Layoffs At ArvinMeritor

TROY, Mich.--About 1,500 workers at ArvinMeritor Inc. are being laid-off as part of a $90 million restructuring effort. A quarterly dividend of 22 cents per share of common stock was also announced, and the company noted that more cuts may be coming.

“To strengthen our position as a leading Tier One supplier in the automotive industry, and to improve our financial performance, we are driving aggressive cost-reduction strategies company-wide. This focus includes the further evaluation of reductions in capital spending and our salaried workforce,” said Bill Hunt, vice chairman and president. “We are taking the critical steps necessary to ensure that we emerge stronger at the end of our first full fiscal year, as well as achieve our long-term financial goals,” he said.

“Our Commercial Vehicle Systems business will account for approximately 50 percent of the total restructuring activities, Light Vehicle Systems about 35 percent and our Light Vehicle Aftermarket group will account for 15 percent. Although we are continually looking for opportunities to reduce costs and improve operating efficiencies, we believe we must respond quickly to the changing economic environment. We will continue to initiate cost reduction actions in each of our businesses and reduce corporate expenses to enhance our performance,” Hunt said.

“We will continue to drive improved financial performance through aggressive ongoing cost-reduction efforts, restructuring actions and synergy realization programs,” said Larry Yost, chairman and chief executive officer. “In addition, we continually evaluate other value-enhancing initiatives, such as our recently announced $100 million stock repurchase program,” he said.

“During the past few months, ArvinMeritor’s financial results were affected by the unfavorable business conditions experienced in our major markets, including substantial softening in the North American commercial vehicle segment, a continued decline in the light vehicle aftermarket, the impact of a weakened euro and North American OEM customer plant shutdowns,” said Yost. “Although the current environment has been challenging for the industry, we are confident that the ArvinMeritor merger strengthens our position to adapt to these changing economics as we emerge as a stronger company,” he said.

Light Vehicle Aftermarket sales declined 16 percent to $209 million in the fourth quarter 2000, compared to $248 million in the fourth quarter of 1999 on a pro forma basis. “Markets in this segment are extremely soft in both North America and Europe, reflecting industry trends toward higher quality products that last longer, and consolidation of the distribution channel base,” Yost said. The operating margin for the Light Vehicle Aftermarket division declined to 2.9 percent in the fourth quarter of fiscal year 2000, from 7.7 percent in the same period last year. The margin decline reflected competitive pricing pressures, product mix changes, and a rapid decline in customer demand for which costs were not reduced commensurate with the sales decline, according to the company. For the year, Light Vehicle Aftermarket pro forma sales increased 5 percent, to $950 million compared to $906 million last year, and the operating margin declined to 4.5 percent in 2000, compared to 7.9 percent in 1999.

“The company continues to make excellent progress in the merger integration process,” said Hunt. “We are committed to a successful integration that will bring value to our employees, customers and shareowners. In the first 100 days of the merger process, we have identified projected cost synergies for 2001 of $50 million pre-tax, and $40 million after-tax, exceeding our initial target by 33 percent. This success reflects the dedicated efforts of our 19 integration teams, including a $10 million annual recurring reduction in income taxes, which is expected to reduce the fiscal 2001 effective tax rate to 35.5 percent. We also are on schedule to increase our cost synergies to $100 million in 2003 and we expect to exceed our previously announced goals of $450 million in revenue synergies by 2004,” he said.

“In addition to the progress made by the numerous integration teams, we are taking aggressive steps to realign our operations, primarily in our Commercial Vehicle Systems and Light Vehicle Aftermarket businesses, with the existing and anticipated declines in our major markets,” Hunt said

“These efforts involve both former Arvin and Meritor operations and result from our post-merger initiative to combine many of our facilities, as well as to align our cost structure with the current market conditions,” said Hunt. “We are restructuring the company’s operations at selected facilities around the world to reduce costs and improve operating efficiencies. The company expects to recover the cost of the program in just over two years and estimates that these actions will reduce operating costs by approximately $25 million in fiscal 2001 growing to $50 million in fiscal 2002,” he said.

For more information, contact www.arvinmeritor.com.