ArvinMeritor 2008 Results Show Reduced Losses, Increased Sales

ArvinMeritor reports achieving sales of US$1.72 billion in the quarter ending September 30, an increase of 8 per cent on the corresponding quarter of 2007. Operating income during this, the company’s fourth quarter, is reported as $40 million, up from the previous year’s quarterly loss of $16 million. The vehicle systems and components manufacturer’s net loss, however, was substantially larger than in the fourth quarter of 2007, standing at $153 million, as opposed to $62 million.

For the full financial year to September 30, sales were $7.167 billion, up 11.1 per cent from the 2007 year. ArvinMeritor attributes this improved result to strength in Europe and South America. The company’s operating income of $186 million showed a 251 per cent improvement, and net loss, at $101 million, was far lower than in 2007, when a net loss of $219 million was recorded.

“Our team executed well in fiscal year 2008,” said chairman, CEO and president Chip McClure. “Although commercial and light vehicle volumes in North America were down dramatically from fiscal year 2007, we increased revenue from customers in Europe, South America and Asia Pacific. We also achieved our strategic objectives to grow our military business through an intense and dedicated focus on customer requirements for ArvinMeritor’s drivetrain products. And, we successfully strengthened our aftermarket business through organic growth and two key acquisitions which position us for greater market penetration globally.”

On October 31, ArvinMeritor announced its plan to explore strategic alternatives for its Light Vehicle Systems business. “Declining global market and credit conditions are the primary factors that have led us to expand our options for separating the LVS business group, excluding the Wheels business located in South America and Mexico,” said McClure. “After a comprehensive review of those options, we have determined that a sale will be our primary focus.” J.P. Morgan is acting as the company’s financial advisor related to the separation of the business.

As for the future, McClure says “the work we did to strengthen the company in 2008 enables us to respond more quickly and efficiently to the deteriorating markets we are now anticipating in fiscal year 2009. We have defined five key priorities that we will diligently focus on this year.” The five priorities include: Accelerating restructuring and cost reductions; improving operational performance in all areas; completing the separation of the light vehicle business, excluding wheels; expanding high-margin segments; and strengthening the company’s product and technology position.

The company’s fiscal year 2009 financial guidance is for expected continuing operations – which includes ArvinMeritor’s commercial vehicle systems and wheels businesses. ArvinMeritor expects the remaining LVS businesses to be separated during 2009. The LVS outlook continues to be weak and may negatively affect the company’s overall financial condition and GAAP results of operations until the point of sale. Sales for fiscal year 2009 are forecasted to be in the range of $4.9 billion to $5.2 billion. The company expects earnings per diluted share, excluding special items, to be in the range of $0.80 to $1.00. ArvinMeritor anticipates free cash flow for the fiscal year to be approximately breakeven.