | 81.6  |       |  |   | 106.9 |         |  |   |         |          |   |   | 194.6 |        
|Prepaid expenses and other               |                                            |             |      |        |  |              | 4.9     |              |   |              | 8.9   |       |  |   | 4.8   |         |  |   |         |          |   |   | 18.6  |        
|                                         |                                            |             |       |        |  |              |         |              |   |              |       |       |  |   |       |         |  |   |          |          |   |   |       |        
|                                         | Total current assets                       |             |       |       |  |              |         | (8.7         | ) |              |       | 240.8 |  |   |       | 386.4   |  |   |          |         |   |   |       | 618.5   | 
|Net property, plant and equipment        |                                            |             |      |        |  |              | 40.9    |              |   |              | 347.6 |       |  |   | 589.6 |         |  |   |         |          |   |   | 978.1 |        
|Goodwill and other assets                |                                            |             | 684.0 |        |  |              | 1,226.1 |              |   |              | 48.3  |       |  |   | 615.7 |         |  |   | (1,879.5 | )        |   |   | 694.6 |        
|                                         |                                            |             |       |        |  |              |         |              |   |              |       |       |  |   |       |         |  |   |          |          |   |   |       |        
|                                         | Total assets                               |             | $     | 684.0  |  |              | $       | 1,258.3      |   |              | $     | 636.7 |  |   | $     | 1,591.7 |  |   | $        | (1,879.5 | ) |   | $     | 2,291.2 | 
|                                         |                                            |             |       |        |  |              |         |              |   |              |       |       |  |   |       |         |  |   |          |          |   |   |       |        
|Bank borrowings and other notes          |                                            | $           |      |        |  | $            |        |              |   | $            |      |       |  | $ | 3.9   |         |  | $ |         |          |   | $ | 3.9   |        
|Current portion of long-term debt        |                                            |             |      |        |  |              | 4.5     |              |   |              | 1.1   |       |  |   | 5.5   |         |  |   |         |          |   |   | 11.1  |        
|Accounts payable and accrued liabilities |                                            |             |      |        |  |              | 76.2    |              |   |              | 92.9  |       |  |   | 228.3 |         |  |   |         |          |   |   | 397.4 |        
|                                         |                                            |             |       |        |  |              |         |              |   |              |       |       |  |   |       |         |  |   |          |          |   |   |       |        
|                                         | Total current liabilities                  |             |       |       |  |              |         | 80.7         |   |              |       | 94.0  |  |   |       | 237.7   |  |   |          |         |   |   |       | 412.4   | 
|Long-term debt, net of current portion   |                                            |             |      |        |  |              | 607.9   |              |   |              | 7.3   |       |  |   | 23.1  |         |  |   |         |          |   |   | 638.3 |        
|Pension and other long-term liabilities  |                                            |             |      |        |  |              | 262.3   |              |   |              | 0.4   |       |  |   | 254.5 |         |  |   |         |          |   |   | 517.2 |        
|Series A Warrants and Series B Warrants  |                                            |             | 0.7   |        |  |              |        |              |   |              |      |       |  |   |      |         |  |   |         |          |   |   | 0.7   |        
|Redeemable preferred stock of subsidiary |                                            |             |      |        |  |              | 11.1    |              |   |              |      |       |  |   |      |         |  |   |         |          |   |   | 11.1  |        
|Minority interest                        |                                            |             |      |        |  |              |        |              |   |              |      |       |  |   | 28.3  |         |  |   |         |          |   |   | 28.3  |        
|Parent loans                             |                                            |             | 0.1   |        |  |              | (340.5  | )            |   |              | (10.5 | )     |  |   | 350.3 |         |  |   | 0.6      |          |   |   |      |        
|Common stock                             |                                            |             | 0.4   |        |  |              |        |              |   |              |      |       |  |   |      |         |  |   |         |          |   |   | 0.4   |        
|Additional paid-in capital               |                                            |             | 670.0 |        |  |              | 663.0   |              |   |              | 617.3 |       |  |   | 584.5 |         |  |   | (1,864.8 | )        |   |   | 670.0 |        
|Retained earnings (accumulated deficit)  |                                            |             | (68.7 | )      |  |              | (47.1   | )            |   |              | (72.0 | )     |  |   | 52.9  |         |  |   | 66.2     |          |   |   | (68.7 | )      
|Accumulated other comprehensive loss     |                                            |             | 81.5  |        |  |              | 20.9    |              |   |              | 0.2   |       |  |   | 60.4  |         |  |   | (81.5    | )        |   |   | 81.5  |        
|                                         |                                            |             |       |        |  |              |         |              |   |              |       |       |  |   |       |         |  |   |          |          |   |   |       |        
|                                         | Total stockholders equity                 |             |       | 683.2  |  |              |         | 636.8        |   |              |       | 545.5 |  |   |       | 697.8   |  |   |          | (1,880.1 | ) |   |       | 683.2   | 
|                                         |                                            |             |       |        |  |              |         |              |   |              |       |       |  |   |       |         |  |   |          |          |   |   |       |        
|                                         | Total liabilities and stockholders equity |             | $     | 684.0  |  |              | $       | 1,258.3      |   |              | $     | 636.7 |  |   | $     | 1,591.7 |  |   | $        | (1,879.5 | ) |   | $     | 2,291.2 | 
|                                         |                                            |             |       |        |  |              |         |              |   |              |       |       |  |   |       |         |  |   |          |          |   |   |       |        

30



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONDENSED CONSOLIDATING BALANCE
SHEETS

SUCCESSOR COMPANY

As of January 31, 2004


(Dollars in millions)


|                                             |                                            |             |       |        |  |              |         |              |  |              |       |       |  |   |       |         |  |   |          |          |   |   |       |         | 
|-------------------------------------------- | ------------------------------------------ | ----------- | ----- | ------ |  | ------------ | ------- | ------------ |  | ------------ | ----- | ----- |  | - | ----- | ------- |  | - | -------- | -------- | - | - | ----- | ------- | 
|                                             |                                            |             |       |        |  | Guarantor    |         | Nonguarantor |  |              |       |      
|                                             |                                            | Parent      |       | Issuer |  | Subsidiaries |         | Subsidiaries |  | Eliminations |       | Total
|                                             |                                            |             |       |        |  |              |         |              |  |              |       |      
|                                             |                                            |            
|                                             |                                            | (Unaudited)
|Cash and cash equivalents                    |                                            | $           |      |        |  | $            | (3.2    | )            |  | $            | (0.6  | )     |  | $ | 52.3  |         |  | $ |         |          |   | $ | 48.5  |        
|Receivables                                  |                                            |             |      |        |  |              | 1.2     |              |  |              | 133.1 |       |  |   | 191.2 |         |  |   |         |          |   |   | 325.5 |        
|Inventories                                  |                                            |             |      |        |  |              | 5.7     |              |  |              | 86.5  |       |  |   | 97.1  |         |  |   |         |          |   |   | 189.3 |        
|Prepaid expenses and other                   |                                            |             |      |        |  |              | 6.8     |              |  |              | 8.9   |       |  |   | 13.3  |         |  |   |         |          |   |   | 29.0  |        
|                                             |                                            |             |       |        |  |              |         |              |  |              |       |       |  |   |       |         |  |   |          |          |   |   |       |        
|                                             | Total current assets                       |             |       |       |  |              |         | 10.5         |  |              |       | 227.9 |  |   |       | 353.9   |  |   |          |         |   |   |       | 592.3   | 
|Net property, plant and equipment            |                                            |             |      |        |  |              | 36.6    |              |  |              | 355.5 |       |  |   | 574.4 |         |  |   |         |          |   |   | 966.5 |        
|Goodwill and other assets                    |                                            |             | 604.1 |        |  |              | 1,290.7 |              |  |              | 83.3  |       |  |   | 618.9 |         |  |   | (1,858.1 | )        |   |   | 738.9 |        
|                                             |                                            |             |       |        |  |              |         |              |  |              |       |       |  |   |       |         |  |   |          |          |   |   |       |        
|                                             | Total assets                               |             | $     | 604.1  |  |              | $       | 1,337.8      |  |              | $     | 666.7 |  |   | $     | 1,547.2 |  |   | $        | (1,858.1 | ) |   | $     | 2,297.7 | 
|                                             |                                            |             |       |        |  |              |         |              |  |              |       |       |  |   |       |         |  |   |          |          |   |   |       |        
|Bank borrowings and other notes              |                                            | $           |      |        |  | $            |        |              |  | $            |      |       |  | $ | 14.2  |         |  | $ |         |          |   | $ | 14.2  |        
|Current portion of long-term debt            |                                            |             |      |        |  |              | 4.5     |              |  |              |      |       |  |   | 6.8   |         |  |   |         |          |   |   | 11.3  |        
|Accounts payable and accrued liabilities     |                                            |             |      |        |  |              | 83.3    |              |  |              | 83.8  |       |  |   | 188.4 |         |  |   |         |          |   |   | 355.5 |        
|                                             |                                            |             |       |        |  |              |         |              |  |              |       |       |  |   |       |         |  |   |          |          |   |   |       |        
|                                             | Total current liabilities                  |             |       |        |  |              |         |             |  |              |       | 87.8  |  |   |       | 83.8    |  |   |          | 209.4    |   |   |       | 381.0   | 
|Long-term debt, net of current portion       |                                            |             |      |        |  |              | 714.3   |              |  |              | 8.4   |       |  |   | 29.7  |         |  |   |         |          |   |   | 752.4 |        
|Pension and other long-term liabilities      |                                            |             |      |        |  |              | 263.1   |              |  |              | 0.4   |       |  |   | 263.0 |         |  |   |         |          |   |   | 526.5 |        
|Series A Warrants and Series B Warrants      |                                            |             | 8.2   |        |  |              |        |              |  |              |      |       |  |   |      |         |  |   |         |          |   |   | 8.2   |        
|Redeemable preferred Stock of Subsidiary     |                                            |             |      |        |  |              | 10.5    |              |  |              |      |       |  |   |      |         |  |   |         |          |   |   | 10.5  |        
|Minority interest                            |                                            |             |      |        |  |              |        |              |  |              |      |       |  |   | 23.2  |         |  |   |         |          |   |   | 23.2  |        
|Parent loans                                 |                                            |             |      |        |  |              | (293.3  | )            |  |              | (24.5 | )     |  |   | 315.4 |         |  |   | 2.4      |          |   |   |      |        
|Liabilities subject to compromise            |                                            |             |      |        |  |              |        |              |  |              |      |       |  |   |      |         |  |   |         |          |   |   |      |        
|Common stock                                 |                                            |             | 0.3   |        |  |              |        |              |  |              |      |       |  |   |      |         |  |   |         |          |   |   | 0.3   |        
|Additional paid-in capital                   |                                            |             | 548.2 |        |  |              | 540.9   |              |  |              | 652.3 |       |  |   | 626.6 |         |  |   | (1,819.8 | )        |   |   | 548.2 |        
|Retained earnings (accumulated deficit)      |                                            |             | (46.5 | )      |  |              | (16.8   | )            |  |              | (53.5 | )     |  |   | 21.6  |         |  |   | 48.7     |          |   |   | (46.5 | )      
|Accumulated other comprehensive income loss) |                                            |             | 93.9  |        |  |              | 31.3    |              |  |              | (0.2  | )     |  |   | 58.3  |         |  |   | (89.4    | )        |   |   | 93.9  |        
|                                             |                                            |             |       |        |  |              |         |              |  |              |       |       |  |   |       |         |  |   |          |          |   |   |       |        
|                                             | Total stockholders equity                 |             |       | 595.9  |  |              |         | 555.4        |  |              |       | 598.6 |  |   |       | 706.5   |  |   |          | (1,860.5 | ) |   |       | 595.9   | 
|                                             |                                            |             |       |        |  |              |         |              |  |              |       |       |  |   |       |         |  |   |          |          |   |   |       |        
|                                             | Total liabilities and stockholders equity |             | $     | 604.1  |  |              | $       | 1,337.8      |  |              | $     | 666.7 |  |   | $     | 1,547.2 |  |   | $        | (1,858.1 | ) |   | $     | 2,297.7 | 
|                                             |                                            |             |       |        |  |              |         |              |  |              |       |       |  |   |       |         |  |   |          |          |   |   |       |        

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HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF CASH
FLOWS

SUCCESSOR COMPANY

For the Nine Months Ended October 31,
2004


(Dollars in millions)


|                                                           |                                                                                     |                                                  |   |        |   |              |       |              |       |              |      |       |       |   |       |       |       |   |   |   |   |   |       |        |        |  
|---------------------------------------------------------- | ----------------------------------------------------------------------------------- | ------------------------------------------------ | - | ------ | - | ------------ | ----- | ------------ | ----- | ------------ | ---- | ----- | ----- | - | ----- | ----- | ----- | - | - | - | - | - | ----- | ------ | ------ | -
|                                                           |                                                                                     |                                                  |   |        |   | Guarantor    |       | Nonguarantor |       |              |      |      
|                                                           |                                                                                     | Parent                                           |   | Issuer |   | Subsidiaries |       | Subsidiaries |       | Eliminations |      | Total
|                                                           |                                                                                     |                                                  |   |        |   |              |       |              |       |              |      |      
|                                                           |                                                                                     |                                                 
|                                                           |                                                                                     | (Unaudited)                                     
|Cash flows provided by (used for) operating
    activities |                                                                                     | $                                                |  |        |   | $            | (24.3 | )            |       | $            | 32.7 |       |       | $ | 93.8  |       |       | $ |  |   |   | $ | 102.2 |       
|                                                           |                                                                                     |                                                  |   |        |   |              |       |              |       |              |      |       |       |   |       |       |       |   |   |   |   |   |       |       
|Cash flows from investing activities:                      |                                                                                     |                                                  |   |        |   |              |       |              |       |              |      |       |       |   |       |       |       |   |   |   |   |   |       |       
|                                                           | Acquisition of property, plant, equipment, and
    tooling                          |                                                  |   |       |   |              |       | (7.0         | )     |              |      | (45.3 | )     |   |       | (56.9 | )     |   |   |  |   |   |       | (109.2 | )     
|                                                           | Proceeds from sale of non-core businesses                                           |                                                  |   |       |   |              |       | 0.5          |       |              |      | 0.1   |       |   |       |      |       |   |   |  |   |   |       | 0.6    |       
|                                                           |                                                                                     |                                                  |   |        |   |              |       |              |       |              |      |       |       |   |       |       |       |   |   |   |   |   |       |       
|                                                           |                                                                                     | Cash used for investing activities               |   |        |  |              |       |              | (6.5  | )            |      |       | (45.2 | ) |       |       | (56.9 | ) |   |   |  |   |       |        | (108.6 | )
|                                                           |                                                                                     |                                                  |   |        |   |              |       |              |       |              |      |       |       |   |       |       |       |   |   |   |   |   |       |       
|Cash flows from financing activities:                      |                                                                                     |                                                  |   |        |   |              |       |              |       |              |      |       |       |   |       |       |       |   |   |   |   |   |       |       
|                                                           | Changes in bank borrowings and credit facility                                      |                                                  |   |       |   |              |       |             |       |              |      |      |       |   |       | 2.8   |       |   |   |  |   |   |       | 2.8    |       
|                                                           | Repayment of notes payable issued in connection
    with the purchase of businesses |                                                  |   |       |   |              |       |             |       |              |      |      |       |   |       | (13.1 | )     |   |   |  |   |   |       | (13.1  | )     
|                                                           | Repayment of long term debt                                                         |                                                  |   |       |   |              |       | (3.0         | )     |              |      |      |       |   |       | (5.2  | )     |   |   |  |   |   |       | (8.2   | )     
|                                                           | Net proceeds from the issuance of common stock                                      |                                                  |   | 117.0  |   |              |       |             |       |              |      |      |       |   |       |      |       |   |   |  |   |   |       | 117.0  |       
|                                                           | Capital contribution                                                                |                                                  |   | (117.0 | ) |              |       | 117.0        |       |              |      |      |       |   |       |      |       |   |   |  |   |   |       |       |       
|                                                           | Redemption of New Senior Notes, net                                                 |                                                  |   |        |   |              |       |              |       |              |      |       |       |   |       |       |       |   |   |   |   |   |       |        |       
|                                                           |                                                                                     | of discount and related fees                     |   |        |  |              |       |              | (96.7 | )            |      |       |      |   |       |       |      |   |   |   |  |   |       |        | (96.7  | )
|                                                           | Prepayment of New Term Loan, net of related fees                                    |                                                  |   |       |   |              |       | (16.0        | )     |              |      |      |       |   |       |      |       |   |   |  |   |   |       | (16.0  | )     
|                                                           |                                                                                     |                                                  |   |        |   |              |       |              |       |              |      |       |       |   |       |       |       |   |   |   |   |   |       |       
|                                                           |                                                                                     | Cash provided by (used for) financing activities |   |        |  |              |       |              | 1.3   |              |      |       |      |   |       |       | (15.5 | ) |   |   |  |   |       |        | (14.2  | )
|Increase (decrease) in parent loans and advances           |                                                                                     |                                                  |  |        |   |              | 12.9  |              |       |              | 13.1 |       |       |   | (26.0 | )     |       |   |  |   |   |   |      |       
|Effect of exchange rates of cash and cash
    equivalents  |                                                                                     |                                                  |  |        |   |              |      |              |       |              |     |       |       |   | (0.1  | )     |       |   |  |   |   |   | (0.1  | )     
|                                                           |                                                                                     |                                                  |   |        |   |              |       |              |       |              |      |       |       |   |       |       |       |   |   |   |   |   |       |       
|                                                           | Net increase (decrease) in cash and cash
    equivalents                            |                                                  |   |       |   |              |       | (16.6        | )     |              |      | 0.6   |       |   |       | (4.7  | )     |   |   |  |   |   |       | (20.7  | )     
|Cash and cash equivalents at beginning of period           |                                                                                     |                                                  |  |        |   |              | (3.2  | )            |       |              | (0.6 | )     |       |   | 52.3  |       |       |   |  |   |   |   | 48.5  |       
|                                                           |                                                                                     |                                                  |   |        |   |              |       |              |       |              |      |       |       |   |       |       |       |   |   |   |   |   |       |       
|Cash and cash equivalents at end of period                 |                                                                                     | $                                                |  |        |   | $            | (19.8 | )            |       | $            |     |       |       | $ | 47.6  |       |       | $ |  |   |   | $ | 27.8  |       
|                                                           |                                                                                     |                                                  |   |        |   |              |       |              |       |              |      |       |       |   |       |       |       |   |   |   |   |   |       |       

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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF CASH
FLOWS

SUCCESSOR COMPANY

For the Five Months Ended October 31,
2003


(Dollars in millions)


|                                                           |                                                                                           |                                    |   |        |   |              |       |              |      |              |      |       |       |   |      |       |       |   |   |   |   |   |       |       |       |  
|---------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ---------------------------------- | - | ------ | - | ------------ | ----- | ------------ | ---- | ------------ | ---- | ----- | ----- | - | ---- | ----- | ----- | - | - | - | - | - | ----- | ----- | ----- | -
|                                                           |                                                                                           |                                    |   |        |   | Guarantor    |       | Nonguarantor |      |              |      |      
|                                                           |                                                                                           | Parent                             |   | Issuer |   | Subsidiaries |       | Subsidiaries |      | Eliminations |      | Total
|                                                           |                                                                                           |                                    |   |        |   |              |       |              |      |              |      |      
|                                                           |                                                                                           |                                   
|                                                           |                                                                                           | (Unaudited)                       
|Cash flows provided by (used for) operating
    activities |                                                                                           | $                                  |  |        |   | $            | (9.4  | )            |      | $            | 26.1 |       |       | $ | 37.8 |       |       | $ |  |   |   | $ | 54.5  |      
|Cash flows from investing activities:                      |                                                                                           |                                    |   |        |   |              |       |              |      |              |      |       |       |   |      |       |       |   |   |   |   |   |       |      
|                                                           | Acquisition of property, plant, equipment, and
    tooling                                |                                    |   |       |   |              |       | (1.9         | )    |              |      | (22.5 | )     |   |      | (16.7 | )     |   |   |  |   |   |       | (41.1 | )    
|                                                           | Proceeds from sale of assets and businesses                                               |                                    |   |       |   |              |       | 0.2          |      |              |      | 0.1   |       |   |      | 0.5   |       |   |   |  |   |   |       | 0.8   |      
|                                                           |                                                                                           |                                    |   |        |   |              |       |              |      |              |      |       |       |   |      |       |       |   |   |   |   |   |       |      
|                                                           |                                                                                           | Cash used for investing activities |   |        |  |              |       |              | (1.7 | )            |      |       | (22.4 | ) |      |       | (16.2 | ) |   |   |  |   |       |       | (40.3 | )
|                                                           |                                                                                           |                                    |   |        |   |              |       |              |      |              |      |       |       |   |      |       |       |   |   |   |   |   |       |      
|Cash flows from financing activities:                      |                                                                                           |                                    |   |        |   |              |       |              |      |              |      |       |       |   |      |       |       |   |   |   |   |   |       |      
|                                                           | Increase in bank borrowings, revolving facility
    and DIP facility                      |                                    |   |       |   |              |       |             |      |              |      |      |       |   |      | (11.9 | )     |   |   |  |   |   |       | (11.9 | )    
|                                                           | Repayment of Term Debt                                                                    |                                    |   |       |   |              |       |             |      |              |      |      |       |   |      | (1.1  | )     |   |   |  |   |   |       | (1.1  | )    
|                                                           | Repayment of bank borrowings, revolving facility,
    and long term debt from refinancing |                                    |   |       |   |              |       |             |      |              |      |      |       |   |      | (74.0 | )     |   |   |  |   |   |       | (74.0 | )    
|                                                           |                                                                                           |                                    |   |        |   |              |       |              |      |              |      |       |       |   |      |       |       |   |   |   |   |   |       |      
|                                                           |                                                                                           | Cash used for financing activities |   |        |  |              |       |              |     |              |      |       |      |   |      |       | (87.0 | ) |   |   |  |   |       |       | (87.0 | )
|Increase (decrease) in parent loans and advances           |                                                                                           |                                    |  |        |   |              | (78.6 | )            |      |              | (3.4 | )     |       |   | 82.0 |       |       |   |  |   |   |   |      |      
|Effect of exchange rates of cash and cash
    equivalents  |                                                                                           |                                    |  |        |   |              |      |              |      |              |     |       |       |   | 2.7  |       |       |   |  |   |   |   | 2.7   |      
|                                                           |                                                                                           |                                    |   |        |   |              |       |              |      |              |      |       |       |   |      |       |       |   |   |   |   |   |       |      
|                                                           | Net increase (decrease) in cash and cash
    equivalents                                  |                                    |   |       |   |              |       | (89.7        | )    |              |      | 0.3   |       |   |      | 19.3  |       |   |   |  |   |   |       | (70.1 | )    
|Cash and cash equivalents at beginning of period           |                                                                                           |                                    |  |        |   |              | 108.0 |              |      |              | (0.3 | )     |       |   | 71.4 |       |       |   |  |   |   |   | 179.1 |      
|                                                           |                                                                                           |                                    |   |        |   |              |       |              |      |              |      |       |       |   |      |       |       |   |   |   |   |   |       |      
|                                                           | Cash and cash equivalents at end of period                                                |                                    | $ |       |   |              | $     | 18.3         |      |              | $    |      |       |   | $    | 90.7  |       |   | $ |  |   |   | $     | 109.0 |      
|                                                           |                                                                                           |                                    |   |        |   |              |       |              |      |              |      |       |       |   |      |       |       |   |   |   |   |   |       |      

33



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HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF CASH
FLOWS

PREDECESSOR COMPANY

For the Four Months Ended May 31,
2003


(Dollars in millions)


|                                                           |                                                                                 |                                    |       |              |       |              |      |              |       |       |      |      |      |   |   |   |   |   |       |        |       |  
|---------------------------------------------------------- | ------------------------------------------------------------------------------- | ---------------------------------- | ----- | ------------ | ----- | ------------ | ---- | ------------ | ----- | ----- | ---- | ---- | ---- | - | - | - | - | - | ----- | ------ | ----- | -
|                                                           |                                                                                 |                                    |       | Guarantor    |       | Nonguarantor |      |              |       |      
|                                                           |                                                                                 | Parent                             |       | Subsidiaries |       | Subsidiaries |      | Eliminations |       | Total
|                                                           |                                                                                 |                                    |       |              |       |              |      |              |       |      
|                                                           |                                                                                 |                                   
|                                                           |                                                                                 | (Unaudited)                       
|Cash flows provided by (used for) operating
    activities |                                                                                 | $                                  | (7.5  | )            |       | $            | 14.7 |              |       | $     | 23.9 |      |      | $ |  |   |   | $ | 31.1  |       
|                                                           |                                                                                 |                                    |       |              |       |              |      |              |       |       |      |      |      |   |   |   |   |   |       |       
|Cash flows from investing activities:                      |                                                                                 |                                    |       |              |       |              |      |              |       |       |      |      |      |   |   |   |   |   |       |       
|                                                           | Acquisition of property, plant, equipment, and
    tooling                      |                                    |       | (24.9        | )     |              |      | (15.4        | )     |       |      | (9.6 | )    |   |   |  |   |   |       | (49.9  | )    
|                                                           | Proceeds from sale of non-core businesses                                       |                                    |       |             |       |              |      | 0.5          |       |       |      | 0.3  |      |   |   |  |   |   |       | 0.8    |      
|                                                           |                                                                                 |                                    |       |              |       |              |      |              |       |       |      |      |      |   |   |   |   |   |       |       
|                                                           |                                                                                 | Cash used for investing activities |       |              | (24.9 | )            |      |              | (14.9 | )     |      |      | (9.3 | ) |   |   |  |   |       |        | (49.1 | )
|                                                           |                                                                                 |                                    |       |              |       |              |      |              |       |       |      |      |      |   |   |   |   |   |       |       
|Cash flows from financing activities:                      |                                                                                 |                                    |       |              |       |              |      |              |       |       |      |      |      |   |   |   |   |   |       |       
|                                                           | Changes in bank borrowings, credit facilities,
    DIP facility and other notes |                                    |       | (59.7        | )     |              |      | (2.0         | )     |       |      |     |      |   |   |  |   |   |       | (61.7  | )    
|                                                           | Proceeds from debt issuance                                                     |                                    |       | 678.9        |       |              |      |             |       |       |      |     |      |   |   |  |   |   |       | 678.9  |      
|                                                           | Prepetition lenders payment                                                    |                                    |       | (477.3       | )     |              |      |             |       |       |      |     |      |   |   |  |   |   |       | (477.3 | )    
|                                                           | Payment to holders of Old Senior Notes                                          |                                    |       | (13.0        | )     |              |      |             |       |       |      |     |      |   |   |  |   |   |       | (13.0  | )    
|                                                           |                                                                                 |                                    |       |              |       |              |      |              |       |       |      |      |      |   |   |   |   |   |       |       
|                                                           | Cash provided by (used for) financing activities                                |                                    |       | 128.9        |       |              |      | (2.0         | )     |       |      |     |      |   |   |  |   |   |       | 126.9  |      
|Increase (decrease) in parent loans and advances           |                                                                                 |                                    | (1.9  | )            |       |              | 2.2  |              |       |       | (0.3 | )    |      |   |  |   |   |   |      |       
|Effect of exchange rates of cash and cash
    equivalents  |                                                                                 |                                    |      |              |       |              |     |              |       |       | 4.1  |      |      |   |  |   |   |   | 4.1   |       
|                                                           |                                                                                 |                                    |       |              |       |              |      |              |       |       |      |      |      |   |   |   |   |   |       |       
|                                                           | Net increase (decrease) in cash and cash
    equivalents                        |                                    |       | 94.6         |       |              |      |             |       |       |      | 18.4 |      |   |   |  |   |   |       | 113.0  |      
|Cash and cash equivalents at beginning of period           |                                                                                 |                                    | 13.3  |              |       |              |     |              |       |       | 52.8 |      |      |   |  |   |   |   | 66.1  |       
|                                                           |                                                                                 |                                    |       |              |       |              |      |              |       |       |      |      |      |   |   |   |   |   |       |       
|Cash and cash equivalents at end of period                 |                                                                                 | $                                  | 107.9 |              |       | $            |     |              |       | $     | 71.2 |      |      | $ |  |   |   | $ | 179.1 |       
|                                                           |                                                                                 |                                    |       |              |       |              |      |              |       |       |      |      |      |   |   |   |   |   |       |       



|         |                  
|-------- | -----------------
|Note 17. | Subsequent Events

On December 9, 2004 the Company established
an accounts receivable securitization facility, which will
provide up to $75.0 million in funding from commercial
paper conduits sponsored by commercial lenders. The actual
amount of funding available at any given time is based on
availability of eligible receivables and other customary
factors. Pursuant to the securitization facility, certain of the
Companys subsidiaries will sell trade accounts receivables
to a non-consolidated Special Purpose Entity which resells the
receivables to a Qualifying Special Purpose Entity which will
then pledge the receivables to secure borrowings from commercial
paper conduits. The securitization transactions will be
accounted for as sales of the receivables under the provisions
of SFAS No. 140 Accounting Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities, and will be removed from the consolidated
balance sheets. The proceeds received will be included in cash
flows from operating activities in the consolidated statements
of cash flows. Costs associated with the receivables facility
will be recorded as other expense in the consolidated statements

34



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HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

of operations. The Company expects to begin
selling receivables pursuant to the securitization program
during the fourth quarter of fiscal 2004.

Also on December 9, 2004, the Company
announced its plan to explore the potential divestiture of the
Commercial Highway Hub and Drum business. This includes
facilities in Berea, KY, Chattanooga, TN, and Mexico City,
Mexico.

35



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

Executive Summary

This discussion should be read in conjunction
with the Companys Annual Report on Form 10-K for the
fiscal year ended January 31, 2004 as filed with the
Securities and Exchange Commission on April 12, 2004 and
the other information included herein.



| |                 
| | ----------------
| | Company Overview

Unless otherwise indicated, references to
Company mean Hayes Lemmerz International, Inc. and
its subsidiaries, and references to fiscal year mean the
Companys year commencing on February 1 of that year and
ending on January 31 of the following year (i.e.,
fiscal 2004 refers to the period beginning
February 1, 2004 and ending January 31, 2005 and
fiscal 2003 refers to the period beginning
February 1, 2003 and ending January 31, 2004).

Originally founded in 1908, the Company is a
leading worldwide producer of aluminum and steel wheels for the
light vehicle market. The Company is a leading provider of steel
wheels for the commercial highway market and is also a leading
supplier in the high growth market for lightweight aluminum
products, including suspension, brake and powertrain components.
The Company is a leading supplier of the automotive wheels used
by Original Equipment Manufacturers (OEMs) in
North America and Europe. The Company has a global
footprint with 43 facilities and one joint venture located
in 14 countries around the world. The Company sells
products to every major North American, Japanese and
European manufacturer of passenger cars and light trucks, as
well as commercial highway vehicle customers throughout the
world.

The Company has a sales and marketing
organization of dedicated customer teams located in all major
vehicle producing regions. The Companys ability to support
its customers globally is further enhanced by the Companys
broad global presence in terms of sales offices, manufacturing
facilities and engineering/technical centers.

Also on December 9, 2004, the Company
announced its plan to explore the potential divestiture of the
Commercial Highway Hub and Drum business. This includes
facilities in Berea, KY, Chattanooga, TN, and Mexico City,
Mexico.

On December 5, 2001, the Company, 30 of its
wholly-owned domestic subsidiaries and one wholly-owned Mexican
subsidiary filed voluntary petitions under Chapter 11 of
the U.S. Bankruptcy Code. The Company emerged from
bankruptcy on June 3, 2003. In connection with the
emergence from Chapter 11, the Company entered into a
$550.0 million senior secured credit facility, as amended.
The New Credit Facility consists of a $450.0 million
six-year amortizing term loan (the New Term Loan)
and a five-year $100.0 million revolving credit facility.
In addition, HLI issued an aggregate of $250.0 million
principal amount of 10 1/2% senior notes due 2010 (the
New Senior Notes). On February 11, 2004, the
Company closed on a primary offering of 7.7 million shares
of common stock, and a secondary offering of 2.0 million
shares of its common stock. The Company used the net proceeds
that it received from the primary offering to redeem
$87.5 million aggregate principal amount, plus accrued and
unpaid interest thereon, of its outstanding New Senior Notes on
March 12, 2004, to prepay $16.0 million, plus accrued
and unpaid interest thereon, of its New Term Loan on
February 12, 2004, and for general corporate purposes.

In fiscal 2003, the Company had net sales of
$2.1 billion, with approximately 48% of the Companys
net sales for that period derived from international markets,
and in the first nine months of fiscal 2004, the Company had
sales of $1.7 billion, with approximately 50% of the
Companys net sales for that period derived from
international markets. The Company had earnings from operations
in fiscal 2003 of $62.0 million (which includes the impact
of certain gains and expenses related to its emergence from
Chapter 11 proceedings), and in the first nine months of
fiscal 2004, the Company had earnings from operations of
$42.9 million.

36



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##### Table of Contents





| |                   
| | ------------------
| | Chapter 11 Filings

On December 5, 2001, Hayes Lemmerz
International, Inc. (Old Hayes), 30 of its
wholly-owned domestic subsidiaries and one wholly-owned Mexican
subsidiary (collectively, the Debtors) filed
voluntary petitions for reorganization relief (the
Chapter 11 Filings or the Filings)
under Chapter 11 of the Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware (the
Bankruptcy Court).

On December 16, 2002, certain of the Debtors
filed a proposed joint plan of reorganization with the
Bankruptcy Court. On April 9, 2003, the Debtors filed a
modified first amended joint plan of reorganization (the
Plan of Reorganization) which received the requisite
support from creditors authorized to vote thereon. The following
five Debtors were not proponents of the Plan of
Reorganization and are not subject to the terms thereof: HLI
Netherlands Holdings, Inc., CMI Quaker Alloy, Inc., Hayes
Lemmerz Funding Company, LLC, Hayes Lemmerz Funding Corporation,
and Hayes Lemmerz International Import, Inc. (collectively, the
Non-reorganizing Debtors).

The Plan of Reorganization provided for the
cancellation of the existing common stock of the Company and the
issuance of cash, new common stock in the reorganized Company
and other property to certain creditors of the Company in
respect of certain classes of claims. The Plan of Reorganization
was confirmed by an order of the Bankruptcy Court on
May 12, 2003, which order has become final and
non-appealable.



| |                              
| | -----------------------------
| | Emergence from
    Chapter 11

On June 3, 2003 (the Effective
Date), Hayes Lemmerz International, Inc. and each of the
27 Debtors proposing the Plan of Reorganization emerged
from Chapter 11 proceedings pursuant to the Plan of
Reorganization, which was confirmed by an order of the
Bankruptcy Court on May 12, 2003, which order has become
final and non-appealable. The Non-reorganizing Debtors were not
proponents of the Plan of Reorganization and are not subject to
the terms thereof. On June 3, 2003, the Bankruptcy Court
entered an order dismissing the Chapter 11 Filings of the
Non-reorganizing Debtors.

Pursuant to the Plan of Reorganization, the
Company caused the formation of (i) a new holding company,
HLI Holding Company, Inc., a Delaware corporation
(HoldCo), (ii) HLI Parent Company, Inc., a
Delaware corporation and a wholly owned subsidiary of HoldCo
(ParentCo), and (iii) HLI Operating
Company, Inc, a Delaware corporation and a wholly owned
subsidiary of ParentCo (HLI). On the Effective Date,
(i) HoldCo was renamed Hayes Lemmerz International, Inc.
(New Hayes), (ii) New Hayes contributed to
ParentCo 30,000,000 shares of its common stock, par value
$.01 per share (the New Common Stock), and
957,447 series A warrants and
957,447 series B warrants to acquire New Common Stock
of New Hayes (the Series A Warrants and
Series B Warrants, respectively),
(iii) ParentCo in turn contributed such shares of New
Common Stock and Series A Warrants and Series B
Warrants to HLI and (iv) pursuant to an Agreement and
Plan of Merger, dated as of June 3, 2003 (the Merger
Agreement), between the Company and HLI, the Company was
merged with and into HLI (the Merger), with HLI
continuing as the surviving corporation.

Pursuant to the Plan of Reorganization and as a
result of the Merger, all of the issued and outstanding shares
of common stock, par value $.01 per share, of the Company
(the Old Common Stock), and any other outstanding
equity securities of the Company, including all options and
warrants, were cancelled. The holders of the existing voting
common stock of the Company immediately before confirmation did
not receive any voting shares of the emerging entity or any
other consideration under the Plan of Reorganization as a result
of their ownership interests of the Predecessor. This
represented a complete change of control in the ownership of the
Company. Promptly following the Merger, HLI distributed to
certain holders of allowed claims, under the terms of the Plan
of Reorganization, an amount in cash, the New Common Stock, the
Series A Warrants, the Series B Warrants and the
Preferred Stock (as defined below). Prior to the Merger, the Old
Common Stock was registered pursuant to Section 12(g) of
the Securities Exchange Act of 1934, as amended (the
Exchange Act). In reliance on Rule 12g-3(a) of
the Exchange Act, by virtue of the status of New Hayes as a
successor issuer to the Company, the New Common Stock is deemed
registered under

37



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##### Table of Contents



Section 12(g) of the Exchange Act. The
Company filed a Form 15 with the SEC to terminate the
registration of the Old Common Stock under the Exchange Act.


Pursuant to the terms of the Plan of
Reorganization, HLI issued 100,000 shares of Preferred
Stock, par value $1.00, of HLI (the Preferred Stock)
to the holders of certain allowed claims. In accordance with the
terms of the Preferred Stock, the shares of Preferred Stock are,
at the holders option, exchangeable into a number of fully
paid and nonassessable shares of New Common Stock equal to
(i) the aggregate liquidation preference of the shares of
Preferred Stock so exchanged ($100 per share plus all
accrued and unpaid dividends thereon (whether or not declared)
to the exchange date) divided by (ii) 125% of the
Emergence Share Price. As determined pursuant to the
terms of the Plan of Reorganization, the Emergence Share Price
is $18.50.

In connection with the Debtors emergence
from Chapter 11, on the Effective Date, HLI entered into a
$550.0 million senior secured credit facility, as amended
by Amendment No. 1 and Waiver to Credit Agreement, dated
October 16, 2003, Amendment No. 2 and Waiver to the
Credit Agreement dated February 6, 2004, by Amendment
No. 3 dated May 6, 2004, by Waiver to the Credit
Agreement dated June 1, 2004 and by Amendment No. 4,
Waiver and Consent to Credit Agreement dated November 10,
2004 (as amended, the New Credit Facility). The New
Credit Facility consists of a $450.0 million six-year
amortizing term loan (the New Term Loan) and a
five-year $100.0 million revolving credit facility (the
Revolving Credit Facility). In addition, HLI issued
on the Effective Date an aggregate of $250.0 million
principal amount of 10 1/2% senior notes due 2010 (the
New Senior Notes). The proceeds from the initial
$450.0 million of borrowings under the New Credit Facility
and the net proceeds from the New Senior Notes were used to make
payments required under the Plan of Reorganization, including
the repayment of the Companys DIP Facility and a payment
of $477.3 million to certain prepetition lenders, to pay
related transaction costs and to refinance certain debt.



| |                     
| | --------------------
| | Reorganization Items

Reorganization items as reported in the
consolidated statements of operations of the Predecessor
included herein are comprised of income, expense and loss items
that were realized or incurred by the Debtors as a direct result
of the Companys decision to reorganize under
Chapter 11. During the four months ended May 31, 2003
respectively, reorganization items were as follows (dollars in
millions):

|                                                  |  |              |      | 
|------------------------------------------------- |  | ------------ | ---- | 
|                                                  |  | Predecessor 
|                                                  |  |             
|                                                  |  | Four Months 
|                                                  |  | Ended       
|                                                  |  | May 31, 2003
|                                                  |  |             
|Critical employee retention plan provision        |  | $            | 11.7 | 
|Professional fees directly related to the Filings |  |              | 30.8 | 
|Creditors Trust obligation                       |  |              | 2.0  | 
|Other                                             |  |              | 0.5  | 
|                                                  |  |              |      | 
|Total                                             |  | $            | 45.0 | 
|                                                  |  |              |      | 

On May 30, 2002, the Bankruptcy Court
entered an order approving, among other things, the critical
employee retention plan (the CERP) filed with the
Bankruptcy Court in February 2002 which was designed to
compensate certain critical employees in order to assure their
retention and availability during the Companys
restructuring. The plan has two components which
(i) rewarded critical employees who remained with the
Company (and certain affiliates of the Company who are not
directly involved in the restructuring) during and through the
completion of the restructuring (the Retention
Bonus) and (ii) provided additional incentives
to a more limited group of the most senior critical employees if
the enterprise value upon completing the restructuring exceeded
an established baseline (the Restructuring Performance
Bonus).

Thirty-five percent, or approximately
$3.0 million, of the Retention Bonus was paid on
October 1, 2002. The remaining portion of the Retention
Bonus of approximately $5.9 million was paid on
June 13, 2003.

38



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Further, the Restructuring Performance Bonus
provided under the CERP was paid after the consummation of the
restructuring as discussed below.


Based on the Companys compromise total
enterprise value of $1,250.0 million as confirmed by the
Bankruptcy Court, the aggregate amount of the Restructuring
Performance Bonus is $12.1 million. Of the aggregate
$12.1 million, approximately $6.0 million was paid in
cash on July 1, 2003, and approximately $2.0 million
was paid on August 29, 2003 as determined by the
Companys Board of Directors. The remaining portion of the
Restructuring Performance Bonus was paid in 215,935 shares
of restricted units of New Hayes on July 28, 2003. Pursuant
to provisions contained in the CERP, the restricted units will
vest as follows, subject to the participants continued
employment:



| |   |                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------
| |  | one half of the restricted units vested on
    June 3, 2004, the first anniversary of the Effective Date,
    and;
|
| |  | one half of the restricted units will vest on the
    second anniversary of the Effective Date.                   

Cash payments with respect to other
reorganization items consisted primarily of professional fees
and cure payments and were approximately $20.3 million and
$21.2 million during the five months ended
October 31, 2003 and the four months ended May 31,
2003, respectively.

As a result of the application of fresh start
accounting on May 31, 2003, and in accordance with
SOP 90-7, the post-emergence financial results of the
Company for the period ending October 31, 2003 are
presented as the Successor and the pre-emergence
financial results of the Company for the period ending
May 31, 2003 are presented as the Predecessor.
Comparative financial statements do not straddle the Effective
Date because in effect the Successor Company represents a new
entity. As a result of applying fresh start accounting the
Successor will have increased depreciation and amortization
expense, no reorganization items, no fresh start accounting
adjustments and lower interest expense in comparison to the
Predecessor. Depreciation expense of the Successor is expected
to be approximately $7.5 million higher annually resulting
from: (a) an increase in the carrying value of certain
plant, equipment and tooling to fair value under fresh start
accounting; (b) revisions to remaining estimated useful
lives under fresh start accounting; and (c) the increase in
the carrying value of other property, plant, equipment and
tooling from refinancing certain synthetic leases. Amortization
expense of the Successor is expected to be approximately
$10.4 million higher annually resulting from an increase in
the carrying value of definite-lived intangible assets to fair
value under fresh start accounting. Interest expense is expected
to decrease resulting from the Successors new capital
structure.

For purposes of the periods presented in
Managements Discussion and Analysis of Financial Condition
and Result of Operations, the Successor five months ended
October 31, 2003 and the Predecessor four months ended
May 31, 2003 have been combined for convenience of
discussion and are collectively referred to as fiscal 2003
nine months.

Results of Operations

Sales of the Companys wheels, wheel-end
attachments, aluminum structural components and brake components
produced in North America are directly affected by the overall
level of passenger car, light truck and commercial highway
vehicle production of North American OEMs, while sales of its
wheels and automotive castings in Europe are directly affected
by the overall vehicle production in Europe. The North American
and European automotive industries are sensitive to the overall
strength of their respective economies.

The Company is organized based primarily on
markets served and products produced. Under this organization
structure, the Companys operating segments have been
aggregated into three reportable segments: Automotive Wheels,
Components and Other. The Automotive Wheels segment includes
results from the Companys operations that primarily design
and manufacture fabricated steel and cast aluminum wheels for
original equipment manufacturers in the global passenger car and
light vehicle markets. The Components segment includes results
from the Companys operations that primarily design and
manufacture suspension, brake and powertrain components for
original equipment manufacturers in the global passenger car and
light vehicle markets. The Other segment includes results from
the Companys operations that

39



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##### Table of Contents



primarily design and manufacture wheel and brake
products for commercial highway and aftermarket customers in
North America. The Other segment also includes financial results
related to the Companys corporate office and elimination
of certain intercompany activities.




| |                                                                                             
| | --------------------------------------------------------------------------------------------
| | Three Months Ended October 31, 2004
    Compared to Three Months Ended October 31,
    2003:



| |          
| | ---------
| | Net Sales

|                  |       |                                |       |       |  |          |       |       |  |   |       |      | 
|----------------- | ----- | ------------------------------ | ----- | ----- |  | -------- | ----- | ----- |  | - | ----- | ---- | 
|                  |       |                               
|                  |       | Three Months Ended October 31,
|                  |       |                               
|                  |       | 2004                           |       | 2003  |  | $ Change
|                  |       |                                |       |       |  |         
|                  |       |                               
|                  |       | (millions)                    
|Automotive Wheels |       | $                              | 344.3 |       |  | $        | 310.1 |       |  | $ | 34.2  |     
|Components        |       |                                | 173.6 |       |  |          | 188.8 |       |  |   | (15.2 | )   
|Other             |       |                                | 38.3  |       |  |          | 32.0  |       |  |   | 6.3   |     
|                  |       |                                |       |       |  |          |       |       |  |   |       |     
|                  | Total |                                | $     | 556.2 |  |          | $     | 530.9 |  |   | $     | 25.3 | 
|                  |       |                                |       |       |  |          |       |       |  |   |       |     

The Companys net sales increased 4.8%, or
$25.3 million, to $556.2 million in the third quarter of
fiscal 2004 from $530.9 million in the third quarter of
2003. The Company acquired a controlling interest in its joint
venture in Turkey during the fourth quarter of 2003, the
consolidation of those sales in 2004 and increases in
international volumes, increased net sales by $37 million.
Foreign exchange rate fluctuations relative to the U.S. dollar
were favorable during the third quarter of 2004, which increased
sales by approximately $17 million. Partially offsetting
these increases was a decrease of $28 million in North
American volumes due to lower OEM production requirements.

Net sales from the Companys Automotive
Wheels segment increased 11.0%, or $34.2 million to
$344.3 million in the third quarter of fiscal 2004 from
$310.1 million in the third quarter of 2003. The Company
acquired a controlling interest in its joint venture in Turkey
during the fourth quarter of 2003, the consolidation of those
sales in 2004 and increases in international volumes, increased
net sales by $33 million. Foreign exchange rate
fluctuations relative to the U.S. dollar were favorable during
the third quarter of 2004, which increased sales by
approximately $15 million. The combination of pricing
pressures caused by new competitors in foreign markets, such as
China, and lower production requirements on existing OEM
programs in North America reduced sales by approximately
$14 million.

Net sales from Components decreased 8.1%, or
$15.2 million to $173.6 million in third quarter 2004
from $188.8 million in third quarter 2003. Components net
sales decreased by approximately $18 million due to lower
customer production requirements, unfavorable product mix and
decreased unit pricing globally. Partially offsetting these
decreases were favorable foreign exchange rate fluctuations of
approximately $3 million and a slight increase in aluminum
pass through pricing.

Net sales from the Companys Other segment
increased 19.7%, or $6.3 million to $38.3 million
during third quarter 2004 from $32.0 million during third
quarter 2003. This increase was primarily due to higher volumes
and favorable pricing in the Companys commercial highway
and aftermarket operations, as demand for Class 8 trucks
and commercial highway trailers in North America increased
year-over-year.

40



---



##### Table of Contents





| |                                
| | -------------------------------
| | Earnings (Loss) from Operations

The following tables present earnings (loss) from
operations, as well as other information by segment (dollars in
millions):

|                                                   |                                                |                                                             |      |            |      |       |      |       |      |   |     |   |   |   |     |      |      |  
|-------------------------------------------------- | ---------------------------------------------- | ----------------------------------------------------------- | ---- | ---------- | ---- | ----- | ---- | ----- | ---- | - | --- | - | - | - | --- | ---- | ---- | -
|                                                   |                                                |                                                            
|                                                   |                                                | Three Months Ended October 31, 2004                        
|                                                   |                                                |                                                            
|                                                   |                                                | Automotive                                                  |      |           
|                                                   |                                                | Wheels                                                      |      | Components |      | Other |      | Total
|                                                   |                                                |                                                             |      |            |      |       |      |      
|Earnings (loss) from operations                    |                                                | $                                                           | 15.3 |            |      | $     | (8.5 | )     |      | $ | 0.4 |   |   | $ | 7.2 |     
|Asset impairments and other restructuring charges: |                                                |                                                             |      |            |      |       |      |       |      |   |     |   |   |   |     |     
|                                                   | Facility closure costs                         |                                                             | $    | (0.7       | )    |       | $    |      |      |   | $   |  |   |   | $   | (0.7 | )   
|                                                   | Impairment of machinery, equipment and tooling |                                                             |      | (0.7       | )    |       |      |      |      |   |     |  |   |   |     | (0.7 | )   
|                                                   | Severance and other restructuring costs        |                                                             |      | (0.9       | )    |       |      | (0.6  | )    |   |     |  |   |   |     | (1.5 | )   
|                                                   |                                                |                                                             |      |            |      |       |      |       |      |   |     |   |   |   |     |     
|                                                   |                                                | Total asset impairments and other restructuring
    charges |      | $          | (2.3 | )     |      | $     | (0.6 | ) |     | $ |  |   |     | $    | (2.9 | )
|                                                   |                                                |                                                             |      |            |      |       |      |       |      |   |     |   |   |   |     |     

|                                                   |                                                |                                                             |      |            |       |       |     |       |      |   |      |   |   |   |      |       |       |  
|-------------------------------------------------- | ---------------------------------------------- | ----------------------------------------------------------- | ---- | ---------- | ----- | ----- | --- | ----- | ---- | - | ---- | - | - | - | ---- | ----- | ----- | -
|                                                   |                                                |                                                            
|                                                   |                                                | Three Months Ended October 31, 2003                        
|                                                   |                                                |                                                            
|                                                   |                                                | Automotive                                                  |      |           
|                                                   |                                                | Wheels                                                      |      | Components |       | Other |     | Total
|                                                   |                                                |                                                             |      |            |       |       |     |      
|Earnings (loss) from operations                    |                                                | $                                                           | 10.6 |            |       | $     | 4.8 |       |      | $ | (1.5 | ) |   | $ | 13.9 |      
|Asset impairments and other restructuring charges: |                                                |                                                             |      |            |       |       |     |       |      |   |      |   |   |   |      |      
|                                                   | Impairment of manufacturing facilities         |                                                             | $    |           |       |       | $   | (0.8  | )    |   | $    |  |   |   | $    | (0.8  | )    
|                                                   | Impairment of machinery, equipment and tooling |                                                             |      | (12.1      | )     |       |     | (6.7  | )    |   |      |  |   |   |      | (18.8 | )    
|                                                   |                                                |                                                             |      |            |       |       |     |       |      |   |      |   |   |   |      |      
|                                                   |                                                | Total asset impairments and other restructuring
    charges |      | $          | (12.1 | )     |     | $     | (7.5 | ) |      | $ |  |   |      | $     | (19.6 | )
|                                                   |                                                |                                                             |      |            |       |       |     |       |      |   |      |   |   |   |      |      

The Companys earnings from operations
decreased $6.7 million in the third quarter of fiscal 2004
to $7.2 million from earnings of $13.9 million in the
third quarter of fiscal 2003. Adjusted for the net impact of
foreign exchange rate fluctuations relative to the
U.S. dollar, the Companys earnings from operations
decreased approximately $8.3 million from fiscal 2003.
Increased volumes abroad were offset by lower OEM production
requirements in North America, lower unit pricing globally, and
increased steel and iron prices.

Earnings from operations at the Companys
Automotive Wheels operations increased $4.7 million in the
third quarter of fiscal 2004 to $15.3 million compared to
$10.6 million in the fiscal 2003. Increased volumes abroad,
improved operating performance and the impact of consolidating
earnings from the Companys Turkey facility, in which
controlling interest was acquired during the fourth quarter of
fiscal 2003, increased earnings by approximately
$5 million. Favorable fluctuations in foreign exchange
rates relative to the U.S. dollar increased earnings
approximately $2 million. Lower OEM production requirements
in North America, increased steel pricing, an unfavorable
product mix and lower unit pricing globally were some of the
factors which negatively impacted earnings operations by
approximately $12 million. During the third quarter of
fiscal 2004, the Companys Automotive Wheels segment
recorded facility closure and severance costs of approximately
$2.3 million primarily associated with the Companys
Howell, Michigan facility and the rationalization of its South
African facilitys workforce. During the third quarter of
fiscal 2003, the Company recorded asset impairment losses of
$12.1 million based on its most recent sales projections,
which estimated that the future undiscounted cash flows from its
La Mirada, California and Gainesville, Georgia
manufacturing facilities would not be sufficient to recover the
carrying value of the fixed assets at those facilities.

Components earnings from operations decreased by
$13.3 million in the third quarter of fiscal 2004 to a loss
of $8.5 million compared to earnings of $4.8 million
during the same period in fiscal 2003. Lower OEM production
requirements, decreased unit pricing, unfavorable product mix
and increased steel and iron prices decreased earnings from
operations by approximately $16 million in the third
quarter of fiscal 2004. Favorable international volumes and
decreases in depreciation costs were offset by unfavorable
operating performance and increased selling, administrative and
engineering costs, which decreased earnings from operations

41



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##### Table of Contents



approximately $5 million. In the third
quarter of fiscal 2003, the Company recorded asset impairment
losses of $7.5 million at its Wabash, Indiana facility
based on its most recent sales projections, which estimated that
the future undiscounted cash flows would not be sufficient to
recover the carrying value of the fixed assets at that facility.


Earnings from operations in the Companys
Other segment increased by $1.9 million in the third
quarter of fiscal 2004 to $0.4 million from a loss of
$1.5 million in the third quarter of 2003. The
Companys commercial highway and aftermarket operations
experienced increased volumes, partially offset by an
unfavorable product mix, which increased earnings by
approximately $1 million. Also favorably impacting earnings
was improved operating performance, partially offset by
increased depreciation costs, which increased earnings by
approximately $1 million.



| |                      
| | ---------------------
| | Interest Expense, Net

Interest expense decreased 39.8%, or
$6.6 million to $10.0 million for the third quarter of
fiscal 2004 from $16.6 million for the third quarter of
fiscal 2003. The decreased interest expense in the third quarter
of 2004 was primarily due to an overall reduction in debt
levels, primarily arising from debt redeemed as a result of the
Companys equity offering in February 2004. See
Notes 1 and 8 to the consolidated financial statements
included herein regarding the Companys new capital
structure.

Additionally, interest expense, net, includes a
$2.3 million and $1.9 million reduction to interest expense
for the third quarter of fiscal 2004 and fiscal 2003,
respectively as the result of adjusting to fair value the
Companys outstanding Series A Warrants and
Series B Warrants, which are recorded as liabilities on the
consolidated balance sheet as of October 31, 2004 and
October 31, 2003, respectively.



| |             
| | ------------
| | Income Taxes

Income tax expense was $3.7 million on
pre-tax loss of $3.9 million and $6.1 million on
pre-tax loss of $2.9 million for the third quarter of
fiscal 2004 and fiscal 2003, respectively. The income tax rate
varies from the United States statutory income tax rate of 35%
due primarily to losses in the United States without recognition
of a corresponding income tax benefit.



| |         
| | --------
| | Net Loss

Due to the factors mentioned above, net loss
decreased $0.5 million, to $9.5 million in 2004 from
$10.0 million in 2003.



| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | Nine Months Ended October 31, 2004
    Compared to Nine Months Ended October 31,
    2003



| |          
| | ---------
| | Net Sales

|                  |       |                               |         |         |  |          |       |         |  |   |       |       | 
|----------------- | ----- | ----------------------------- | ------- | ------- |  | -------- | ----- | ------- |  | - | ----- | ----- | 
|                  |       |                              
|                  |       | Nine Months Ended October 31,
|                  |       |                              
|                  |       | 2004                          |         | 2003    |  | $ Change
|                  |       |                               |         |         |  |         
|                  |       |                              
|                  |       | (millions)                   
|Automotive Wheels |       | $                             | 1,019.5 |         |  | $        | 912.9 |         |  | $ | 106.6 |      
|Components        |       |                               | 532.1   |         |  |          | 547.5 |         |  |   | (15.4 | )    
|Other             |       |                               | 122.4   |         |  |          | 88.6  |         |  |   | 33.8  |      
|                  |       |                               |         |         |  |          |       |         |  |   |       |      
|                  | Total |                               | $       | 1,674.0 |  |          | $     | 1,549.0 |  |   | $     | 125.0 | 
|                  |       |                               |         |         |  |          |       |         |  |   |       |      

The Companys net sales increased 8.1%, or
$125.0 to $1,674.0 million in the nine months ended
October 31, 2004 from $1,549.0 million in the nine
months ended October 31, 2003 million. After adjusting
for the net impact of favorable exchange rate fluctuations
relative to the U.S. dollar, net sales for the first nine
months of 2004 improved 3.9% or approximately $60.9 million
compared to the same period in 2003.

Net sales from the Companys Automotive
Wheels segment increased $106.6 million from
$912.9 million in the first nine months of fiscal 2003 to
$1,019.5 million in the first nine months of fiscal 2004.
Automotive

42



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##### Table of Contents



Wheels net sales were favorably impacted by
foreign exchange rate fluctuations relative to the
U.S. dollar, which increased sales by approximately
$56 million. The remaining increase in sales is primarily
due to increased sales volumes in the Companys
international markets and the impact of consolidating sales from
the Companys facility in Turkey after having acquired a
controlling interest in the facility during the fourth quarter
of fiscal 2003. Additionally, sales increased slightly due to
aluminum pass through pricing. These increases were partially
offset by decreased unit pricing globally and an unfavorable
product mix in North America.


Net sales from Components decreased
$15.4 million to $532.1 in the first nine months of fiscal
2004 from $547.5 million in the first nine months of 2003.
The decrease in Components net sales was primarily due to lower
customer production requirements and lower unit pricing
globally, which was partially offset by a favorable product mix.
The impact of favorable foreign exchange rate fluctuations
increased net sales by approximately $9 million.

Net sales from the Other segment increased
$33.8 million from $88.6 million in the first nine
months of 2003 to $122.4 in the first nine months of fiscal
2004. This increase was primarily due to higher volumes in the
Companys commercial highway and aftermarket operations, as
demand for Class 8 trucks and commercial highway trailers
in North America increased year-over-year.



| |                                                                                                              
| | -------------------------------------------------------------------------------------------------------------
| | Earnings (Loss) from Operations Excluding
    Fresh Start Accounting Adjustments and Reorganization
    Items

Earnings (loss) from operations excluding fresh
start accounting adjustments and reorganization items is used as
a non-GAAP measure of the Companys profitability because
it excludes fresh start accounting adjustments and
reorganization items which do not represent normal operating
performance of the Company as these items relate only to the
Companys Chapter 11 Filings and emergence. Earnings
from operations excluding fresh start accounting adjustments and
reorganization items is calculated as follows (dollars in
millions):

|                                                                                                          |                                    |             |      |      |  |   |      |       |  
|--------------------------------------------------------------------------------------------------------- | ---------------------------------- | ----------- | ---- | ---- |  | - | ---- | ----- | -
|                                                                                                          |                                    |            
|                                                                                                          |                                    | Nine Months
|                                                                                                          |                                    | Ended      
|                                                                                                          |                                    | October 31,
|                                                                                                          |                                    |            
|                                                                                                          |                                    | 2004        |      | 2003
|                                                                                                          |                                    |             |      |     
|Earnings (loss) from operations                                                                           |                                    | $           | 42.9 |      |  | $ | 66.8 |      
|Excluding:                                                                                                |                                    |             |      |      |  |   |      |      
|                                                                                                          | Fresh start accounting adjustments |             |      |     |  |   |      | (63.1 | )
|                                                                                                          | Reorganization items               |             |      |     |  |   |      | 45.0  |  
|                                                                                                          |                                    |             |      |      |  |   |      |      
|Earnings (loss) from operations excluding fresh
    start accounting adjustments and reorganization items |                                    | $           | 42.9 |      |  | $ | 48.7 |      
|                                                                                                          |                                    |             |      |      |  |   |      |      

The following tables present earnings (loss) from
operations excluding fresh start accounting adjustments and
reorganization items, as well as other information by segment:

|                                                   |                                                |                                                             |      |            |      |       |      |       |      |   |     |   |   |   |      |      |      |  
|-------------------------------------------------- | ---------------------------------------------- | ----------------------------------------------------------- | ---- | ---------- | ---- | ----- | ---- | ----- | ---- | - | --- | - | - | - | ---- | ---- | ---- | -
|                                                   |                                                |                                                            
|                                                   |                                                | Nine Months Ended October 31, 2004                         
|                                                   |                                                |                                                            
|                                                   |                                                | Automotive                                                  |      |           
|                                                   |                                                | Wheels                                                      |      | Components |      | Other |      | Total
|                                                   |                                                |                                                             |      |            |      |       |      |      
|Earnings from operations                           |                                                | $                                                           | 46.7 |            |      | $     | (7.7 | )     |      | $ | 3.9 |   |   | $ | 42.9 |     
|Asset impairments and other restructuring charges: |                                                |                                                             |      |            |      |       |      |       |      |   |     |   |   |   |      |     
|                                                   | Facility closure costs                         |                                                             | $    | (1.0       | )    |       | $    | 0.2   |      |   | $   |  |   |   | $    | (0.8 | )   
|                                                   | Impairment of machinery, equipment and tooling |                                                             |      | (0.7       | )    |       |      |      |      |   |     |  |   |   |      | (0.7 | )   
|                                                   | Severance and other restructuring costs        |                                                             |      | (4.1       | )    |       |      | (0.6  | )    |   |     |  |   |   |      | (4.7 | )   
|                                                   |                                                |                                                             |      |            |      |       |      |       |      |   |     |   |   |   |      |     
|                                                   |                                                | Total asset impairments and other restructuring
    charges |      | $          | (5.8 | )     |      | $     | (0.4 | ) |     | $ |  |   |      | $    | (6.2 | )
|                                                   |                                                |                                                             |      |            |      |       |      |       |      |   |     |   |   |   |      |     

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|                                                                                   |                                                |                                                           |      |            |       |       |      |       |       |   |       |   |   |   |       |       |       |  
|---------------------------------------------------------------------------------- | ---------------------------------------------- | --------------------------------------------------------- | ---- | ---------- | ----- | ----- | ---- | ----- | ----- | - | ----- | - | - | - | ----- | ----- | ----- | -
|                                                                                   |                                                |                                                          
|                                                                                   |                                                | Nine Months Ended October 31, 2003                       
|                                                                                   |                                                |                                                          
|                                                                                   |                                                | Automotive                                                |      |           
|                                                                                   |                                                | Wheels                                                    |      | Components |       | Other |      | Total
|                                                                                   |                                                |                                                           |      |            |       |       |      |      
|Earnings (loss) from operations excluding fresh
    start and reorganization items |                                                | $                                                         | 46.7 |            |       | $     | 12.7 |       |       | $ | (10.7 | ) |   | $ | 48.7  |      
|Fresh start adjustments                                                            |                                                |                                                           | 57.9 |            |       |       | 27.7 |       |       |   | (22.5 | ) |   |   | 63.1  |      
|Reorganization items                                                               |                                                |                                                           | (0.1 | )          |       |       | 0.2  |       |       |   | (45.1 | ) |   |   | (45.0 | )    
|Asset impairments and other restructuring charges:                                 |                                                |                                                           |      |            |       |       |      |       |       |   |       |   |   |   |       |      
|                                                                                   | Impairment of manufacturing facilities         |                                                           | $    | (0.5       | )     |       | $    | (0.9  | )     |   | $     |  |   |   | $     | (1.4  | )    
|                                                                                   | Impairment of machinery, equipment and tooling |                                                           |      | (13.6      | )     |       |      | (10.0 | )     |   |       |  |   |   |       | (23.6 | )    
|                                                                                   | Facility closure costs                         |                                                           |      | (0.9       | )     |       |      |      |       |   |       |  |   |   |       | (0.9  | )    
|                                                                                   | Severance and other restructuring costs        |                                                           |      | (0.1       | )     |       |      |      |       |   |       |  |   |   |       | (0.1  | )    
|                                                                                   |                                                |                                                           |      |            |       |       |      |       |       |   |       |   |   |   |       |      
|                                                                                   |                                                | Total asset impairments and other restructuring
    costs |      | $          | (15.1 | )     |      | $     | (10.9 | ) |       | $ |  |   |       | $     | (26.0 | )
|                                                                                   |                                                |                                                           |      |            |       |       |      |       |       |   |       |   |   |   |       |      

The Companys earnings from operations
excluding fresh start accounting adjustments and reorganization
items decreased $5.8 million from $48.7 million in the
first nine months of fiscal 2003 to $42.9 million in the
first nine months of fiscal 2004. Adjusted for the net impact of
foreign exchange rate fluctuations relative to the
U.S. dollar, the Companys earnings from operations
excluding fresh start accounting adjustments and reorganization
items decreased approximately $12 million from fiscal 2003.
Decreased unit pricing, increased steel and iron prices, lower
OEM production requirements, and an unfavorable product mix were
partially offset by increased volumes abroad and improved
operating performance.

Earnings from operations excluding fresh start
accounting adjustments and reorganization items at the
Companys Automotive Wheels operations remained flat
between the first nine months of fiscal 2004 and the same period
in 2003. During the first nine months of fiscal 2004, increased
volumes abroad, improved operating performance and the impact of
consolidating earnings from the Companys Turkey facility,
in which controlling interest was acquired during the fourth
quarter of fiscal 2003, increased earnings by approximately
$30 million. Favorable fluctuations in foreign exchange
rates relative to the U.S. dollar increased earnings
approximately $6 million, but were offset by an increase in
depreciation and amortization of approximately $2 million,
primarily related to the Companys adoption of fresh start
accounting upon emergence from Chapter 11. This was offset
by lower OEM production requirements in North America, increased
steel pricing, various customer satisfaction issues and lower
unit pricing globally which decreased earnings from operations
by approximately $38 million. During the first nine months
of fiscal 2004, the Companys Automotive Wheels segment
recorded facility closure and severance costs of approximately
$5.8 million primarily associated with the Companys
Howell, Michigan facility. During the first nine months of
fiscal 2003, Automotive Wheels recorded asset impairment losses
and restructuring charges of $15.1 million primarily
related to its La Mirada, California and Gainesville,
Georgia manufacturing facilities.

Components earnings from operations excluding
fresh start accounting adjustments and reorganization items
decreased by $20.4 million in the first nine months of
fiscal 2004 compared to the same period in fiscal 2003. During
the first nine months of 2004, earnings were negatively impacted
approximately $27 million by decreased unit pricing,
increased steel and iron prices, lower OEM production
requirements, and an unfavorable product mix. Increased selling,
administrative and engineering costs were partially offset by
improved operating performance and increased international
production requirements, which decreased earnings from
operations approximately $2 million. Also, during the first
nine months of fiscal 2004 the Components segment recorded
$0.4 million in asset impairments and other restructuring
charges while in 2003 $10.9 million was recorded at various
facilities due to a change in managements plan for the
future use of idle machinery and equipment.

Other income from operations excluding fresh
start accounting adjustments and reorganization items increased
$14.6 million from a loss of $10.7 million in fiscal
2003 to income of $3.9 million in fiscal 2004. The
Companys commercial highway and aftermarket operations
experienced increased volumes and performance

44



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##### Table of Contents



levels, partially offset by increased steel
pricing, increased depreciation costs and an unfavorable product
mix which increased earnings by approximately $12 million.
Also during the first nine months of fiscal 2004 the
Companys North American pension and retiree medical costs
declined approximately $5 million, due primarily to the
Companys implementation of fresh start accounting upon its
emergence from Chapter 11 in 2003. This was offset by
increased selling, administrative and engineering costs which
negatively impacted earnings approximately $4 million.




| |                      
| | ---------------------
| | Interest Expense, Net

Interest expense was $31.6 million for the
first nine months of fiscal 2004 and $47.4 million for the
same period of fiscal 2003. Interest expense amounts between the
two periods are not comparable, due to the Companys new
capital structure established upon emergence from
Chapter 11. See Notes 1 and 8 to the consolidated
financial statements included herein regarding the
Companys new capital structure.

Additionally, interest expense, net, includes a
$7.5 million and $2.6 million reduction to interest expense
for the first nine months of fiscal 2004 and fiscal 2003,
respectively as the result of adjusting to fair value the
Companys outstanding Series A Warrants and
Series B Warrants, which are recorded as liabilities on the
consolidated balance sheet as of October 31, 2004 and
October 31, 2003, respectively.



| |             
| | ------------
| | Income Taxes

Income tax expense was $14.3 million on
pre-tax loss of $1.9 and $69.0 million on pre-tax income of
$19.1 million for the first nine months ended
October 31, 2004 and 2003, respectively. Income tax expense
between the two periods is not comparable due to the
Companys emergence from Chapter 11. The income tax
rate varies from the United States statutory income tax rate of
35% due primarily to losses in the United States without
recognition of a corresponding income tax benefit.



| |                  
| | -----------------
| | Net Income (Loss)

Due to the factors mentioned above, net income
decreased $1,046.0 million, to a net loss of
$22.2 million in 2004 from net income of
$1,023.8 million in 2003.

The net income for the nine months ended
October 31, 2003 includes an extraordinary gain on
discharge of debt of $1,076.7 million realized upon
emergence from Chapter 11.



| |                                
| | -------------------------------
| | Liquidity and Capital Resources



| |           
| | ----------
| | Cash Flows

Operating
Activities:The Companys cash
flows provided by operations increased $16.6 million to
$102.2 million in the first nine months of fiscal 2004 from
$85.6 million in the first nine months of fiscal 2003. This
improvement resulted primarily from lower payments related to
the Companys Chapter 11 filings, which was partially
offset by increased trade receivables due to higher sales and
the discontinuance of accelerated payment programs in which the
Company participated and payments made under the Companys
short term incentive programs in fiscal 2004.

Investing
Activities:Cash used for investing
activities increased by $19.2 million to
$108.6 million in the first nine months of fiscal 2004 from
$89.4 million in the first nine months of fiscal 2003.

Capital expenditures for the first nine months of
fiscal 2004 were $109.2 million. These expenditures were
primarily for additional machinery and equipment to improve
productivity and reduce costs, to meet demand for new vehicle
platforms and to meet expected requirements for the
Companys products. The Company anticipates capital
expenditures for fiscal 2004 will be approximately
$150 million primarily relating to meeting demand for new
vehicle platforms and supporting maintenance and cost reduction
programs, including approximately $13 million for
renovation and expansion of its aluminum wheel plant located in
Chihuahua, Mexico.

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##### Table of Contents



Financing
Activities:Cash used for financing
activities increased by $54.1 million during the first nine
months of fiscal 2004 compared with the first nine months of
fiscal 2003.

On February 11, 2004, the Company closed on
a primary offering of 7,720,970 shares of its common stock
for net proceeds of $117.0 million. On March 12, 2004,
the Company used a portion of the net proceeds to redeem
$87.5 million aggregate principal amount, plus accrued and
unpaid interest thereon, of its outstanding New Senior Notes at
a redemption price of 110.5%. This redemption resulted in a loss
on early extinguishment of $11.8 million during the first
quarter of fiscal 2004, including $2.6 million related to
original issue discount and debt issuance costs on the redeemed
portion of the New Senior Notes. The Company also used a portion
of the primary stock offering proceeds to prepay
$16.0 million, plus accrued and unpaid interest thereon, of
its New Term Loan on February 12, 2004. Upon prepayment,
the Company recognized a loss on early extinguishment of
$0.4 million related to debt issuance costs on the prepaid
portion of the New Term Loan.

During the first nine months of fiscal 2004, the
Company also repaid in full $13.1 million of notes payable
issued in conjunction with the purchases of its Chihuahua,
Mexico and Manisa, Turkey facilities.



| |                     
| | --------------------
| | Sources of Liquidity

The principal sources of liquidity for the
Companys future operating, capital expenditure, facility
closure, restructuring and reorganization requirements are
expected to be (i) cash flows from operations,
(ii) proceeds from the sale of non-core assets and
businesses, (iii) cash and cash equivalents on hand,
(iv) proceeds related to the Companys new
$75.0 million trade receivable securitization program, and
(v) borrowings under the $100.0 million revolving
credit facility under the New Credit Facility. While the Company
expects that such sources will meet these requirements, there
can be no assurances that such sources will prove to be
sufficient, in part, due to inherent uncertainties about
applicable future capital market conditions.

The Company continues to implement operational
improvements, which consist of a number of cost-cutting and
profit-enhancing initiatives. If the implementation of the
operational improvements is not successful, the Company may be
unable to offer products at competitive prices to generate
sufficient operating funds to pay the interest on the New Senior
Notes and make payments due under its New Credit Facility. In
such event, there can be no assurance that alternative sources
of financing would be available to the Company or, if available,
that such financing would be on commercially reasonable terms.



| |                        
| | -----------------------
| | Other Liquidity Matters

During the third quarter of fiscal 2004, two of
the Companys OEM customers notified the Company of the
discontinuance of accelerated payment programs in which the
Company participated. The termination of these programs
negatively impacted cash flow during this quarter by
approximately $12.0 million and is expected to negatively
impact future cash flow through March 2005 by an additional
$25.0 million. The Companys newly established
securitization program is intended to offset the negative impact
associated with the loss of these programs.

On November 13, 2003, the Company acquired
an additional 35% ownership interest in its Turkish joint
venture for $15.0 million in cash of which
$1.1 million was paid in the first quarter of fiscal 2004.
As a result of this acquisition, the Company owns 60% of the
subsidiary, Hayes Lemmerz Jantas Jant Sanayi ve Ticaret A.S.,
which became a consolidated subsidiary of the Company beginning
in the fourth quarter of fiscal 2003. As part of this
transaction, the Company sold an approximate 7.8% interest in
another Turkish subsidiary, Hayes Lemmerz Inci Jant Sanayi A.S.,
for $2.4 million. This sale reduced the Companys
holdings in Hayes Lemmerz Inci Jant Sanayi A.S. to 60%.

On June 3, 2003, in connection with the
Companys emergence from Chapter 11, HLI entered into
the $550.0 million New Credit Facility, consisting of the
$450.0 million New Term Loan and the $100.0 million
Revolving Credit Facility. HLI also issued an aggregate of
$250.0 million New Senior Notes, which was subsequently
reduced to $161.7 million, net of a discount of
$0.8 million. The Company and substantially all of its
material direct and indirect domestic subsidiaries have
guaranteed HLIs obligations under the New Credit Facility,
and the Company and substantially all of its domestic
subsidiaries have guaranteed HLIs

46



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##### Table of Contents



obligations under the New Senior Notes. The
proceeds from the initial $450.0 million of borrowings
under the New Credit Facility and the net proceeds from the New
Senior Notes were used to make payments required under the Plan
of Reorganization. At October 31, 2004 and December 9,
2004, there were no outstanding borrowings with
$18.7 million and $20.2 million, respectively, in
letters of credit issued under the Revolving Credit Facility.
The amount available to borrow under the Revolving Credit
Facility at October 31, 2004 and December 9, 2004 was
approximately $81.3 million and $79.8 million, respectively.


In addition, upon the Companys emergence
from bankruptcy, all of the Companys existing securities,
including the Old Common Stock, Old Senior Notes and Old
Subordinated Notes, were cancelled. All amounts outstanding
under the Prepetition Credit Agreement were satisfied in
exchange for: (i) a cash payment of $477.3 million;
(ii) 15,930,000 shares of New Common Stock; and
(iii) 53,100 shares of Preferred Stock. All amounts
outstanding under the Old Senior Notes were satisfied in
exchange for: (i) a cash payment of approximately
$13.0 million; (ii) 13,470,000 shares of New
Common Stock; (iii) 44,900 shares of Preferred Stock;
and (iv) a portion of the distributions from the trust
established under the Plan of Reorganization for the benefit of
the prepetition creditors (the Creditors
Trust). All amounts outstanding under the Old Subordinated
Notes were satisfied in exchange for a distribution of
Series A Warrants and a portion of the distributions under
the Creditors Trust. In addition, holders of unsecured
claims will receive an aggregate amount of 600,000 shares
of New Common Stock, 2,000 shares of Preferred Stock, the
Series B Warrants and a portion of the distributions under
the Creditors Trust.

Upon emergence from Chapter 11, the
Company:(i) repaid the DIP
Facility in full; (ii) settled certain of the operating
leases discussed below; and (iii) paid certain other costs
and expenses pursuant to the Plan of Reorganization.

Certain of the Companys operating leases
covering leased assets with an original cost of approximately
$68.0 million contained provisions which, if certain events
occur or conditions were met, including termination of the
lease, could have required the Company to purchase or re-sell
the leased assets within a specified period of time, generally
one year, based on amounts specified in the lease agreements. In
connection with the Companys emergence from
Chapter 11, the Company purchased these assets for
$23.6 million.



| |               
| | --------------
| | Credit Ratings

|                               |  |     |     |         |  |  |     | 
|------------------------------ |  | --- | --- | ------- |  |  | --- | 
|                               |  | S&P |     | Moodys
|                               |  |     |     |        
|Corporate and Bank Debt rating |  |     | BB- |         |  |  | Ba3 | 
|Senior Note rating             |  |     | B+  |         |  |  | B1  | 

In the event of a downgrading, the Company
believes it would continue to have access to sufficient
liquidity, however, the cost of borrowing would increase and the
Companys ability to access certain financial markets could
be limited.



| |        
| | -------
| | Outlook



| |          
| | ---------
| | Customers

The Company derived approximately half of its
fiscal 2003 net sales on a worldwide basis from Ford,
DaimlerChrysler and General Motors and their subsidiaries. The
Companys sales levels and margins could be adversely
affected as a result of pricing pressures caused by new
competitors in low-cost foreign markets, such as China. These
factors led to selective resourcing of future business to
competitors in the second quarter of fiscal 2003. Additionally,
these customers have been experiencing decreasing market share
in North America which could result in lower sales volumes for
the Company.

The Companys net sales are continually
affected by pressure from its major customers to reduce prices.
The Companys emphasis on reduction of production costs,
increased productivity and improvement of production facilities
has enabled the Company to respond to this pressure. However,
there is no guarantee that the Company will be as successful at
this in the future.

47



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##### Table of Contents



The Companys expects to launch new business
of approximately $130.0 million, $30.0 million and
$140.0 million (in aggregate approximately
$130.0 million, $180.0 million and
$300.0 million) in revenue in fiscal 2006, 2007 and 2008,
respectively. These revenue estimates are incremental to its
full year fiscal 2004 outlook. The Company calculates these
amounts by estimating awarded new and conquest business, as well
as expected follow-on business that the Company currently
supplies. These amounts are decreased by estimated reductions in
sales resulting from any platforms that are expected to balance
out and for which the Company is not expected to receive the
follow-on award.



| |             
| | ------------
| | Steel Supply

Global spot market steel prices have
significantly increased during 2003 and into 2004. Factors
leading to the higher prices include the increasing demand for
steel in China, industry consolidation and rising raw material
costs. In response to the increasing cost of raw materials, a
number of steel suppliers have implemented surcharges on
existing fixed price contracts. Without the surcharge some
suppliers claim they will be unable to provide adequate supplies
of steel. In addition, some of the Companys suppliers have
sought, and others may seek in the future, bankruptcy relief
which could affect the availability or price of steel. These
factors could negatively impact the Companys results of
operations as it may be unable to compel suppliers to comply
with existing contracts or to source adequate supplies of steel.
The Company believes it can partially offset the impact of cost
increases through higher scrap sales recoveries and by passing
some of these costs through to certain of its customers. The
full impact of steel prices is uncertain given the volatility in
the spot steel market. However, the Company anticipates the net
impact to reduce earnings by approximately $20.0 million in
fiscal 2004.



| |                                                         
| | --------------------------------------------------------
| | Interest Rate and Foreign Exchange Rate
    Fluctuations

A portion of the Companys debt, including
its borrowings under the New Credit Facility, bears interest at
variable rates. Any increase in the interest rates on the
Companys debt will reduce funds available to it for its
operations and future business opportunities.

Due to the increase in the Companys
operations outside the United States, the Company has
experienced increased foreign currency exchange gains and losses
in the ordinary course of business. As a result, fluctuations in
the exchange rate between the U.S. dollar, the euro and the
currencies of other countries in which the Company conducts its
business, may have a material impact on its financial condition
as cash flows generated in other currencies will be used, in
part, to service its dollar-denominated debt. This could result
in an increase in the Companys overall leverage and could
result in less cash flow available for debt repayment should the
U.S. dollar appreciate significantly versus other
currencies in which significant cash flows are generated.

In addition, fluctuations in foreign currency
exchange rates may affect the value of the Companys
foreign assets and liabilities as reported in U.S. dollars,
which in turn may adversely affect reported earnings and,
accordingly, the comparability of period-to-period results of
operations. Changes in currency exchange rates may affect the
relative prices at which the Company and foreign competitors
sell products in the same market. In addition, changes in the
value of the relevant currencies may affect the cost of certain
items required in its operations. There can be no assurance that
fluctuations in interest rates or exchange rates will not have a
material adverse effect on the Companys financial
condition or results of operations, or cause significant
fluctuations in quarterly and annual results of operations.



| |                        
| | -----------------------
| | Postretirement Benefits

On December 8, 2003, President George W.
Bush signed the Medicare Prescription Drug, Improvement and
Modernization Act (the Act) into law. The Act introduces a
prescription drug benefit under Medicare as well as a federal
subsidy to sponsors of retiree health care benefit plans that
provide a benefit that is at least actuarially equivalent to the
benefit established by the law.

In January 2004, the Financial Accounting
Standards Board (FASB) issued FASB Staff Position
No. FAS 106-1, Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003
(FSP 106-1). FSP 106-1 permitted companies
that are a sponsor of a postretirement heath care plan that
provides a prescription drug benefit to either include the

48



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##### Table of Contents



effects of the Act in its financial statements or
defer accounting for the Act until the FASB issued guidance on
how to account for the federal subsidy. Such guidance was
released by the FASB in May 2004 in Staff Position
No. FAS 106-2 (FSP 106-2).


In accordance with the provisions of
FSP 106-2, the Company applied the accounting guidance of
the pronouncement in the fiscal quarter ending October 31,
2004. As such, the accumulated postretirement benefit obligation
(APBO) and the net periodic postretirement benefit cost reflect
the effects of the Act as of and for the periods ended
October 31, 2004.



| |                                   
| | ----------------------------------
| | Off Balance Sheet
    Arrangements

On December 9, 2004 the Company established
an accounts receivable securitization facility, which will
provide up to $75.0 million in funding from commercial
paper conduits sponsored by commercial lenders,. The actual
amount of funding available at any given time is based on
availability of eligible receivables and other customary
factors. Pursuant to the securitization facility, certain of the
Companys subsidiaries will sell trade accounts receivables
to a non-consolidated Special Purpose Entity which resells the
receivables to a Qualifying Special Purpose Entity which will
then pledge the receivables to secure borrowings from commercial
paper conduits. The securitization transactions will be
accounted for as sales of the receivables under the provisions
of SFAS No. 140 Accounting Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities, and will be removed from the consolidated
balance sheets. The proceeds received will be included in cash
flows from operating activities in the consolidated statements
of cash flows. Costs associated with the receivables facility
will be recorded as losses on sale of receivables in the
consolidated statements of operations. The Company expects to
begin selling receivables pursuant to the securitization program
during the fourth quarter of fiscal 2004.



| |                        
| | -----------------------
| | Contractual Obligations

The following table identifies the Companys
significant contractual obligations (dollars in millions):

|                                         |                   |                       |      |       |  |       |      |         |  |       |      |      |  |   |       |       |  |   |       |       | 
|---------------------------------------- | ----------------- | --------------------- | ---- | ----- |  | ----- | ---- | ------- |  | ----- | ---- | ---- |  | - | ----- | ----- |  | - | ----- | ----- | 
|                                         |                   |                      
|                                         |                   | Payment Due by Period
|                                         |                   |                      
|                                         |                   | Less than             |      | 1-3   |  | 4-5   |      | After   |  |      
|                                         |                   | 1 Year                |      | Years |  | Years |      | 5 Years |  | Total
|                                         |                   |                       |      |       |  |       |      |         |  |      
|Long-term debt                           |                   | $                     | 6.0  |       |  | $     | 14.2 |         |  | $     | 30.2 |      |  | $ | 586.1 |       |  | $ | 636.5 |      
|Redeemable preferred stock of subsidiary |                   |                       |     |       |  |       |     |         |  |       |     |      |  |   | 11.1  |       |  |   | 11.1  |      
|Short-term borrowings                    |                   |                       | 3.9  |       |  |       |     |         |  |       |     |      |  |   |      |       |  |   | 3.9   |      
|Capital lease obligations                |                   |                       | 5.1  |       |  |       | 7.7  |         |  |       | 0.1  |      |  |   |      |       |  |   | 12.9  |      
|Operating leases                         |                   |                       | 16.2 |       |  |       | 21.9 |         |  |       | 11.5 |      |  |   | 0.3   |       |  |   | 49.9  |      
|Capital expenditures                     |                   |                       | 30.8 |       |  |       |     |         |  |       |     |      |  |   |      |       |  |   | 30.8  |      
|                                         |                   |                       |      |       |  |       |      |         |  |       |      |      |  |   |       |       |  |   |       |      
|                                         | Total obligations |                       | $    | 62.0  |  |       | $    | 43.8    |  |       | $    | 41.8 |  |   | $     | 597.5 |  |   | $     | 745.1 | 
|                                         |                   |                       |      |       |  |       |      |         |  |       |      |      |  |   |       |       |  |   |       |      



| |                        
| | -----------------------
| | Other Cash Requirements

The Company anticipates the following approximate
significant cash requirements to be paid during the remainder of
fiscal 2004 (dollars in millions):

|                                                   |  |   |      | 
|-------------------------------------------------- |  | - | ---- | 
|Interest                                           |  | $ | 16.5 | 
|Taxes                                              |  |   | 10.0 | 
|Pension and other post-retirement benefits funding |  |   | 1.5  | 
|Various customer satisfaction issues               |  |   | 4.5  | 
|Restructuring costs(1)                             |  |   | 2.5  | 



---



|    |                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------
|(1) | See Note 7 to the consolidated financial
    statements included herein for a discussion of restructuring and
    other closure costs.

49



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##### Table of Contents





| |                             
| | ----------------------------
| | Critical Accounting Policies

The preparation of consolidated financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses
during the reporting period. Considerable judgment is often
involved in making these determinations; the use of different
assumptions could result in significantly different results.
Management believes its assumptions and estimates are reasonable
and appropriate; however, actual results could differ from those
estimates.



| |                                                            
| | -----------------------------------------------------------
| | Asset Impairment Losses and Other
    Restructuring Charges

The Companys consolidated statements of
operations included herein reflect an element of operating
expenses described as asset impairments and other restructuring
charges. The Company periodically evaluates whether events and
circumstances have occurred that indicate that the remaining
useful life of any of its long lived assets may warrant revision
or that the remaining balance might not be recoverable. When
factors indicate that the long lived assets should be evaluated
for possible impairment, the Company uses an estimate of the
future undiscounted cash flows generated by the underlying
assets to determine if a write-down is required. If a write-down
is required, the Company adjusts the book value of the impaired
long-lived assets to their estimated fair values. Fair value is
determined through third party appraisals or discounted cash
flow calculations. The related charges are recorded as asset
impairment or, in the case of certain exit costs in connection
with a plant closure or restructuring, a restructuring or other
charge in the consolidated statements of operations.

As discussed above and in the notes to the
Companys consolidated financial statements included
herein, a number of decisions have occurred or other factors
have indicated that these types of charges are required to be
currently recognized. There can be no assurance that there will
not be additional charges based on future events and that the
additional charges would not have a materially adverse impact on
the Companys financial position and results of operations.



| |                                                            
| | -----------------------------------------------------------
| | Pension and Postretirement Benefits Other
    Than Pensions

Annual net periodic expense and benefit
liabilities under the Companys defined benefit plans are
determined on an actuarial basis. Assumptions used in the
actuarial calculations have a significant impact on plan
obligations and expense. Each October, the Company reviews the
actual experience compared to the more significant assumptions
used and makes adjustments to the assumptions, if warranted. The
healthcare trend rates are reviewed with the actuaries based
upon the results of their review of claims experience. Discount
rates are based upon an expected benefit payments duration
analysis and the equivalent average yield rate for high-quality
fixed-income investments.

Pension benefits are funded through deposits with
trustees and the expected long-term rate of return on fund
assets is based upon actual historical returns modified for
known changes in the market and any expected change in
investment policy. Postretirement benefits are not funded and
Company policy is to pay these benefits as they become due.

Certain accounting guidance, including the
guidance applicable to pensions, does not require immediate
recognition of the effects of a deviation between actual and
assumed experience or the revision of an estimate. This approach
allows the favorable and unfavorable effects that fall within an
acceptable range to be netted. Although this netting occurs
outside the basic financial statements, the net amount is
disclosed as an unrecognized gain or loss in the footnotes to
the Companys financial statements. In accordance with the
fresh start accounting provisions of SOP 90-7, all
previously unrecognized gains or losses were immediately
recognized at the emergence date.

The Company expects to incur approximately
$11.1 million of pension expense and $9.6 million of
retiree benefit expense in fiscal 2004.

50



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##### Table of Contents





| |                            
| | ---------------------------
| | Goodwill Impairment Testing

On February 1, 2002, the Company adopted
Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS)
No. 142, Goodwill and Other Intangible Assets.
Under SFAS No. 142, goodwill and other
indefinite-lived intangible assets are no longer amortized;
rather those assets must be tested for impairment annually.
Other definite-lived intangible assets continue to be amortized
over their estimated lives. (See Note 6 to the consolidated
financial statements included herein.)

The Company tests goodwill for impairment as of
November 1st of each fiscal year, or more frequently should
circumstances change or events occur that would more likely than
not reduce the fair value of a reporting unit below its carrying
amount, as provided for in SFAS No. 142.



| |                                         
| | ----------------------------------------
| | Allowance for Uncollectible
    Accounts

The allowance for uncollectible accounts provides
for losses believed to be inherent within the Companys
Receivables, (primarily trade receivables).
Management evaluates both the creditworthiness of specific
customers and the overall probability of losses based upon an
analysis of the overall aging of receivables, past collection
trends and general economic conditions. Management believes,
based on its review, that the allowance for uncollectible
accounts is adequate to cover potential losses. Actual results
may vary as a result of unforeseen economic events and the
impact those events could have on the Companys customers.



| |             
| | ------------
| | Income Taxes

In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be
realized. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. The Company
determined that it could not conclude that it was more likely
than not that the benefits of certain deferred income tax assets
would be realized. As a result of managements assessment,
a valuation allowance was recognized. The valuation allowance
recorded by the Company reduces to zero the net carrying value
of all United States and certain foreign net deferred tax
assets. The Company expects the deferred tax assets, net of the
valuation allowance, to be realized as a result of the reversal
of existing taxable temporary differences in the United States
and as a result of projected future taxable income and the
reversal of existing taxable temporary differences in certain
foreign locations.

The Company has not recorded a deferred tax
liability for temporary differences related to investments in
foreign subsidiaries that are essentially permanent in duration.
These temporary differences may become taxable upon a
repatriation of assets from the subsidiaries or a sale or
liquidation of the subsidiaries.



| |                                                         
| | --------------------------------------------------------
| | Valuation of Series A Warrants and
    Series B Warrants

The Companys Series A Warrants and
Series B Warrants are classified as liabilities that were
initially measured at fair value and will subsequently be
measured at fair value with changes in fair value recognized in
interest expense. The fair value of the Series A Warrants
and Series B Warrants at emergence was approximately
$9.3 million. As of October 31, 2004, the fair value
of the Series A Warrants and Series B Warrants was
approximately $0.7 million. The Series A Warrants and
Series B Warrants were valued utilizing the Black-Scholes
model that requires the estimation of several variables in the
formula.






|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures
    About Market Risk

For the period ended October 31, 2004, the
Company did not experience any material change in market risk
exposures affecting the quantitative and qualitative disclosures
as presented in the Companys Annual Report on
Form 10-K for the year ended January 31, 2004.

51



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##### Table of Contents








|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures

Definition of Controls

Management of the Company, including the
Companys Chief Executive Officer and Chief Financial
Officer, has designed, or caused to be designed, and maintained
disclosure controls and procedures, as defined in Exchange Act
Rules 13a-15 and 15d-15 (the Disclosure Controls and
Procedures), to reasonably assure that material
information is recorded, processed, summarized and reported
within the time periods specified by the SECs rules and
forms and to reasonably assure that such information is
accumulated and communicated to management, including the
Companys Chief Executive Officer and Chief Financial
Officer, in a timely manner to allow for appropriate decisions
regarding required disclosures. Management has also designed
internal controls, including internal controls over financial
reporting (the Internal Controls), to provide
reasonable assurance regarding the reliability of the
Companys financial reporting and the preparation of the
Companys financial statements in accordance with
accounting principles generally accepted in the United States
(GAAP).

Limitations on the Effectiveness of
Controls

As more fully discussed in the American Institute
of Certified Public Accountants (AICPA) auditing
standards pronouncement Consideration Of Internal Control
in a Financial Statement Audit, AU Section 319,
paragraphs .21 to .24, an internal control system, no matter how
well designed and operated, can provide only reasonable, not
absolute, assurance that the control objectives will be met.
Limitations inherent in any system of internal controls might
include, among other things, (i) faulty human judgment and
simple errors or mistakes, (ii) collusion of two or more
people or inappropriate management override of procedures,
(iii) imprecision in estimating and judging cost-benefit
relationships in designing controls and (iv) reductions in
the effectiveness of one deterring component (such as a strong
cultural and governance environment) by a conflicting component
(such as may be found in certain management incentive plans).
Because of such inherent limitations in any system of internal
controls, no evaluation of controls can provide absolute
assurance that all weaknesses or instances of fraud, if any,
have been detected.

The Company, including its Chief Executive
Officer and Chief Financial Officer, believes that the
aforementioned limitations apply to any applicable system of
internal controls, including the Disclosure Controls and
Procedures and Internal Controls. The Company will continue the
process of identifying and implementing corrective actions where
required to improve the effectiveness of its Disclosure Controls
and Procedures and Internal Controls. Significant supplemental
resources may continue to be required to prepare the required
financial and other information during this ongoing process.

Financial Systems Implementation

The Company is currently in the process of
upgrading its North American general ledger and financial
computer systems, the first phase of which was completed in
October 2004. The implementation is expected to further improve
or otherwise enhance the Companys Disclosure Controls and
Procedures and Internal Controls.

Evaluation of Disclosure Controls and
Procedures

The Company maintains a disclosure committee
reporting to the Chief Executive Officer of the Company to
assist the Chief Executive Officer and Chief Financial Officer
in fulfilling their responsibility in designing, establishing,
maintaining and reviewing the Companys Disclosure Controls
and Procedures (the Disclosure Committee). The
Disclosure Committee is currently chaired by the Companys
Chief Financial Officer and includes the Companys General
Counsel, Vice President of Human Resources and Administration,
Corporate Controller  Operations, Treasurer,
Assistant General Counsel, Manager of Financial Reporting and
Governance, and Director of Internal Audit as its other members.
As of the end of the period covered by this report, the
Companys Chief Executive Officer and Chief Financial
Officer, along with the Disclosure Committee, evaluated the
Companys Disclosure Controls and Procedures. The
Companys Chief Executive Officer and

52



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##### Table of Contents



Chief Financial Officer have concluded, subject
to the limitations noted above, that the Disclosure Controls and
Procedures are effective based on such evaluation.


Changes in Internal Controls

There were no significant changes in the
Companys Internal Controls or in other factors that have
materially affected, or are reasonably likely to affect,
Internal Controls over financial reporting during the most
recent fiscal quarter.




PART II. OTHER INFORMATION






|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings

There have been no material developments in legal
proceedings involving the Company since those reported in the
Companys Annual Report on Form 10-K for the year
ended January 31, 2004.






|        |                                              
|------- | ---------------------------------------------
|Item 2. | Changes in Securities and Use of
    Proceeds

None.






|        |                                    
|------- | -----------------------------------
|Item 3. | Defaults upon Senior
    Securities

None.






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

None.






|        |                  
|------- | -----------------
|Item 5. | Other Information

None.






|        |         
|------- | --------
|Item 6. | Exhibits

| |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
| | ----- |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.10 |  |  | Amendment No. 4 dated as of
    November 10, 2004, by and among HLI Operating Company,
    Inc., as Borrower, Hayes Lemmerz International, Inc., the
    Lenders and Issuers listed therein, Citicorp North America,
    Inc., as Administrative Agent, Lehman Commercial Paper, Inc., as
    Syndication Agent, and General Electric Capital Corporation, as
    Documentation Agent*
| | 31.1  |  |  | Certification of Curtis J. Clawson, Chairman of
    the Board, President and Chief Executive Officer, pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                 
| | 31.2  |  |  | Certification of James A. Yost, Vice President,
    Finance, and Chief Financial Officer, pursuant to
    Section 302 of the Sarbanes Oxley Act of 2002.*                                                                                                                                                                                                                             
| | 32.1  |  |  | Certification of Curtis J. Clawson, Chairman of
    the Board, President and Chief Executive Officer, Pursuant to
    18 U.S.C. Section 1350, as Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                              
| | 32.2  |  |  | Certification of James A. Yost, Vice President,
    Finance, and Chief Financial Officer, Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                          



---



|  |                               
|- | ------------------------------
|* | Filed electronically herewith.

53



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.



| |                                  
| | ---------------------------------
| | HAYES LEMMERZ INTERNATIONAL, INC.
|
| | /s/ JAMES A. YOST                
| |                                  
| | James A. Yost                    
| | Vice President, Finance,         
| | and Chief Financial Officer      

December 10, 2004

54



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC.

10-Q EXHIBIT INDEX

| |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
| | ----- |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.10 |  |  | Amendment No. 4 dated as of
    November 10, 2004, by and among HLI Operating Company,
    Inc., as Borrower, Hayes Lemmerz International, Inc., the
    Lenders and Issuers listed therein, Citicorp North America,
    Inc., as Administrative Agent, Lehman Commercial Paper, Inc., as
    Syndication Agent, and General Electric Capital Corporation, as
    Documentation Agent*
| | 31.1  |  |  | Certification of Curtis J. Clawson, Chairman of
    the Board, President and Chief Executive Officer, pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                 
| | 31.2  |  |  | Certification of James A. Yost, Vice President,
    Finance, and Chief Financial Officer, pursuant to
    Section 302 of the Sarbanes Oxley Act of 2002.*                                                                                                                                                                                                                             
| | 32.1  |  |  | Certification of Curtis J. Clawson, Chairman of
    the Board, President and Chief Executive Officer, Pursuant to
    18 U.S.C. Section 1350, as Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                              
| | 32.2  |  |  | Certification of James A. Yost, Vice President,
    Finance, and Chief Financial Officer, Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                          



---



|  |                               
|- | ------------------------------
|* | Filed electronically herewith.