- Announces $125 million cost reduction
initiatives.
- Provides update on previously announced spin-off of
light vehicle systems business.
- Renews key factoring and securitization commitments.
- Recognizes non-cash income tax charge.
TROY, Mich. (Oct. 31, 2008) — ArvinMeritor, Inc. (NYSE: ARM) today announced that it is
responding aggressively to the current weakness in global business conditions
by executing comprehensive restructuring and cost-reduction initiatives. In
addition, it is exploring strategic alternatives to the spin-off of its Light
Vehicle Systems (LVS) business group.
“Swift and decisive actions are necessary in response to today’s
global economic conditions, which include softness in all markets in which we
participate, as well as weaker foreign currencies,” said Chip McClure,
chairman, CEO and president of ArvinMeritor.
The company has:
- Accelerated
restructuring actions, including workforce and discretionary cost
reductions, to achieve an expected $125 million in annualized savings in
2009.
- Implemented
prudent steps in an effort to maintain profitability and positive annual
cash flow.
- Remained
focused on its strategy to separate the LVS and Commercial Vehicle Systems
(CVS) businesses and is pursuing strategic alternatives to ensure the
completion of the separation, which may potentially include a sale.
- Retained
a strong liquidity position through recent renewals of significant
factoring and securitization lines with key partner banks.
- Continued
to focus on executing growth strategies and investing in critical product
offerings and technologies.
- Repositioned
cash for maximum flexibility, which will result in a non-cash income tax
charge in fiscal year 2008.
“We believe the actions we are announcing today, as
well as the progress we have made over the last several years to improve our
cost structure solidly position our company to address the weakness we are
seeing in the market place,” said McClure. “I am confident that
when the global economies and our industry stabilize we will be a stronger,
more focused company.”
The new cost reduction actions announced today are additional to those the
company executed over the past four years. During this period, the company
consolidated and/or closed 17 of its North American and European manufacturing
facilities; divested non-core businesses; reduced its global workforce by
approximately 4,000; and implemented a business transformation program
(Performance Plus).
“We are pleased that in a very tough environment we were successful
in achieving our Performance Plus cost savings target of $75 million in
2008,” said McClure. “We are also continuing to make strides in
executing our profitable growth strategy by expanding our global presence and growing
our CVS aftermarket, specialty, and military businesses.”
The company also announced today that it expects to recognize a non-cash income
tax charge of approximately $190 million in its fourth quarter of fiscal year
2008 related to the repositioning of cash for maximum flexibility. The large
majority of this non-cash charge is to provide for the utilization of certain
deferred tax assets. This charge will result in a net loss for the company on a
GAAP basis for fiscal year 2008. Excluding this charge and other previously
disclosed special items, the company expects earnings to be in line with the
full fiscal year guidance it provided in September. The company expects free
cash flow to be near breakeven for the fiscal year, significantly ahead of
guidance.
Restructuring and Cost Reduction Initiatives
The company has begun implementing a number of immediate
restructuring and cost reduction initiatives aimed at mitigating current market
conditions. In fiscal year 2009, ArvinMeritor expects to achieve $125
million in annualized savings related to these significant actions. The company
is reducing its global workforce by 1,250 employees, or approximately seven
percent, which is comprised of 450 salaried and 800 hourly positions, including
full-time, contract and temporary workers. The majority of these actions have
already been completed; while the remainder are in process.
ArvinMeritor is implementing proactive cost reduction actions to keep a strong
focus on cash flow by maintaining tight controls on global inventory, pursuing
working capital improvements and significantly reducing discretionary spending.
Strategic Alternatives for LVS
In May 2008, ArvinMeritor announced its plan to spin off its LVS
business to its shareholders within twelve months, contingent upon satisfactory
financial and automotive market conditions.
Although the LVS spin-off continues to be an option, ArvinMeritor is
investigating other alternatives to achieve the separation, including a
potential sale.
“We continue to believe that separating our two business groups will
unlock significant value for our shareowners and strengthen the competitive
position of both businesses, but due to today’s difficult environment we
are pursuing additional approaches to achieve a separation,” McClure added.
Strong Financial Position
At the end of ArvinMeritor’s fiscal
year 2008 (Sept. 28), the company had:
- More than $1 billion in global liquidity, consisting of
an unused or undrawn amount of $626 million of
its revolving credit facility and cash balances of $484 million.
- No current covenant constraints which would limit the
full availability of its revolving credit facility.
- Total secured debt to EBITDA of 0.10x compared with the
current covenant level of 2.5x. This is the only financial
covenant governing availability under the company’s revolving credit
facility.
- Utilized $521 million of factoring and securitization
facilities, $419 million of which are pursuant to recently renewed 364-day
committed liquidity facilities that extend to September and October of
2009. These committed facilities are provided by SunTrust and Nordea Bank.
- No significant debt maturity until 2012, as a result of
both refinancing and paying down debt during the past three years.
About ArvinMeritor
ArvinMeritor, Inc. is a premier global supplier of a broad
range of integrated systems, modules and components to the motor vehicle
industry. The company serves commercial truck, trailer and specialty original
equipment manufacturers and certain aftermarkets, and
light vehicle manufacturers. ArvinMeritor common stock is traded on the New
York Stock Exchange under the ticker symbol ARM. For more information, visit
the company's Web site at:
http://www.arvinmeritor.com/.
Forward-Looking Statements
This
press release contains statements relating to future results of the company
(including certain projections and business trends) that are
“forward-looking statements” as defined in the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are typically
identified by words or phrases such as “believe,”
“expect,” “anticipate,” “estimate,”
“should,” “are likely to be,” “will” and
similar expressions. There are risks and uncertainties relating to the
planned separation of ArvinMeritor’s LVS business,
including the timing and certainty of completion of the transition. In
addition, actual results may differ materially from those projected as a result
of certain risks and uncertainties, including but not limited to global
economic and market cycles and conditions; the demand for commercial, specialty
and light vehicles for which the company supplies products; risks inherent in
operating abroad (including foreign currency exchange rates and potential
disruption of production and supply due to terrorist attacks or acts of
aggression); availability and sharply rising cost of raw materials, including
steel and oil; OEM program delays; demand for and market acceptance of new and
existing products; successful development of new products; reliance on major
OEM customers; labor relations of the company, its suppliers and customers,
including potential disruptions in supply of parts to our facilities or demand
for our products due to work stoppages; the financial condition of the
company’s suppliers and customers, including potential bankruptcies;
possible adverse effects of any future suspension of normal trade credit terms
by our suppliers; potential difficulties competing with companies that have
avoided their existing contracts in bankruptcy and reorganization proceedings;
successful integration of acquired or merged businesses; the ability to achieve
the expected annual savings and synergies from past and future business
combinations and the ability to achieve the expected benefits of restructuring
actions; success and timing of potential divestitures; potential impairment of
long-lived assets, including goodwill; potential adjustment of the value of
deferred tax assets; competitive product and pricing pressures; the amount of
the company’s debt; the ability of the company to continue
to comply with covenants in its financing agreements; the ability of the
company to access capital markets; credit ratings of the company’s debt;
the outcome of existing and any future legal proceedings, including any litigation
with respect to environmental or asbestos-related matters; the outcome of
actual and potential product liability and warranty and recall claims; rising
costs of pension and other post-retirement benefits and possible changes in
pension and other accounting rules; as well as other risks and uncertainties,
including but not limited to those detailed from time to time in filings of the
company with the SEC. These forward-looking statements are made only as of the
date hereof, and the company undertakes no obligation to update or revise the
forward-looking statements, whether as a result of new information, future
events or otherwise, except as otherwise required by law.
All earnings per share amounts are on a
diluted basis. The company's fiscal year ends on the Sunday nearest Sept. 30,
and its fiscal quarters end on the Sundays nearest Dec. 31, March 31 and June
30. All year and quarter references relate to the company's fiscal year and
fiscal quarters, unless otherwise stated.
CONTACTS: Media Inquiries
Lin Cummins
(248) 435-7112
linda.cummins@arvinmeritor.com
Investor
Inquiries
Terry Huch
(248) 435-9426
terry.huch@arvinmeritor.com
