31st
October 2008 - ArvinMeritor
Announces Actions in Response to Global Market Conditions
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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 |
ArvinMeritor, Inc.
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:
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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 |
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Continued to
focus on executing growth strategies and investing in
critical product offerings and technologies |
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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:
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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. |
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No current
covenant constraints which would limit the full availability
of its revolving credit facility |
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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 |
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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.
Source: ArvinMeritor Press Release