TROY, Mich., Oct. 31 /PRNewswire-FirstCall/ -- ArvinMeritor, Inc.
(NYSE: ARM) 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:
-- 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.
-- Continued to focus on executing growth strategies and investing in
critical product offerings and technologies.
-- 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:
-- 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.
-- No current covenant constraints which would limit the full availability
of its revolving credit facility.
-- 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.
-- 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. For more information, visit the company's Web site at:
http://www.arvinmeritor.com/ .
Forward-Looking Statements
This press release contains statements relating to future results of the
company (including certain projections and business trends) that are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are typically identified by
words or phrases such as "believe," "expect," "anticipate," "estimate,"
"should," "are likely to be," "will" and similar expressions. There are risks
and uncertainties relating to the planned separation of ArvinMeritor's LVS
business, including the timing and certainty of completion of the transition.
In addition, actual results may differ materially from those projected as a
result of certain risks and uncertainties, including but not limited to global
economic and market cycles and conditions; the demand for commercial,
specialty and light vehicles for which the company supplies products; risks
inherent in operating abroad (including foreign currency exchange rates and
potential disruption of production and supply due to terrorist attacks or acts
of aggression); availability and sharply rising cost of raw materials,
including steel and oil; OEM program delays; demand for and market acceptance
of new and existing products; successful development of new products; reliance
on major OEM customers; labor relations of the company, its suppliers and
customers, including potential disruptions in supply of parts to our
facilities or demand for our products due to work stoppages; the financial
condition of the company's suppliers and customers, including potential
bankruptcies; possible adverse effects of any future suspension of normal
trade credit terms by our suppliers; potential difficulties competing with
companies that have avoided their existing contracts in bankruptcy and
reorganization proceedings; successful integration of acquired or merged
businesses; the ability to achieve the expected annual savings and synergies
from past and future business combinations and the ability to achieve the
expected benefits of restructuring actions; success and timing of potential
divestitures; potential impairment of long-lived assets, including goodwill;
potential adjustment of the value of deferred tax assets; competitive product
and pricing pressures; the amount of the company's debt; the ability of the
company to continue to comply with covenants in its financing agreements; the
ability of the company to access capital markets; credit ratings of the
company's debt; the outcome of existing and any future legal proceedings,
including any litigation with respect to environmental or asbestos-related
matters; the outcome of actual and potential product liability and warranty
and recall claims; rising costs of pension and other post-retirement benefits
and possible changes in pension and other accounting rules; as well as other
risks and uncertainties, including but not limited to those detailed from time
to time in filings of the company with the SEC. These forward-looking
statements are made only as of the date hereof, and the company undertakes no
obligation to update or revise the forward-looking statements, whether as a
result of new information, future events or otherwise, except as otherwise
required by law.
All earnings per share amounts are on a diluted basis. The company's
fiscal year ends on the Sunday nearest Sept. 30, and its fiscal quarters end
on the Sundays nearest Dec. 31, March 31 and June 30. All year and quarter
references relate to the company's fiscal year and fiscal quarters, unless
otherwise stated.
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