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5. Meritor, Inc. Business Report FY ended Sep. 2014

Meritor, Inc. Business Report FY ended Sep. 2014

Factors
1) Overall

-The Company's sales for fiscal year 2015 were $3,505 million, a decrease compared to $3,766 million in the prior year. The decrease in sales was the result of the strengthening of the US dollar against most currencies, primarily the euro and Brazilian real. In addition, unfavorable macro-economic conditions in South America and China resulted in lower production in these regions, and the Company experienced lower revenue from the Company's Defense business compared to the prior fiscal year. The production decreases were partially offset by higher sales in North America, as the Class 8 truck market reached its strongest production levels since 2006.

2) Commercial Truck & Industrial

-Commercial Truck & Industrial sales were $2,739 million in fiscal year 2015, down 8.1 percent from fiscal year 2014. The decrease in sales was the result of the strengthening of the US dollar against most currencies, primarily the euro and Brazilian real,which unfavorably impacted sales by $193 million in fiscal year 2015 compared to the prior fiscal year.

Business Partnership

-The Company and Brakes India, Ltd. announced the signing of a Licensing and Technology Assistance Agreement for the manufacture and sale of Meritor ELSA air disc brakes in India. The agreement expands on an existing licensing agreement for B-frame hydraulic disc brakes, air drum, and air disc brakes between the two companies. (From a press release on May 7, 2014)

Recent Developments in the US

-In 2013, the Company initiated a three-year plan called M2016 as a guide to improve itself and achieve specific financial goals. The plan revolves around four areas: driving operational excellence, focusing on customer value, reducing product cost, and investing in a high-performing workforce. By emphasizing these areas, the company plans to use M2016 to achieve three financial goals by the end of the fiscal year ending September 2016:

• Achieve 10% adjusted EBITDA margin
• Reduce net debt, including retirement benefit liabilities, by USD 400 million to less than USD 1.5 billion
• Have incremental booked revenue of USD 500 million per year (at run-rate)

Focusing on customer value

-The Company has worked with their customers to design axles, brakes, drivelines and suspensions that will enhance the value of their vehicles in alignment with their forward product programs. There are several examples of this that the Company executed in 2015:

• The Company are now supplying rear axles in North America, Australia and Brazil to PACCAR, an important global customer. The Company also gained standard positioning for front steer axles with PACCAR in fiscal year 2015.

• The Company launched the superfast 2.28 ratio for our 14X axle platform that can be integrated with Meritor's RPL35 series driveline. This product combination will effectively handle the higher torques generated from downspeeding, allowing the driver to maintain vehicle speed at lower engine RPMs enhancing vehicle efficiency.

• In the Company's Defense business, the Company announced that the Company will supply wheel-ends for approximately 17,000 Joint Light Tactical Vehicles to be manufactured by Oshkosh (“Oshkosh”) Corporation over an 8-year timeframe. The Company is also supplying Navistar with all-wheel-drive components for approximately 2,300 Medium Tactical Vehicles with deliveries starting in January 2017 and concluding in 2019.

• In 2016, the Company will supply rear drive, tag and front steer axles and brakes to MCI in connection with the purchase of almost 800 Commuter Coaches by New Jersey's public transportation corporation over a six-year delivery.

• In Asia Pacific, the Company has a new axle and brake program with a major OEM. This customer award supports our new broad range of fully-dressed axle products in the region that offer our customers greater efficiency, localization and cost savings.

Contracts

-The Company announced a new five-year agreement with Navistar. Under the terms of the agreement, Meritor retains standard position for brakes and rear axles, as well as standard position for front axles in severe service, medium-duty and bus applications. (From a press release on March 31, 2016)

-Meritor WABCO announced that its SmartTrac electronic stability control (ESC) is featured on Thomas Built Buses' Saf-T-Liner C2 school buses. Starting in September 2015, Thomas Built Buses will offer SmartTrac ESC, an active vehicle safety system that intervenes automatically when there is a high risk of rollover or directional instability that could lead to loss of vehicle control. (From a press release on September 9, 2015)

-In the FY ended September 30, 2014, the Company entered or extended the following contracts:

• Extended contract with Volvo to supply axles in Europe and South America through December 2021.
• Extended contract with Volvo to supply axles in Australia through May 2019.
• Extended contract with Volvo to supply axles and drivelines in North America through May 2019.
• Extended contract with Hino to supply axles and brakes through March 2017.
• Entered new four year agreement with Daimler Trucks North America.
• Entered new agreement with Scania to supply ELSA225H range of air disc brakes to trucks and buses starting 2014.

Awards

-Meritor WABCO has earned the 2015 Platinum Supplier Award from Wabash National Corp. for excellence in quality and delivery performance. Meritor WABCO supplies Wabash with SmartTrac trailer anti-lock braking, roll stability and InfoLink data gateway systems. (From a press release on October 6, 2015)

-Meritor WABCO announced that it has received the 2014 Excellence in Quality Award from Hino Motors Manufacturing U.S.A., Inc. Meritor WABCO has been recognized with this award five times in the past seven years. Meritor WABCO supplies Hino with pneumatic and hydraulic anti-lock braking systems (ABS) for commercial vehicles built in Williamstown, West Virginia, USA and Woodstock, Ontario, Canada. In addition to the zero PPM quality performance for Hino, Meritor WABCO's on-time delivery performance was 100 percent for 2014. (From a press release on July 21, 2015)

R&D Facilities

-The Company will invest USD 58 million in air disc brake capabilities at its technical center and manufacturing facility in Cwmbran, United Kingdom. This was in response to the recent announcement that the Company was selected to supply its ELSA225H range of air disc brakes for Scania's trucks and buses starting in 2014. (From a press release on December 11, 2013)

Product Development

13X drive axle
-The Company has unveiled the 13X drive axle for Class 6 and 7 applications. It will be available for OEM production starting in the second quarter of 2016. Available in a wide variety of ratios from 3.90 to 6.50 and with gross axle weight ratings (GAWR) between 17,000 and 21,000 pounds, the 13X is offered with standard differentials and is compatible with air drum or hydraulic disc brakes as well as parking brakes. (From a press release on February 28, 2016)

Front Steer axle
-The Company announced that it has unveiled the Meritor Front Steer axle (MFS+). The new lighter-weight, front-steer axle has a gross axle weight rating (GAWR) between 12,000 and 13,200 pounds. The MFS+ saves up to 85 pounds from the current offering. (From a press release on February 28, 2016)

Collision Mitigation System
-Meritor WABCO announced the OnGuard Collision Mitigation System is now available for use in medium-duty trucks, another first in the industry. Used extensively in heavy-duty trucks since 2007, OnGuard is North America's leading collision mitigation system, with more than 90,000 systems and over 32 billion miles now on the road. A new member of the OnGuard family to be made available to medium- and heavy-duty trucks in 2016 is OnGuardACTIVE, which warns and brakes when detecting stationary objects, to mitigate or possibly avoid a potential accident. (From a press release on September 3, 2015)

-The Company announced that it has purchased the majority of the assets at the Sypris Solutions, Inc. manufacturing facility in Morganton, North Carolina, USA. The facility currently manufactures trailer axle beams, and machines carriers and differentials for Meritor, in addition to producing light vehicle components for other customers. (From a press release on July 10, 2015)

Data

Number of Employees

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