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Meritor Automotive Settles Treasury Interest Rate Lock Agreements

6 October 1998

Meritor Automotive Settles Treasury Interest Rate Lock Agreements

    TROY, Mich., Oct. 6 -- Meritor Automotive, Inc.
today reported the settlement of two forward treasury interest rate lock
agreements resulting in a one-time payment of $31 million.  As previously
reported, the agreements were entered into last April to secure interest rates
in connection with the anticipated issuance under Meritor's shelf registration
statement of both intermediate and long-term bonds, aggregating $100 million
each.  This was part of the company's overall corporate capital strategy to
balance fixed rate and floating rate debt.
    The issuance of the bonds was delayed initially due to the consideration
of a major acquisition and, most recently, the instability of financial
markets.  In light of current market conditions, it now appears unlikely that
the long-term bonds will be issued in the near future, while there is a
somewhat higher probability that the intermediate term bonds may be issued in
the near future.
    The accounting treatment of the one-time settlement payment is expected to
result in a non-recurring charge in the fourth quarter of fiscal 1998 of
between $0.16 and $0.27 per share.  The earnings per share impact could be at
the low end of this range if the intermediate term bond offering is completed
in the near future, since the accounting treatment would then permit the
settlement payment to be amortized over the life of the bonds.
    Meritor Chairman and Chief Executive Officer Larry D. Yost said:  "Meritor
management has made the difficult decision to settle these agreements at this
time, due to the uncertainty of the financial markets.  Settling these
agreements now is the right decision, given the potential for further declines
in treasury yields."
    Yost added:  "Notwithstanding the instability of the financial markets,
Meritor's fiscal 1998 operating performance continues to provide the momentum
for the achievement of our stated long-term financial goals to grow, on an
average annual basis, sales by 8 percent and earnings per share by 15 percent.
Actual performance for fiscal 1998, excluding the impact of the above non-
recurring charge, is expected to substantially exceed these goals."
    Meritor, with 1997 sales of $3.3 billion, is a global supplier of a broad
range of components and systems for commercial, specialty and light vehicles.
Meritor consists of two businesses:  Heavy Vehicle Systems, a leading supplier
of drivetrain systems and components for medium- and heavy-duty trucks,
trailers and off-highway equipment and specialty vehicles including military,
bus and coach, and fire and rescue; and Light Vehicle Systems, a major
supplier of roof, door, access control and seat adjusting systems, electric
motors, suspension systems and wheels for passenger cars, light trucks and
sport utility vehicles.
    This news release contains statements relating to future results that are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995.  Actual results may differ materially from those projected
as a result of certain risks and uncertainties, including but not limited to
those detailed from time to time in the company's Securities and Exchange
Commission filings.
    Meritor World Wide Web Site Address:  http://www.meritorauto.com