Barclays is out with a major call on American Axle (NYSE:AXL) upgrading the shares to Overweight from Equal-Weight while raising their price target to $13 (prev. $8).

According to the firm the upgrade comes as the recent GM agreement and in their view, a strong likelihood of a bank deal should remove liquidity concerns, enabling investors to focus on AXL's earnings in a recovery, which they view very favorably. Firm is bullish about the prod. outlook for AXL's top platform, the GMT900, and believes the Street materially underestimates demand for full-size trucks in the context of a recovery in SAAR, likely marketing programs focused on large pickups, and a 1Q10 bottoming in construction employment. Benefitting from its large exposure to this segment and its large cost reductions, AXL could expand its EBITDA margin to the 13%+ range in 2010 and nearly 14% by 2011, yielding above-consensus earnings growth.

Barclay's expects AXL to beat the Street as early as this qtr, benefitting from a sharp rebound in pickups post clunkers and shutdowns. This could be a catalyst for the stock to rerate towards a valuation more in line with its peers, which trade at 5-6x 2011 EBITDA. Their new $13 PT is based on a still conservative 4.5x their 2011 EBITDA of $365mm.

Barclays is Bullish About the Outlook for GMT900 Production
Large pickup production is likely to be up materially in the second half of the year, in our view, benefitting from lean inventories and a potential pick up in sales pace. In August, the GMT 900 sales rate reached 810k units, or about 630k units when conservatively adjusted for cash for clunkers boost. While cash for clunkers mainly drove passenger car sales, the DOT reported 46,836 "Category 2" trucks (which includes pickups and large SUVs) were subsidized.