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ArvinMeritor Reports Second-Quarter 2007 Results
Company Announces Major Restructuring Initiatives in North America and Europe

TROY, Mich., May 1 /PRNewswire-FirstCall/ -- ArvinMeritor, Inc. (NYSE: ARM) today reported financial results for its second quarter ended March 31, 2007.

    Highlights for Second-Quarter Fiscal Year 2007

    -- Sales from continuing operations of $1.6 billion -- approximately equal
       to the same period last year. Results for continuing operations exclude
       the company's Emissions Technologies (ET) business group now held in
       discontinued operations.

    -- Net loss from continuing operations on a GAAP basis was $13 million, or
       $0.19 per diluted share, compared to income of $32 million, or $0.46
       per diluted share in the second quarter of fiscal year 2006.

    -- Income from continuing operations, before special items, was $12
       million, or $0.17 per diluted share, compared to $24 million, or $0.34
       per diluted share in the same period last year.

    -- The company expects to achieve targeted annual profit improvements of
       $150 million through Performance Plus cost reductions by 2009; growth
       opportunities previously included in the target should provide
       incremental improvements.

    -- Planned restructuring actions in North America and Europe are expected
       to affect 13 plants and 2,800 employees, resulting in an estimated
       annual run rate savings of $130-$140 million by 2012.

    -- ArvinMeritor's Chassis Systems business has been reinforced to include
       the Aftermarket Ride Control business (Gabriel) which will be
       restructured and grown.

"While second-quarter results did not meet our expectations, we are pleased with the substantial margin improvement in our LVS business as our new leadership team becomes fully integrated and the initiatives identified through our Performance Plus program begin to take effect," said Chairman, CEO and President Chip McClure. "The initial investment we made in Performance Plus increases our confidence that we can deliver profit improvement actions which will improve cash flow and increase shareowner value. We have committed significant resources to building a more focused and profitable business model for ArvinMeritor and we anticipate improved results in 2008 and beyond, achieving cost savings of $150 million alone in 2009 from our Performance Plus cost initiatives," said McClure.

Results for the Second-Quarter Fiscal Year 2007

For the second quarter of fiscal year 2007, ArvinMeritor posted sales from continuing operations of $1.6 billion, approximately equal to the same period last year. Commercial vehicle sales in Europe improved over 2006, but were offset by lower volumes in North America due to the early stages of the Class 8 truck downturn.

EBITDA, before special items, in the second quarter of fiscal year 2007, was $77 million, down 21 percent, or $21 million, from the same period last year. EBITDA margins, before special items, for the Light Vehicle Systems (LVS) business group, in the second quarter of fiscal year 2007, were 5.2 percent of sales compared to 2.8 percent of sales in the same period last year. Benefits of the previously announced restructuring initiatives and cost reductions in material, labor and burden, and favorable mix toward higher margin products drove the LVS margin improvement. EBITDA margins, before special items, in the Commercial Vehicle Systems (CVS) business group, in the second quarter of fiscal year 2007, were 5.5 percent of sales, compared to 8.3 percent of sales in the same period last year, primarily due to higher retiree medical costs, unfavorable regional mix, and ongoing operations issues in our European CVS business -- compounded by record truck sales in that region.

Income from continuing operations, excluding special items, in the second quarter of fiscal year 2007, was $12 million, or $0.17 per diluted share, compared to $24 million, or $0.34 per diluted share a year ago. Special items were a net cost of $25 million after taxes, and include:

    -- Positive adjustments to previously recorded inventory and accounts
       receivable reserves associated with our Aftermarket Ride Control
       business, net of depreciation charges that were previously deferred
       while the business was held for sale.

    -- Favorable settlement of certain claims related to prior work
       disruptions.

    -- Charges for restructuring and related actions associated with
       manufacturing footprint changes and staff realignment actions.

    -- Debt retirement costs.

Losses from discontinued operations totaled $81 million, or $1.15 per diluted share, in the second quarter of fiscal year 2007. Included in the loss from discontinued operations are ET and certain Light Vehicle Aftermarket businesses in Europe. The loss from discontinued operations includes an asset impairment charge totaling $90 million, after taxes, related to the ET business, based upon the sale value for the upcoming transaction.

Update on Performance Plus

As previously announced, ArvinMeritor's Performance Plus program is focused on six areas, three related to cost reductions and three focused on revenue enhancement. Since the company announced this initiative in December 2006, ArvinMeritor now anticipates incremental savings in excess of what it had originally targeted. ArvinMeritor expects restructuring and cost reductions alone to generate $150 million in savings by 2009, resulting from:

    -- Restructuring in North America and Europe which will affect 13 plants
       and 2,800 employees estimated to cost approximately $325 million
       through 2012.

    -- Sourcing opportunities in leading cost-competitive countries, lower
       transportation and freight costs, logistics cost savings, and product
       redesign.

    -- Reductions in overhead.

    -- Improvements to the company's manufacturing operations and supply chain
       management.

During the quarter, the company completed several steps toward achieving targeted growth in Asia, Light Vehicle Systems and Aftermarket sales including:

    -- New Light Vehicle business awards of $550 million through 2010.

    -- Opening of new operations in Wuxi, China, to service trailer customers
       in China and export operations.

    -- Establishment of an Asian headquarters under the leadership of Rakesh
       Sachdev, newly appointed president of Asia Pacific operations.

    -- Approval of plans for a major technical center in China.

    -- Development and expansion of North America Commercial Vehicle
       remanufacturing operations.

    Sale of Emissions Technologies

As previously announced, ArvinMeritor signed a definitive agreement to sell its ET business group to One Equity Partners (OEP) for approximately $310 million. OEP has secured all necessary antitrust approvals to acquire ArvinMeritor's ET business. The transaction is expected to be completed in the third quarter of fiscal year 2007.

Freezing Pension Plan

ArvinMeritor also announced today a freeze of its defined benefit pension plan for salaried and non-represented employees in the United States, effective Jan. 1, 2008. The change will affect approximately 3,800 employees including certain employees who will continue to accrue benefits for an additional transition period, ending June 30, 2011.

After these freeze dates, the company will instead make additional contributions to its defined contribution savings plan on behalf of the affected employees. The amount of the savings plan contribution will be based on a percentage of the employee's pay, with the contribution percentage increasing as the employee ages.

    These changes do not affect current retirees or represented employees.

Outlook

The company has adjusted its forecast for the balance of fiscal year 2007. The company now expects sales from continuing operations in fiscal year 2007 to be in the range of $6.0 to $6.2 billion, up from our previous range of $5.9 to $6.1 billion, and anticipates full-year diluted earnings per share from continuing operations to be in the range of $0.70 to $0.80, down from $1.00 to $1.10. This guidance excludes gains or losses on divestitures, restructuring costs and other special items, including potential extended customer shutdowns or production interruptions. Cash flow guidance for fiscal year 2007 remains in the range of $50 million to $100 million.

"Although we have reduced our forecast for the full fiscal year due to lower than expected volumes in the North American Class 8 truck market, unfavorable regional mix, and ongoing operational issues in our European CVS business, we are confident that the results of our actions this fiscal year will result in a significant earnings improvement in fiscal 2008 and 2009. A strong balance sheet, the divestiture of ET, improvements in the cost structure of the LVS business, the predicted rebound in the Class 8 truck market, and a very talented management team -- combined with our aggressive Performance Plus initiatives - will drive increased value for our shareowners," said McClure.

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 light vehicle, commercial truck, trailer and specialty original equipment manufacturers and certain aftermarkets from more than 110 manufacturing facilities globally. Headquartered in Troy, Mich., ArvinMeritor employs approximately 27,500 people in 26 countries. 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/.

Editor's Note: High-resolution photos can be downloaded from ArvinMeritor's Photo Library at http://www.arvinmeritor.com/media_room/photo_library.asp.

Forward-Looking Statements

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.

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. 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 cost of raw materials, including steel; 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; including the sale of ET; potential impairment of long-lived assets, including goodwill; 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; 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.

Non-GAAP Measures

In addition to the results reported in accordance with accounting principles generally accepted in the United States ("GAAP") included throughout this press release, the company has provided information regarding income from continuing operations, diluted earnings per share and operating income before special items, which are non-GAAP financial measures. These non- GAAP measures are defined as reported income or loss from continuing operations, reported diluted earnings or loss per share, and operating income or loss plus or minus special items. Other non-GAAP financial measures include EBITDA, before special items. EBITDA, before special items, is defined as earnings before interest, taxes, depreciation and amortization, and losses on sales of receivables, plus or minus special items.

Management believes that the non-GAAP financial measures used in this press release are useful to both management and investors in their analysis of the company's financial position and results of operations. Management uses EBITDA as the primary basis to evaluate the performance of each of its reportable segments. Further, management uses EBITDA for planning and forecasting in future periods.

Management believes EBITDA is a meaningful measure of performance as it is commonly utilized by management and investors to analyze operating performance and entity valuation. Management, the investment community and the banking institutions routinely use EBITDA, together with other measures, to measure operating performance in our industry.

EBITDA should not be considered a substitute for the reported results prepared in accordance with GAAP and should not be considered as an alternative to net income as an indicator of our operating performance or to cash flows as a measure of liquidity. EBITDA, as determined and presented by the company, may not be comparable to related or similarly titled measures reported by other companies.

These non-GAAP measures should not be considered a substitute for the reported results prepared in accordance with GAAP. These non-GAAP financial measures, as determined and presented by the company, may not be comparable to related or similarly titled measures reported by other companies.

Set forth on the following pages are reconciliations of these non-GAAP financial measures, if applicable, to the most directly comparable financial measures calculated and presented in accordance with GAAP.

Second-Quarter Results Conference Call

The company will host an update of its Performance Plus improvement strategy, and the company's fiscal second-quarter earnings report at 9 a.m. (ET) on May 1, at the Marriott New York East Side in New York City.

To access the webcast, visit the ArvinMeritor Web site at www.arvinmeritor.com and click on the webcast link on either the home page or investor page.

To participate by phone, call (617) 614-3944 10 minutes prior to the start of the call. Please reference participant Passcode 81741810 when dialing in. Investors can also listen to the conference for 90 days by recording, or by visiting www.arvinmeritor.com. A replay of the call will be available from noon (ET) on May 1 through 11:59 p.m. May 4, by calling (888) 286-8010 (within the United States and Canada) or (617) 801-6888 for international calls. Please refer to Passcode 85328063.

    (Logo: http://www.newscom.com/cgi-bin/prnh/20010524/ARVINLOGO )



                               ARVINMERITOR, INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS
                (Unaudited, in millions, except per share amounts)

                                             Quarter Ended   Six Months Ended
                                               March 31,         March 31,
                                            2007     2006     2007     2006
                                             (Unaudited)       (Unaudited)

     Sales                                 $1,627   $1,629   $3,195   $3,093
     Cost of sales                         (1,484)  (1,477)  (2,948)  (2,824)
     GROSS MARGIN                             143      152      247      269
       Selling, general, and
        administrative                        (99)     (89)    (172)    (167)
       Restructuring costs                    (37)      (7)     (37)      (9)
       Other income (expense)                  10       (3)      12       20
     OPERATING INCOME                          17       53       50      113
       Equity in earnings of affiliates         7        7       14       13
       Interest expense, net and other        (34)     (44)     (61)     (75)
     INCOME (LOSS) BEFORE INCOME TAXES        (10)      16        3       51
       Income tax benefit (expense)             -       20       (1)      14
       Minority interests                      (3)      (4)      (5)      (7)
     Income (loss) from continuing
      operations                              (13)      32       (3)      58
     Income (loss) from discontinued
      operations                              (81)      13      (84)      21

     NET INCOME (LOSS)                       $(94)     $45     $(87)     $79

     DILUTED EARNINGS (LOSS) PER SHARE
       Continuing operations               $(0.19)   $0.46   $(0.04)   $0.83
       Discontinued operations              (1.15)    0.19    (1.20)    0.30
     Diluted earnings (loss) per share     $(1.34)   $0.65   $(1.24)   $1.13

     Diluted shares outstanding              70.2     69.9     69.8     69.8

    Note:  Amounts for the three and six months ended March 31, 2006 have
    been restated for discontinued operations.



                               ARVINMERITOR, INC.
                    CONSOLIDATED BUSINESS SEGMENT INFORMATION
                                  (In millions)

                                            Quarter Ended   Six Months Ended
                                               March 31,         March 31,
                                            2007     2006     2007     2006
                                             (Unaudited)       (Unaudited)
    Sales:
      Light Vehicle Systems                  $552     $575   $1,074   $1,122
      Commercial Vehicle Systems            1,075    1,054    2,121    1,971
    Total Sales                            $1,627   $1,629   $3,195   $3,093

    Segment EBITDA:
      Light Vehicle Systems                    $8      $10      $22      $18
      Commercial Vehicle Systems               60       87      123      178
         Total Segment EBITDA                  68       97      145      196
     Unallocated Costs                         (1)      (3)      (1)      (2)
     ET Corporate Allocations                 (11)      (6)     (18)     (14)
         Total EBITDA                          56       88      126      180
     Loss on Sale of Receivables               (1)       -       (3)       -
     Depreciation and Amortization            (34)     (32)     (64)     (61)
     Interest Expense, Net and Other          (34)     (44)     (61)     (75)
     Benefit (Provision) for Income Taxes       -       20       (1)      14
     Income (Loss) From Continuing
      Operations                             $(13)     $32      $(3)     $58

    Note:  Amounts for the three and six months ended March 31, 2006 have
    been restated for discontinued operations.



                               ARVINMERITOR, INC.
                       SUMMARY CONSOLIDATED BALANCE SHEET
                                  (In millions)

                                                    March 31,        Sept. 30,
                                                      2007              2006
     ASSETS                                       (Unaudited)

     Cash and cash equivalents                        $222              $350
     Receivables, net                                1,136             1,103
     Inventories                                       486               488
     Other current assets                              240               246
     Assets of discontinued operations               1,224             1,200
     Net property                                      706               719
     Goodwill                                          511               503
     Other assets                                      973               904
     TOTAL ASSETS                                   $5,498            $5,513

     LIABILITIES AND SHAREOWNERS' EQUITY
     Short-term debt                                   $17               $56
     Accounts payable                                1,128             1,106
     Other current liabilities                         637               706
     Liabilities of discontinued
      operations                                       805               712
     Long-term debt                                  1,220             1,174
     Retirement benefits                               478               487
     Other liabilities                                 228               264
     Minority interests                                 67                64
     Shareowners' equity                               918               944
     TOTAL LIABILITIES AND SHAREOWNERS'
      EQUITY                                        $5,498            $5,513

    Note:  Amounts at September 30, 2006 have been restated for discontinued
    operations.



                               ARVINMERITOR, INC.
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (In millions)

                                                          Six Months Ended
                                                              March 31,
                                                      2007              2006
                                                            (Unaudited)
    OPERATING ACTIVITIES
    Income (loss) from continuing operations           $(3)              $58
        Adjustments to income (loss) from
         continuing operations
            Depreciation and amortization               64                61
            Restructuring costs, net of
             payments                                   20                (9)
            Adjustment of impairment reserves          (10)                -
            Gain on divestitures                        (2)              (23)
            Loss on debt extinguishment                  6                 9
            Pension and retiree medical
             expense                                    67                66
            Other adjustments to income
            (loss) from continuing
             operations                                  1                 2
    Pension and retiree medical contributions         (136)              (49)
    Changes in receivable securitization
     and factoring                                      20                42
    Changes in assets and liabilities                  (81)              (54)
    Cash flows provided by (used for)
     continuing operations                             (36)              103
    Cash flows provided by (used for)
     discontinued operations                           (9)               23
    CASH PROVIDED BY (USED FOR) OPERATING
     ACTIVITIES                                        (63)              126

    INVESTING ACTIVITIES
          Capital expenditures                         (48)              (53)
          Proceeds from dispositions of
           property and businesses                      11                44
          Proceeds from marketable securities            5                 -
          Acquisitions of businesses and
           investments, net of cash acquired            (2)               (1)
          Net investing cash flows provided
           by (used for) discontinued
           operations                                  (23)              177
    CASH PROVIDED BY (USED FOR) INVESTING
     ACTIVITIES                                        (57)              167

    FINANCING ACTIVITIES
        Change in revolving debt, net                   74                 -
        Change in U.S. accounts receivable
         securitization program                        (40)               94
        Debt issuance                                  200               300
        Debt buy back                                 (227)             (603)
        Payments on lines of credit and
         other, net                                     (1)               (3)
           Net change in debt                            6              (212)
        Costs associated with debt
         extinguishment and issuance                   (10)              (18)
        Proceeds from exercise of stock
         options                                         6                 -
        Cash dividends                                 (14)              (14)
        Other financing activities                      (1)                -
        Net financing cash flows provided
         by discontinued operations                     (1)               (2)
    CASH USED FOR FINANCING ACTIVITIES                 (14)             (246)

    IMPACT OF CURRENCY ON CASH AND CASH
     EQUIVALENTS                                         6                 2

    CHANGE IN CASH AND CASH EQUIVALENTS               (128)               49
    CASH AND CASH EQUIVALENTS AT
     BEGINNING OF PERIOD                               350               187
    CASH AND CASH EQUIVALENTS AT END OF
     PERIOD                                           $222              $236

    Note:  Amounts for the six months ended March 31, 2006 have been restated
    for discontinued operations.



                                ARVINMERITOR, INC.
                 SELECTED FINANCIAL INFORMATION - RECONCILIATION
                                     Non-GAAP
              (Unaudited, in millions, except for per share amounts)

                               Ride
                              Control
                               Fair                      Debt         Q2 FY 07
                              Value    Product          Extin-          Before
                   Q2 FY 07   Adjust-  Disrup- Restruc- guish-  Income Special
                   Reported   ments     tions   turing   ment   Taxes   Items

    (in millions,
     except per
     share amounts)

    Sales            $1,627   $    -   $    -   $   -   $   -   $   -   $1,627
    Gross Margin        143        -       (6)      -       -       -      137
    Operating Income     17      (10)      (6)     37       -       -       38
    Income from
     Continuing
     Operations         (13)      (6)      (4)     23       4       8       12
    Diluted Earnings
     Per Share -
     Continuing
     Operations      $(0.19)  $(0.08)  $(0.05)  $0.32   $0.06   $0.11   $ 0.17

    Segment EBITDA
      Light Vehicle
       Systems       $    8   $  (10)  $    3   $  29   $   -   $   -   $   30
      Commercial
       Vehicle
       Systems           60       -        (9)      8       -   $   -       59
    Total Segment
     EBITDA          $   68   $ (10)   $   (6)  $  37   $   -   $   -   $   89

    Segment EBITDA
     Margins
      Light Vehicle
       Systems  (1)    1.4%                                               5.2%
      Commercial
       Vehicle
       Systems         5.6%                                               5.5%
    Total Segment
     EBITDA Margins    4.2%                                               5.4%


    (1) LVS margins before special items are adjusted to reflect the impact of
    reduced volumes in our Brussels operation.



                                ARVINMERITOR, INC.
                 SELECTED FINANCIAL INFORMATION - RECONCILIATION
                                    Non-GAAP
              (Unaudited, in millions, except for per share amounts)

                                                    Debt              Q2 FY 06
                                                    Extin-             Before
                     Q2 FY 06   Environ-  Restruc-  guish-   Income    Special
                     Reported    mental    turing   ment     Taxes      Items

    (in millions,
     except per
     share amounts)

    Sales             $1,629   $   -      $   -   $   -    $   -      $1,629
    Gross Margin         152       -          -       -        -         152
    Operating Income      53       3          7                -          63
    Income from
     Continuing
     Operations           32       2          4       6      (20)         24
    Diluted Earnings
     Per Share -
     Continuing
     Operations       $ 0.46   $0.03      $0.06   $0.09   $(0.30)      $0.34


    Segment EBITDA
      Light Vehicle
       Systems        $   10   $  -       $   6   $  -    $    -         $16
      Commercial
       Vehicle
       Systems            87      -           1      -    $    -          88
    Total Segment
     EBITDA           $   97   $  -       $   7   $  -    $    -        $104

    Segment EBITDA
     Margins
      Light Vehicle
       Systems          1.7%                                             2.8%
      Commercial
       Vehicle
       Systems          8.3%                                             8.3%
    Total Segment
     EBITDA Margins     6.0%                                             6.4%



                               ARVINMERITOR, INC.
                   EBITDA BEFORE SPECIAL ITEMS RECONCILIATION
                                    Non-GAAP
              (Unaudited, in millions, except for per share amounts)

                                                           Quarter Ended
                                                              March 31,
                                                       2007              2006

     Total EBITDA - Before Special Items               $77               $98
         Restructuring Costs                           (37)               (7)
         Ride Control Fair Value
          Adjustment                                    10                 -
         Product Disruptions                             6                 -
         Environmental Remediation Costs                 -                (3)
         Loss on Sale of Receivables                    (1)                -
         Depreciation and Amortization                 (34)              (32)
         Interest Expense, Net and Other               (34)              (44)
         Benefit for Income Taxes                        -                20
     Income (Loss) From Continuing
      Operations                                      $(13)              $32

SOURCE ArvinMeritor, Inc.

CONTACT: Media Inquiries, Lin Cummins, +1-248-435-7112,
linda.cummins@arvinmeritor.com, or Investor Inquiries, Terry Huch,
+1-248-435-9426, terry.huch@arvinmeritor.com
Web site: http://www.arvinmeritor.com
(ARM)

 
 
 
 
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