ArvinMeritor Business Report FY2005

Business Highlights

Financial overview

In million USD Sept.
Sept. 2005 Rate of change (%) Remarks
Sales 9,195 8,873 +3.6% The increase in sales was attributable to stronger commercial vehicle truck and trailer volumes in the CVS business segment and higher pass-through sales in the LVS business segment. These increases were partially offset by foreign currency translation, primarily due to the stronger euro in relation to the U.S. dollar, which reduced sales by $72 million, and lower volumes in its North American LVS business. Divestitures of certain LVS businesses in previous periods and the sales of certain assets of CVS's off-highway brake business reduced sales in fiscal year 2006 by $81 million.
Operating income (119) 184 - Operating loss for FY2006 was $119 million, compared to operating income of $184 million in fiscal 2005. Operating loss was significantly impacted by a $310 million non-cash goodwill impairment charge recorded in its light truck vehicle emissions technologies business in the fourth quarter of FY2006. A labor disruption and work stoppage at its commercial vehicle brakes operation in Tilbury, Ontario unfavorably impacted operating income by $45 million. Operating loss for FY2006 also includes a $23 million gain on the sale of certain assets of CVS' off-highway brakes business.
Net Income (175) 12 -  
By division
Light Vehicle Systems (LVS)
Sales  4,905 4,819 +1.8% Light Vehicle Systems (LVS) sales increased to $4,905 in FY2006, up $86 million, or 2 percent, from $4,819 million in FY2005. The effect of foreign currency translation decreased sales by $40 million. Pass-through sales were approximately $1,600 million in FY2006 compared to approximately $1,300 million in FY2005. The higher pass-through sales were partially offset by lower value added sales, lower selling prices to its customers and the loss of sales associated with the divestitures.
Commercial Vehicle Systems (CVS)
Sales  4,290 4,054 +5.8% Commercial Vehicle Systems (CVS) sales were $4,290 million, up $236 million, or 6 percent, from FY2005. The increase in sales was primarily attributable to strong commercial vehicle truck and trailer volumes. Compared to FY2005, production volume in North America for commercial vehicle heavy-duty trucks (class 8) increased 8 percent and medium duty trucks increased 4 percent. Western Europe heavy and medium duty truck volumes increased 4 percent. These increases were partially offset by the loss of sales associated with the divestitures of certain assets of the off-highway brakes business of approximately $57 million and foreign currency translation which reduced sales by $32 million.


Light Vehicle Systems (LVS)
Top 10 Light Vehicle Platforms
-VW PQ34/35(Golf, Touran, Audi A1, Skoda Octavia)
-Hyundai NF/CM (Santa Fe, Sonata)
-Renault C (Megane, Scenic)
-Dodge DR-DE (Ram)
-VQ PQ24/25(Polo, Ibiza, Audi A2, Skoda Fabia)
-Ford C1 (Focus, C-Max, Volvo S40/V50)
-GMT 380/390 (TrailBlazer)
-Honda CYR2/UM (Accord, Odyssey, Pilot)
-VW 7L (Audi Q7)
-Peugeot PF1 (207)

- In December 2005, the Company announced to provide a leading automotive manufacturer in China with a complete sealed door module, including window regulator and motor for a 2007 model year vehicle, as part of a newly awarded, multi-year, $79 million contract. The Company will establish a final assembly Customer Value Center close to the customer, with product shipments scheduled to begin in October 2006.

Commercial Vehicle Systems (CVS)
Top 10 Commercial Vehicle Platforms
-Volvo Trucks HD (FH, FH16)
-Freightliner Class 8 (Coronado, Century S/T, Columbia)
-Renault Trucks HD (Premium, Magnum)
-Mack/Volvo Class 8 (VT, VN, Pinnacle, Vision)
-International Class 8 (ProStar, 8000 Series, 9000 Series)
-International MD (4000 Series, CF Series)
-Freightliner/Sterling MD (Business Class, Cargo, 360)
-Armor Holdings (Military Vehicles)
-GM MD Trucks (W Seeries, T-Series)
-Iveco HD (Stralis, Trakker)

- In November 2006, Meritor WABCO has entered into an agreement with International Truck and Engine Corporation to supply its new hydraulic power brake system as standard equipment on selected models of the truck maker's medium-duty models. The new Meritor WABCO Hydraulic Power Brake (HPB) which is the next generation of the company's hydraulic actuation and Anti-lock Braking System (ABS), provides full-power braking performance functions and Electronic Brake Force Distribution (EBD). Optional Automatic Traction Control (ATC) is also with the package.

- In January 2006, the Company's Commercial Vehicle Systems business announced that its "Meritor" transit bus axles and brakes have been specified as part of a hybrid bus consortium contract. The consortium consists of 11 transit agencies in California, Nevada, and New Mexico. The contract was awarded to Gillig Corporation, one of North America's largest producers of transit buses. The contract calls for up to 157 diesel-electric hybrid buses in 30-foot, 35-foot and 40-foot configurations, with deliveries starting this year and running into late 2007. The Meritor 71000 Series, single reduction drive axle, will be utilized on the 35 and 40-foot buses. For the 30-foot bus, the R-160 Series axle (21,000 lb. Capacity) will be utilized. Both axle series feature "Quiet Ride" gearing for a low noise signature.


- In October 2005, the Company announced the sale of the assets of its off-highway brake business to Carlisle Braking Products, owned by Carlisle Companies Incorporated.
- In October 2005, ArvinMeritor Suspension Systems announced the commencement of the "mobilita" (collective dismissal) procedure at its Asti production plant.
- In February 2006, the Company announced its plan to sell the Purolator filter business to Bosch and MANN+HUMMEL to be completed on April 1st, 2006.
- In March 2006, the Company sold its North American Light Vehicle Aftermarket (LVA) exhaust business based in Loudon, Tenn. And Moncton, New Brunswick, Canada, to IMCO (International Muffler Company), a producer of aftermarket exhaust systems and components based in Schulenburg, Texas.
- In June 2006, the Company announced the sale of Gabriel South Africa, its Light Vehicle Aftermarket (LVA) Ride Control business in Cape Town to Control Instruments Group Limited, which is listed on the JSE Limited in South Africa.
- In July 2006, the Company announced that Mitsubishi Steel Mfg. Co, Ltd. agreed to acquire 57% shareholdings in Meritor Suspension Systems Company (MCCS) from its joint venture partner ArvinMeritor Inc. (ARM) in Michigan.


In February 2007, the Company signed a definitive agreement to sell its Emissions Technologies business group.

Growth Strategy After Emissions Technologies Divestiture

Triple Sales in Asia and with Asian OEMs within five years
-1 billion dollars added sales in China
-300 million dollars added sales in India
-Healthy mix of local OEMs and global OEMs
Triple aftermarket sales
Generate compelling new products that create exceptional value for customers
Increase systems, controls and electronics capabilities


R&D Expenditure

in millions USD

FY2006 FY2005 FY2004
R&D Expenditure 177 171 157

R&D Structure -As of September 30, 2006, the Company employed approximately 1,450 professional engineers and scientists.
-The company draws upon the engineering resources of the technical centers in Detroit, Michigan; Columbus, Indiana; and Augsburg, Germany, and the engineering centers of expertise in the United States, Brazil, Canada, France, Germany, India and the United Kingdom.

New Product Development - In January 2007, the Company and Wal-Mart Transportation have agreed to development of a dual-mode, diesel-electric drivetrain for a Class 8 tractor. The vehicle, which is believed to be the first dual-mode diesel-electric tractor prototype in development in North America, will be based on an International Class 8 ProStar tractor and powered by an engine developed by Cummins Inc.

Investment Activities

Domestic Investment

-October 2005, the Company opened its Light Vehicle Systems (LVS) Customer Value Center (CVC) in Montgomery, Ala. This final assembly facility will deliver one million complete door modules annually for Hyundai's North American production of Sonata and Santa Fe models. Located just three miles from Hyundai plant, the Company delivers modules that are line-sequenced to the automaker's production every 90 minutes.

Overseas Investment

- In August 2006, the Company announced that it will open a new wholly-owned operation in Wuxi, Jiangsu Province, China. The 300,000 sq. ft. facility will initially manufacture trailer axles and suspensions for key trailer manufacturers in China, as well as for export of components to North American and European plants.