1st May 2007 - ArvinMeritor Reports Second-Quarter 2007 Results

Company Announces Major Restructuring Initiatives in North America and Europe

ArvinMeritor, Inc. today reported financial results for its second quarter ended March 31, 2007.

Highlights for Second-Quarter Fiscal Year 2007

"While second-quarter results did not meet our expectations, we are pleased with the substantial margin improvement in our LVS business as our new leadership team becomes fully integrated and the initiatives identified through our Performance Plus program begin to take effect," said Chairman, CEO and President Chip McClure. "The initial investment we made in Performance Plus increases our confidence that we can deliver profit improvement actions which will improve cash flow and increase shareowner value. We have committed significant resources to building a more focused and profitable business model for ArvinMeritor and we anticipate improved results in 2008 and beyond, achieving cost savings of $150 million alone in 2009 from our Performance Plus cost initiatives," said McClure.

Results for the Second-Quarter Fiscal Year 2007

For the second quarter of fiscal year 2007, ArvinMeritor posted sales from continuing operations of $1.6 billion, approximately equal to the same period last year. Commercial vehicle sales in Europe improved over 2006, but were offset by lower volumes in North America due to the early stages of the Class 8 truck downturn.

EBITDA, before special items, in the second quarter of fiscal year 2007, was $77 million, down 21 percent, or $21 million, from the same period last year. EBITDA margins, before special items, for the Light Vehicle Systems (LVS) business group, in the second quarter of fiscal year 2007, were 5.2 percent of sales compared to 2.8 percent of sales in the same period last year. Benefits of the previously announced restructuring initiatives and cost reductions in material, labor and burden, and favorable mix toward higher margin products drove the LVS margin improvement. EBITDA margins, before special items, in the Commercial Vehicle Systems (CVS) business group, in the second quarter of fiscal year 2007, were 5.5 percent of sales, compared to 8.3 percent of sales in the same period last year, primarily due to higher retiree medical costs, unfavorable regional mix, and ongoing operations issues in our European CVS business -- compounded by record truck sales in that region.

Income from continuing operations, excluding special items, in the second quarter of fiscal year 2007, was $12 million, or $0.17 per diluted share, compared to $24 million, or $0.34 per diluted share a year ago. Special items were a net cost of $25 million after taxes, and include:

Losses from discontinued operations totaled $81 million, or $1.15 per diluted share, in the second quarter of fiscal year 2007. Included in the loss from discontinued operations are ET and certain Light Vehicle Aftermarket businesses in Europe. The loss from discontinued operations includes an asset impairment charge totaling $90 million, after taxes, related to the ET business, based upon the sale value for the upcoming transaction.

Update on Performance Plus

As previously announced, ArvinMeritor's Performance Plus program is focused on six areas, three related to cost reductions and three focused on revenue enhancement. Since the company announced this initiative in December 2006, ArvinMeritor now anticipates incremental savings in excess of what it had originally targeted. ArvinMeritor expects restructuring and cost reductions alone to generate $150 million in savings by 2009, resulting from:

During the quarter, the company completed several steps toward achieving targeted growth in Asia, Light Vehicle Systems and Aftermarket sales including:

Sale of Emissions Technologies

As previously announced, ArvinMeritor signed a definitive agreement to sell its ET business group to One Equity Partners (OEP) for approximately $310 million. OEP has secured all necessary antitrust approvals to acquire ArvinMeritor's ET business. The transaction is expected to be completed in the third quarter of fiscal year 2007.

Freezing Pension Plan

ArvinMeritor also announced today a freeze of its defined benefit pension plan for salaried and non-represented employees in the United States, effective Jan. 1, 2008. The change will affect approximately 3,800 employees including certain employees who will continue to accrue benefits for an additional transition period, ending June 30, 2011.

After these freeze dates, the company will instead make additional contributions to its defined contribution savings plan on behalf of the affected employees. The amount of the savings plan contribution will be based on a percentage of the employee's pay, with the contribution percentage increasing as the employee ages.

These changes do not affect current retirees or represented employees.

Outlook

The company has adjusted its forecast for the balance of fiscal year 2007. The company now expects sales from continuing operations in fiscal year 2007 to be in the range of $6.0 to $6.2 billion, up from our previous range of $5.9 to $6.1 billion, and anticipates full-year diluted earnings per share from continuing operations to be in the range of $0.70 to $0.80, down from $1.00 to $1.10. This guidance excludes gains or losses on divestitures, restructuring costs and other special items, including potential extended customer shutdowns or production interruptions. Cash flow guidance for fiscal year 2007 remains in the range of $50 million to $100 million.

"Although we have reduced our forecast for the full fiscal year due to lower than expected volumes in the North American Class 8 truck market, unfavorable regional mix, and ongoing operational issues in our European CVS business, we are confident that the results of our actions this fiscal year will result in a significant earnings improvement in fiscal 2008 and 2009. A strong balance sheet, the divestiture of ET, improvements in the cost structure of the LVS business, the predicted rebound in the Class 8 truck market, and a very talented management team -- combined with our aggressive Performance Plus initiatives - will drive increased value for our shareowners," said McClure.

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 light vehicle, commercial truck, trailer and specialty original equipment manufacturers and certain aftermarkets from more than 110 manufacturing facilities globally. Headquartered in Troy, Mich., ArvinMeritor employs approximately 27,500 people in 26 countries. 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/.

Source: ArvinMeritor Press Release