ArvinMeritor Reports Fiscal Year 2008 and Fourth-Quarter Results

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TROY, Mich., November 18, 2008: ArvinMeritor, Inc. today reported financial results for its full fiscal year and fourth quarter ended Sept. 28, 2008.

Fiscal Year 2008 Highlights

Sales from continuing operations for fiscal year 2008 were $7.2 billion, up 11 percent compared to fiscal year 2007, due to strength in Europe and South America. This increase was four percent at constant exchange rates.

On a GAAP basis, net loss was $101 million, or a loss of $1.40 per diluted share, due to non-cash income tax charges of $183 million which the company incurred in the fourth quarter primarily to repatriate cash to the United States.

On a GAAP basis, loss per diluted share from continuing operations was $1.26 compared to $0.43 per diluted share in fiscal year 2007.

Earnings per share from continuing operations, before special items, were $1.60 per diluted share, compared to $0.53 per diluted share in fiscal year 2007 -- in line with the company's full fiscal year guidance provided throughout the year.

Free cash outflow (cash flow from operations, net of capital expenditures) of negative $9 million for the full fiscal year, significantly better than the forecasted range of negative $50 million to negative $100 million.

"Our team executed well in fiscal year 2008," said Chairman, CEO and President Chip McClure. "We increased margins by 1.8 percentage points, before special items, in our Commercial Vehicle Systems business by sharpening operational performance in all regions, and we achieved our targeted savings of $75 million in cost reductions through our global Performance Plus profit improvement program.

"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," said McClure.

Fourth-Quarter Highlights

Fourth-quarter sales were $1.7 billion, up eight percent from the same period last year.

On a GAAP basis, net loss from continuing operations was $165 million, or a loss of $2.29 per diluted share, due to non-cash income tax charges of $183 million primarily to repatriate cash to the United States.

Fourth-quarter income from continuing operations, before special items, was $28 million, or $0.38 per diluted share, compared to a loss of $4 million, or $0.06 per diluted share in fiscal year 2007.

Free cash flow was positive $103 million in the fourth quarter.
  Fourth-Quarter Results 2008

For the fourth quarter of fiscal year 2008, ArvinMeritor posted sales of $1.7 billion, up eight percent from the same period last year. At constant exchange rates, sales were up three percent. This increase in sales was primarily due to higher volumes in military, off-highway and aftermarket products, and strong commercial vehicle production outside of North America. These items were offset by softness in the global light vehicle markets.

Operating income in the fourth quarter of 2008 was $40 million, compared to a loss of $16 million in the fourth quarter of fiscal year 2007. Excluding special items, operating income was $52 million, compared to $8 million in the prior year's fourth quarter.

Income from continuing operations during the fourth quarter of fiscal year 2008, before special items, was $28 million, or $0.38 per diluted share, compared to a loss from continuing operations, before special items, of $4 million, or a loss of $0.06 per diluted share, a year ago. Favorable items that impacted fourth-quarter results in fiscal year 2008 were higher sales and operational improvements in supply chain management, application of lean fundamentals and direct material cost reduction programs.

Special items included non-cash income tax charges, restructuring costs and costs associated with the planned separation of the company's Light Vehicle Systems (LVS) business group. These items accounted for approximately $2.67 per diluted share of expense in the fourth quarter.

Fiscal-Year Accomplishments

"Our results in fiscal year 2008 indicate that we have improved our ability to consistently run leaner operations, produce highly-engineered products for our customers, execute acquisitions, and manage the business at a profitable level despite a longer than anticipated downturn in the North American Class 8 truck market," said McClure.

Specific accomplishments in 2008 include:

Improved manufacturing performance through state-of-the-art technology across several of our core competencies, including advanced gear-cutting processes.

Accelerated engineering and development to meet strong demand for Mine Resistant Ambush Protected (MRAP) programs.

Grew U.S. aftermarket sales by six percent during a year in which the U.S. truck replacement part industry was down six percent from last year.

Achieved $75 million in cost reductions through various initiatives related to manufacturing performance, direct and indirect material optimization and overhead savings within the Performance Plus program.

Higher earnings, enhanced collections and credit management, and global inventory management favorably impacted cash flow in fiscal year 2008.

Cash and Liquidity

ArvinMeritor had $497 million in available cash balances and an undrawn, available amount of $626 million under its revolving credit facility as of Sept. 30, 2008. There are no current covenant constraints that limit the availability of this facility. Also, as of Sept. 30, 2008, the company utilized $521 million in 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. The company has no significant long-term debt maturity due until 2012.

Light Vehicle Systems Transaction Update

On Oct. 31, the company announced its plan to explore strategic alternatives for the LVS 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 the company's financial advisor related to the separation of the business.

2009 Priorities

"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," said McClure. "We have defined five key priorities that we will diligently focus on this year." The five priorities include:

Accelerate restructuring and cost reductions
Improve operational performance in all areas
Complete the separation of the light vehicle business, excluding wheels
Expand high-margin segments
Strengthen our product and technology position

  Outlook for 2009

ArvinMeritor's forecast for North American Class 8 truck production is in the range of 200,000 to 220,000 units in calendar year 2009, approximately the same as in 2008. The company's forecast for heavy and medium truck volumes in Western Europe is in the range of 400,000 to 450,000 units, down approximately 25 percent from fiscal year 2008.

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.

Full-year expectations include approximately $50 million in savings from the company's Performance Plus profit improvement program which is now focused on ArvinMeritor's European operations, and $80 million associated with restructuring and cost reduction actions announced on Oct. 31, 2008.

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