ArvinMeritor, Inc.
Annual Shareowners Meeting
Troy, Mich. USA
February 14, 2001

Remarks of L. Yost
Chairman and CEO
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It’s been quite a year, full of changes and challenges for the automotive industry, as well as for our company.

On July 7, 2000, we completed the merger of Meritor Automotive and Arvin Industries. Merging these two industry leaders helps us position ArvinMeritor as the eleventh largest Tier One supplier within the automotive industry.

Our industry is rapidly transforming to keep pace with the globalization and consolidation of the original equipment manufacturers; the continued trends towards outsourcing by the OEMs; and the desire to better serve our customers by providing them with innovative integrated systems and modules.

We believe that the merger of Arvin and Meritor provides the company with the financial strength, flexibility and product mix to take advantage of these industry trends, as well as with a stronger customer base and stronger market and geographic positions.

We are very pleased with the ArvinMeritor merger, which provides a number of benefits, including:

• Expanding an already impressive product portfolio with a wide range of complementary products.

• Providing significant growth opportunities for revenue, which we expect to generate an additional $450 million by 2004.

We will accomplish this growth by leveraging the strengths of the two organizations to provide new products, as well as by combining existing technologies to create new systems.

Key initiatives include our undercarriage and corner module strategies, where we will combine Arvin and Meritor products into an integrated solution; leveraging Arvin’s light vehicle exhaust technology expertise to develop exhaust and emission solutions for commercial trucks; and by identifying and implementing best practices across the organization.

The new ArvinMeritor Continuous Improvement organization will ensure the ongoing review and implementation of best practices and synergies across our new company.

This group is already pushing aggressive performance initiatives throughout the company, such as the new ArvinMeritor Performance System (AMPS), which is based on the successful Arvin Total Quality Production System (ATQPS), and also incorporates the Meritor “White Shirt” Continuous Improvement program.

The merger integration process is nearly complete and so far we have identified projected 2001 cost-savings synergies that exceed our original target by 33 percent.

Our 19 integration teams have identified — and are in the process of implementing — $40 million in after-tax savings. And we expect these savings to grow to $100 million pre-tax by 2003.

Together, we believe we will continue to provide value to our shareowners, our employees and our customers.

Now, let’s take a look at the past fiscal year.

The numbers you’ll hear are “pro forma.” That is, as if Arvin and Meritor had operated as one company all of year 1999 and 2000.

During the first six months of 2000, most of our businesses benefited from strong markets. However, for the remainder of the year, we faced many challenges that were spawned by conditions that affected the entire industry.

A number of those unfavorable industry-wide conditions contributed significantly to our disappointing fiscal year 2000 results, including substantial softening in Class 8 commercial truck production in North America, weakened light vehicle aftermarket sales, a weak euro and a slowdown in North American automotive production schedules.

Fiscal year 2000 resulted in ArvinMeritor sales of $7.7 billion, up three percent over the prior fiscal year, with net income before special items of $254 million, nine percent lower than 1999.

Operating income, before special items, was $515 million, down three percent from last year, reflecting an operating margin of 6.7 percent, compared to 7.1 percent a year ago.

Light Vehicle Systems sales were at $3.7 billion — up six percent from last year’s $3.5 billion — and operating margins of 6.3 percent, up 60 basis points over last year.

Improved sales for LVS were driven by market penetration gains in door, suspension, wheels and exhaust, as well as by overall industry volumes.

Sales in fiscal 2000 for Commercial Vehicle Systems OE and aftermarket were $2.9 billion, and operating margins were 7.9 percent, down 40 basis points from 1999.

The decline in North American heavy truck production of approximately 7 percent was the primary cause for this downward trend.

Light Vehicle Aftermarket sales in fiscal 2000 were $950 million, an increase of five percent, or $44 million from 1999 levels. Operating margins declined to 4.5 percent in fiscal 2000, compared to 7.9 percent in 1999.

The margin decline reflected competitive pricing pressures, product mix changes, and softening markets in both North America and Europe.

Now, let’s turn our attention to the first quarter of fiscal year 2001. Comparisons to first quarter 2000 are all on a pro forma basis.

As a result of continuing weak market conditions affecting the company’s North American Commercial Vehicle Systems and Light Vehicle Aftermarket businesses, the first quarter of fiscal year 2001 was disappointing.

First quarter 2001 sales declined $265 million, or 14 percent, to $1.7 billion.

Light Vehicle Systems first-quarter sales were $870 million, down four percent from last year’s first quarter. LVS operating income totaled $52 million, up four percent year over year, reflecting an operating margin of six percent compared to 5.5 percent in last year’s first quarter.

In North America, LVS reported total first quarter sales of $500 million, up two percent over last year’s first quarter, excluding the loss of $31 million of seat adjusting systems sales. That segment of the business was divested during the first quarter of fiscal year 2000.

In Europe, light vehicle sales totaled $302 million, down five percent from the prior year. However, excluding the negative currency translation impact, these sales were up nine percent, reflecting improved penetration in a market that’s down seven percent.

In South America, LVS sales in the first quarter were up three percent, primarily due to an increase in the sales of steel wheels.

Commercial Vehicle Systems OE and aftermarket sales during the first quarter of 2001 were $552 million, down 26 percent from last year’s first quarter. Operating income for CVS was $12 million in the first quarter, reflecting an operating margin of 2.2 percent, compared to 7.9 percent a year ago.

In North America, CVS continued to experience significant weakness in the market, with total first quarter sales of $358 million, down 33 percent from last year, which reflects a 49 percent drop in Class 8 production.

In Europe, CVS sales were $153 million, up six percent from last year’s first quarter, excluding the negative impact of currency translation.

And in South America, CVS sales in the first quarter were up 27 percent over last year’s first quarter, reflecting much stronger truck production in that market.

North American Commercial Vehicle aftermarket should start turning around, which is the natural effect of a business-cycle phase in which there are fewer new commercial vehicle purchases.

The Light Vehicle Aftermarket was down significantly, with 2001 first-quarter sales of $197 million, down 14 percent from last year’s first quarter. LVA operating income for the first quarter was $3 million, down 75 percent from last year’s first quarter, reflecting an operating margin of 1.5 percent, compared to 5.2 percent for the first quarter of 2000. Reduced volume and the resulting lower absorption of fixed operating costs drove this decline.

In North America, Light Vehicle Aftermarket first quarter sales declined 14 percent from last year’s first quarter.

In Europe, LVA sales for the first quarter were down 15 percent from a year ago, again reflecting a soft market.

Markets in this segment are extremely soft due to the production of higher quality, longer lasting products, customer consolidation and excess inventory.

Roll Coater is likewise managing through a difficult time responding to the recent challenges in the steel industry, as well as to increases in natural gas prices.

Turning to our full-year outlook, we expect sales in the $7.0 billion-range, down about 10 percent, reflecting very soft markets. We expect earnings per share in the range of $2.00 to $2.30. We remain very focused on improving our balance sheet and cash management through the downturn.

Those results are certainly not as strong as we had hoped, but it’s important to note that the outlook for 2001 would have been lower without the significant savings generated by the integration process and restructuring operations that are currently being implemented.

We are taking aggressive measures to drive down costs and focus on delivering improved financial performance to build a stronger global Tier One supplier position. All in all, we currently plan on reducing costs by $100 million in fiscal year 2001 through these actions.

We are implementing the necessary critical actions to align our cost structure with current market conditions. These actions include trimming our global work force, restructuring the company’s operations, streamlining and consolidating manufacturing facilities around the world, reducing capital spending, and acting on every opportunity to improve operating efficiencies.

We also will continue to concentrate on our core operations, divest and outsource non-core businesses and processes, improve our cash flow, enhance our capital management initiatives and invest in leading-edge technologies to expand our portfolio.

We have been disappointed with our stock performance. However, it closely parallels that of our peer companies, which is disappointing across the board.

Stocks in the automotive sector continue to be out of favor with investors.

However, we see early indications that investors are losing interest in short-term-gain stocks and moving back to stocks that provide long-term value driven by continued financial performance.

We are addressing the stock issue in a number of ways, including raising the profile of the organization. Most importantly, we intend to distinguish ourselves by delivering superior performance through soft market conditions.

We have also moved forward with our stock buyback initiatives. In 2000, we authorized $100 million for share repurchase.

To date, we have repurchased 5.4 million shares, or 7.6 percent, of ArvinMeritor common stock at an aggregate cost of $84 million. This is in addition to the $125-million program completed last year.

We understand that the automotive industry is a cyclical business.

Tough times are nothing new for us, and we believe good times inevitably follow the bad.

As I said earlier, the merger makes us a stronger company and better positions us to adapt to a changing economic environment.

We had been anticipating a slump in the commercial vehicle industry for two years and we had been closely watching the light vehicle market for signs of the same.

The present downturn was clearly no surprise, although it occurred quicker and has gone deeper than expected.

Now, we’re anxious to get it behind us!

Looking ahead, we continue to see weak markets, at least for a while. We believe the light vehicle production levels will continue to soften, especially in North America.

We estimate North American production to be down about nine percent in fiscal year 2001, to about 15.9 million units, and Western Europe down slightly by about two percent to 16.5 million units.

In the heavy vehicle market, we expect North American production of Class 8 trucks to be down as much as 40 percent in fiscal 2001 compared to last year. And we anticipate a decline in European trucks and trailers, by as much as four percent. However, after the inventory situation corrects itself, we believe production levels will begin to increase.

In the light vehicle aftermarket, customer consolidation and heavy inventory will most likely continue to weaken that segment. However, ArvinMeritor has generally held or gained share as the replacement markets weakened.

We believe the commercial vehicle aftermarket, which has recently been flat-to-down, and will start turning around as soon as the fleets and owner-operators invest in repairing their trucks, when they’re not buying new ones.

Despite the weak market outlook, we believe the progress ArvinMeritor is making with the merger integration process and cost synergies, operational improvements, and cost-reduction initiatives gives us the confidence to lower our fixed costs and to establish a strong foundation for future growth.

As we move forward, we will continue our focus on creating long-term value for shareowners by providing consistent top- and bottom-line growth over a multi-year period.

At all levels of the organization, we expect to deliver on our commitments.

It’s our mission to be the very best. Although we’re currently experiencing a “bump in the road” we fully intend to achieve that goal.

Thank you.