ArvinMeritor Exceeds Strategy Targets for 2001 in First 100 Days
2 October 2000
ArvinMeritor Exceeds Integration Strategy Targets for 2001 in First 100 Days
TROY, Mich., Oct. 2 ArvinMeritor, Inc. today
announced that it has exceeded the company's initial integration synergy
expectation targets for 2001 in its first 100 days, following the July 7
merger of Arvin Industries and Meritor Automotive. These targets were in
areas such as cost savings and blending the two cultures as well as in
integrating best practices, systems solutions and technology.
In commenting on the accomplishment, ArvinMeritor Chairman and Chief
Executive Officer Larry Yost said: "We attribute our success in reaching and
exceeding these ambitious goals to our strong management team. These
hardworking individuals have a strong track record of managing successful
integration processes, and that expertise is paying off handsomely in
integrating our operations."
Because integration is often a factor in the success or failure of a
merger, ArvinMeritor sought to make merger integration a core competency
rather that a "one-time" event. ArvinMeritor established 19 integration teams
that began meeting two months before the merger. The leaders of the teams --
that meet every Monday and represent organizational areas such as engineering,
sales, procurement, operations, finance, human relations, quality and
facilities -- report to the Office of the Chairman formed by Larry Yost and
ArvinMeritor Vice Chairman and President Bill Hunt.
At the time of the merger, ArvinMeritor estimated that first-year cost
synergies would result in $50 million pre-tax ($30 million after-tax) savings.
After 100 days as a new company, ArvinMeritor has exceeded that aggressive
goal by 33 percent, with $40 million after-tax savings identified thus far.
These savings will come from adopting best practices and eliminating
duplication wherever possible in areas such as procurement and logistics,
human resources, facilities, finance and income tax. The $40-million savings
figure does not include operational areas, which represent another opportunity
for significant cost reduction.
"We have been relentless in our efforts to drive down fixed costs -- such
as outsourcing non-core products and establishing a low-cost infrastructure --
and create powerful operational and functional synergies wherever we can,"
Yost said. "We have made tremendous progress in integrating the operations of
Arvin and Meritor into one efficient organization. I am confident in our
ability to create long-term value for our shareowners, as we continue to
deliver quality products and superior service to our customers. Further, we
are comfortable with the current consensus earnings per share of $3.85 for
fiscal 2001."
In addition, ArvinMeritor has identified and targeted revenue enhancements
that are expected to generate an additional $450 million by 2003. In contrast
with cost-savings opportunities, these enhancements are from new marketing
opportunities created by the merger and not previously viable for either party
operating alone. These opportunities can come from the creation of integrated
systems -- made possible by combining several existing products -- or by
taking full advantage of the new partner relationship.
An example of the former is ArvinMeritor's new upper corner module
strategy, made possible by combining several Arvin and Meritor products shock
absorbers or struts, coil springs, spring seats, isolators, bearings and top
mounts into an integrated undercarriage solution. On the other hand, an
example of maximizing the potential of the partnership is ArvinMeritor's
strategy to leverage Arvin's light vehicle exhaust expertise into the
development of exhaust and emission solutions for heavy- and medium-duty
trucks -- a market in which Meritor traditionally holds a significant
presence. Both of these synergies create new paths to existing and potential
customers and leverage technology to provide integrated systems solutions.
Another critical integration initiative concerns the development of core
values, a core purpose and an "envisioned future" for the new ArvinMeritor.
Employees from around the world have been involved in this process, which
includes determining strategic goals and short- and long-term objectives and
addresses ArvinMeritor's key constituencies: employees, customers,
shareowners, suppliers and the communities we serve. Yost explained, "Before
the merger, senior leadership brainstormed the range of elements that could
blend the two compatible cultures into a strong ArvinMeritor. Then, global
site leaders participated in workshops on how to conduct on-site, employee
focus groups on the subject. Finally, senior leadership incorporated findings
from the focus groups into the creation of a core purpose and core values that
accurately reflect the opinion and attitudes of the entire organization."
The ArvinMeritor integration process discussed earlier is, in and of
itself, one of the best practices adopted to ensure the long-term success of
the merger. "By encouraging open dialog and insisting on rigid
accountability, we have been able to identify key issues early on and stay on
target toward our goals," said Bill Hunt. "From the beginning, all 400 team
members were actively involved in evaluating potential value drivers and
providing input that enabled the decision makers to move forward."
Other best practices have been determined and are in the process of being
implemented at ArvinMeritor. They include:
* Maintenance Repair and Operating (MRO) supply reductions -- By
consolidating the global procurement process, ArvinMeritor has realized a
$2.2-million savings, with an additional $1.2-million cost savings identified.
* ArvinMeritor Performance System (AMPS) -- Based on the industry-
standard ATQPS system, AMPS has been carefully redesigned to meet the total
quality production needs of the new organization and is managed at the office
of the chairman level.
* Performance Management System -- This strategic action planning process
links individual performance and compensation directly with the organization's
goals set forth in the envisioned future. The annual goal-setting process is
part of ArvinMeritor's pay-for-performance philosophy.
Finally, ArvinMeritor has renewed its commitment to recognize the
essential contribution all employees make to the company's future success and
to saluting their efforts to develop advanced technologies and solutions for
customers. "We want all of our people to be involved in the integration
process, so that they can feel part of this tremendous accomplishment," said
Yost. "ArvinMeritor's future as a premier supplier to the transportation
industry and our ability to deliver innovative, cost-effective products and
solutions depends on their dedication. Communication is key to ensuring that
dedication."
As part of that commitment to two-way communication, ArvinMeritor launched
"Road Tour 2000," a project that will take members of the senior management
team to more than 100 ArvinMeritor facilities in 100 days. So far, more than
50 visits have been completed so far to the enthusiastic response of the
employees, customers and community leaders at the sites.