ArvinMeritor announces strong second quarter profits

ArvinMeritor, Inc. has announced an increase in sales for the second quarter 2008, due primarily to the effects of changes in foreign currency. Sales for the quarter topped $1.8 billion, approximately $150 million higher than the same period last year.

"In spite of the downturn in the North American commercial vehicle market that has lasted longer than we anticipated, and volume declines in the light vehicle market in North America, we delivered strong results this quarter," says the company's Chairman, CEO and President Chip McClure. "Initiatives driven through Performance Plus, including lean improvements in our global manufacturing operations, are helping us put in place a solid foundation for continued earnings growth."

According to the company, the Performance Plus initiatives that were put in place last year have resulted in savings of $32 million on an annual run-rate basis. The company continues to expect Performance Plus cost reductions of $75 million this year net of known risks, while previously announced growth opportunities will provide incremental profit opportunities.

The company originally defined three areas of Performance Plus as cost reduction targets: direct material optimization, manufacturing and overhead. In the second quarter, achievements in each of these areas contributed to the company's cost reduction targets including:

- In-sourced manufacturing for certain CVS products to result in annual savings of $7 million.
- Continued performance improvements resulting from implementation of the ArvinMeritor Production System.
- Selected a single source provider for North American industrial labor and global professional and clerical labor resulting in annual savings of $4 million.

Performance Plus also included initiatives to enhance the company's profitable growth. The following growth actions were implemented this quarter:

- Awarded a long-term, multi-million dollar, supply agreement to provide remanufactured transmissions and axle carriers to Navistar Parts.
- Launched remanufactured transmissions in the Plainfield, Ind., aftermarket facility.
- Entered into a multi-year agreement with Tata Consultancy Services in India to enhance Light Vehicle Systems (LVS) engineering capabilities including product development and support in Asia Pacific.
- Re-established the company's off-highway original equipment and aftermarket components business in North America, South America, Europe and Africa.
- Awarded new business in conjunction with 2,200 new MRAP orders since January 2008.
- Booked new business with an Asian manufacturer to supply more than two million additional window regulator motors in China beginning in mid- 2008.
- Announced new products designed specifically for the Asian market including the New Asian Latch product range of modular door latch designs, and a new sliding door latch system.

In addition, several actions were implemented in the second quarter of fiscal year 2008 to improve the company's global manufacturing footprint.These included:

- Building three new light vehicle manufacturing plants in Asia Pacific to support increased business in the region.
- Began production at the LVS facility in Salonta, Romania, to supply window regulators, cables, latches and actuators directly to Dacia, as well as for export to Western European customers.
- On track for July 2008 completion of the company's new commercial vehicle Monterrey, Mexico facility.
- Upgraded the company's Asheville, N.C. axle facility to include a new carrier assembly line for the NG14X — the next generation line haul axle to be launched in Feb. 2009.

The company's calendar year 2008 forecast for light vehicle sales is 15.2 million vehicles in North America, down from the previous forecast. The company's forecast for Western Europe is 17.1 million vehicles, unchanged from the prior forecast.

The company now expects sales from continuing operations in fiscal year 2008 in the range of $7.1 billion to $7.3 billion, up $200 million from the previous guidance primarily due to foreign exchange movements and continued growth outside the U.S.

"Commodity prices are spiking in a dramatic fashion," says McClure. "These increases, combined with resulting higher energy costs, require us to take additional recovery actions to mitigate future impact. For fiscal year 2008, we remain focused on our strategy to deliver results and are confident we will achieve our full-year guidance."

For more information about ArvinMeritor, visit the company's Web site.