View Filing Data

Print Document View Excel Document

DOCUMENT AND ENTITY INFORMATION - USD ($)	12 Months Ended
DOCUMENT AND ENTITY INFORMATION - USD ($)	Sep. 30, 2012	Nov. 07, 2012	Mar. 30, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	MERITOR INC
Entity Central Index Key	0001113256
Current Fiscal Year End Date	--09-30
Entity Filer Category	Large Accelerated Filer
Trading Symbol	MTOR
Entity Common Stock, Shares Outstanding		96,524,636
Document Period End Date	Sep. 30, 2012
Document Type	10-K
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2012
Amendment Flag	false
Entity Well-Known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 765,333,392

CONSOLIDATED STATEMENT OF INCOME - USD ($) shares in Millions, $ in Millions	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Income Statement [Abstract]
Sales	$ 4,418	$ 4,622	$ 3,530
Cost of sales	(3,933)	(4,146)	(3,105)
GROSS MARGIN	485	476	425
Selling, general and administrative	(285)	(278)	(281)
Restructuring costs	(39)	(22)	(6)
Gain (Loss) on Sale of Property, Plant Equipment	16	0	0
Other operating expense, net	(4)	(2)	(6)
OPERATING INCOME	173	174	132
Other income, net	7	10	2
Equity in earnings of affiliates	52	70	48
Interest expense, net	(95)	(95)	(106)
INCOME (LOSS) BEFORE INCOME TAXES	137	159	76
Provision for income taxes	(56)	(77)	(48)
INCOME (LOSS) FROM CONTINUING OPERATIONS	81	82	28
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(18)	(2)	(2)
Net income (loss)	63	80	26
Less: Net income attributable to noncontrolling interests	(11)	(17)	(14)
NET INCOME (LOSS) ATTRIBUTABLE TO MERITOR, INC.	52	63	12
NET INCOME (LOSS) ATTRIBUTABLE TO MERITOR, INC.
Net income (loss) from continuing operations	70	65	14
Loss from discontinued operations	(18)	(2)	(2)
Net income (loss)	$ 52	$ 63	$ 12
BASIC EARNINGS (LOSS) PER SHARE
Continuing operations (in dollars per share)	$ 0.73	$ 0.69	$ 0.16
Discontinued operations (in dollars per share)	(0.19)	(0.02)	(0.02)
Basic earnings (loss) per share (in dollars per share)	0.54	0.67	0.14
DILUTED EARNINGS (LOSS) PER SHARE
Continuing operations (in dollars per share)	0.72	0.67	0.16
Discontinued operations (in dollars per share)	(0.18)	(0.02)	(0.02)
Diluted earnings (loss) per share (in dollars per share)	$ 0.54	$ 0.65	$ 0.14
Basic average common shares outstanding (in shares)	95.9	94.1	84.7
Diluted average common shares outstanding (in shares)	97.2	96.9	87.6

CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions	Sep. 30, 2012	Sep. 30, 2011
ASSETS
Cash and Cash Equivalents	$ 257	$ 217
Receivables, trade and other, net	542	712
Inventories	438	460
Other current assets	61	70
TOTAL CURRENT ASSETS	1,298	1,459
NET PROPERTY	417	421
GOODWILL	433	431
OTHER ASSETS	353	352
TOTAL ASSETS	2,501	2,663
LIABILITIES AND EQUITY (DEFICIT)
Short-term debt	18	84
Accounts payable	697	841
Other current liabilities	313	328
TOTAL CURRENT LIABILITIES	1,028	1,253
LONG-TERM DEBT	1,042	950
RETIREMENT BENEFITS	1,075	1,096
OTHER LIABILITIES	338	325
EQUITY (DEFICIT):
Common stock (September 30, 2012 and 2011, 96.5 and 94.6 shares issued and outstanding, respectively)	96	94
Additional paid-in capital	901	897
Accumulated deficit	(1,105)	(1,157)
Accumulated other comprehensive loss	(915)	(829)
Total deficit attributable to Meritor, Inc.	(1,023)	(995)
Noncontrolling interest	41	34
TOTAL DEFICIT	(982)	(961)
TOTAL LIABILITIES AND DEFICIT	$ 2,501	$ 2,663

CONSOLIDATED BALANCE SHEET [Parenthetical] - shares	Sep. 30, 2012	Sep. 30, 2011
Balance Sheet Paranthetical [Abstract]
Common stock, shares issued	96,500,000	94,600,000
Common stock, shares outstanding	96,500,000	94,600,000

CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
OPERATING ACTIVITIES
CASH PROVIDED BY OPERATING ACTIVITIES (see Note 25)	$ 77	$ 41	$ 211
INVESTING ACTIVITIES
Capital expenditures	(89)	(105)	(55)
Proceeds from sale of property	18	0	0
Other investing cash flows	3	2	5
Net investing cash flows used for continuing operations	(68)	(103)	(50)
Net investing cash flows provided by (used for) discontinued operations	28	(69)	(14)
CASH USED FOR INVESTING ACTIVITIES	(40)	(172)	(64)
FINANCING ACTIVITIES
Proceeds from debt issuance	100	0	245
Repayment of notes and term loan	(86)	0	(193)
Payments on accounts receivable securitization program	0	0	(83)
Payments on revolving credit facility, net	0	0	(28)
Borrowings on lines of credit and other	0	0	5
Net change in debt	14	0	(54)
Proceeds from stock issuance	0	0	209
Debt and stock issuance and debt extinguishment costs	(12)	0	(45)
Other financing cash flows	0	6	(1)
Net financing cash flows provided by continuing operations	2	6	109
Net financing cash flows used for discontinued operations	0	0	(12)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	2	6	97
EFFECT OF CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	1	(1)	4
CHANGE IN CASH AND CASH EQUIVALENTS	40	(126)	248
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	217	343	95
CASH AND CASH EQUIVALENTS AT END OF YEAR	$ 257	$ 217	$ 343

CONSOLIDATED STATEMENT OF EQUITY (DEFICIT) - USD ($) $ in Millions	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Parent [Member]	Noncontrolling Interest [Member]
Beginning balance at Sep. 30, 2009	$ (1,166)	$ 72	$ 699	$ (1,232)	$ (734)	$ (1,195)	$ 29
Net Income	26	0	0	12	0	12	14
Foreign currency translation adjustments	44	0	0	0	44	44	0
Impact of sale of business	31	0	0	0	31	31	0
Employee benefit adjustments (net of tax of $2)	(157)	0	0	0	(157)	(157)	0
Other	4	0	0	0	4	4	0
Comprehensive Income (loss)	(52)					(66)	14
Issuance of common stock	200	20	180	0	0	200	0
Equity based compensation expense	7	0	7	0	0	7	0
Non-controlling interest dividends	(12)	0	0	0	0	0	(12)
Ending Balance at Sep. 30, 2010	(1,023)	92	886	(1,220)	(812)	(1,054)	31
Net Income	80	0	0	63	0	63	17
Foreign currency translation adjustments	(7)	0	0	0	(7)	(7)	0
Impact of sale of business	(53)	0	0	0	(53)	(53)	0
Employee benefit adjustments (net of tax of $2)	44	0	0	0	44	44	0
Other	(1)	0	0	0	(1)	(1)	0
Comprehensive Income (loss)	63					46	17
Equity based compensation expense	7	0	7	0	0	7	0
Exercise of stock options	6	2	4	0	0	6	0
Non-controlling interest dividends	(14)	0	0	0	0	0	(14)
Ending Balance at Sep. 30, 2011	(961)	94	897	(1,157)	(829)	(995)	34
Net Income	63	0	0	52	0	52	11
Foreign currency translation adjustments	(18)	0	0	0	(17)	(17)	(1)
Employee benefit adjustments (net of tax of $2)	(68)	0	0	0	(68)	(68)	0
Other	(1)	0	0	0	(1)	(1)	0
Comprehensive Income (loss)	(24)					(34)	10
Issuance of common stock	0	2	(2)	0	0	0
Equity based compensation expense	6	0	6	0	0	6	0
Non-controlling interest dividends	(3)	0	0	0	0	0	(3)
Ending Balance at Sep. 30, 2012	$ (982)	$ 96	$ 901	$ (1,105)	$ (915)	$ (1,023)	$ 41

CONSOLIDATED STATEMENT OF EQUITY (DEFICIT) [Parenthetical] - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Employee benefit related adjustment, tax portion	$ 2	$ 2	$ 2

BASIS OF PRESENTATION	12 Months Ended
BASIS OF PRESENTATION	Sep. 30, 2012
Organization, Consolidation and Presentation of Financial Statements [Abstract]
BASIS OF PRESENTATION	BASIS OF PRESENTATION Meritor, Inc. (the "company" or "Meritor"), headquartered in Troy, Michigan, is a premier global supplier of a broad range of integrated systems and components to original equipment manufacturers (“OEMs”) and the aftermarket for the commercial vehicle, transportation and industrial sectors. The company serves commercial truck, trailer, off-highway, military, bus and coach and other industrial OEMs and certain aftermarkets. The consolidated financial statements are those of the company and its consolidated subsidiaries. Certain businesses are reported in discontinued operations in the consolidated statement of operations, statement of cash flows and related notes for all periods presented. Additional information regarding discontinued operations is discussed in Note 3. The company’s fiscal year ends on the Sunday nearest September 30. The 2012, 2011 and 2010 fiscal years ended on September 30, 2012, October 2, 2011, and October 3, 2010. All year and quarter references relate to the company’s fiscal year and fiscal quarters, unless otherwise stated. For ease of presentation, September 30 is used consistently throughout this report to represent the fiscal year end. The company has evaluated subsequent events through the date that the consolidated financial statements were issued (see Note 26).

- Definition

The entire disclosure for organization, consolidation and basis of presentation of financial statements disclosure.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 275
-SubTopic 10
-URI http://asc.fasb.org/subtopic&trid=2134480

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 852
-SubTopic 10
-URI http://asc.fasb.org/subtopic&trid=2209116

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 10
-URI http://asc.fasb.org/subtopic&trid=2122150

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-URI http://asc.fasb.org/subtopic&trid=2197480

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 50
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=7880789&loc=SL6228881-111685

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 272
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6373374&loc=d3e70478-108055

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 720
-SubTopic 15
-URI http://asc.fasb.org/subtopic&trid=2122524

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 10
-Section 45
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=7668296&loc=d3e288-107754

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 915
-SubTopic 235
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6472506&loc=d3e38932-110933

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18780-107790

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=18733093&loc=d3e5614-111684

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6359566&loc=d3e326-107755

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Statement of Position (SOP)
-Number 94-6
-Paragraph 10
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph 2-6
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 15: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name FASB Interpretation (FIN)
-Number 46R
-Paragraph 4, 14, 15
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 16: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name FASB Staff Position (FSP)
-Number FAS140-4/FIN46(R)-8
-Paragraph 8, C1, C7
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

+ Details

SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (U.S.) (GAAP) requires the use of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses and related disclosures. Actual results could differ from these estimates. Significant estimates and assumptions were used to value goodwill and other long-lived assets, including impairment charges (see Notes 4 and 10), costs associated with the company’s restructuring actions (see Note 5), product warranty liabilities (see Note 13), long-term incentive compensation plan obligations (see Note 18), retiree medical and pension obligations (see Notes 19 and 20), income taxes (see Note 21), and contingencies including asbestos and environmental matters (see Note 22).

Consolidation and Joint Ventures

The consolidated financial statements include the accounts of the company and those subsidiaries in which the company has control. All intercompany balances and transactions are eliminated in consolidation. The results of operations of controlled subsidiaries are included in the consolidated financial statements and are offset by a related noncontrolling interest recorded for the noncontrolling partners’ ownership. Investments in affiliates that are not controlled or majority-owned are reported using the equity method of accounting (see Note 12).

Foreign Currency

Local currencies are generally considered the functional currencies for operations outside the U.S. For operations reporting in local currencies, assets and liabilities are translated at year-end exchange rates with cumulative currency translation adjustments included as a component of Accumulated Other Comprehensive Loss in the consolidated balance sheet. Income and expense items are translated at average rates of exchange during the year.

Impairment of Long-Lived Assets

Long-lived assets, excluding goodwill, to be held and used are reviewed for impairment whenever adverse events or changes in circumstances indicate a possible impairment. An impairment loss is recognized when a long-lived asset’s carrying value exceeds the fair value.

Long-lived assets held for sale are recorded at the lower of their carrying amount or estimated fair value less cost to sell.

Discontinued Operations

A business component that either has been disposed of or is classified as held for sale is reported as discontinued operations if the cash flows of the component have been or will be eliminated from the ongoing operations of the company and the company will no longer have any significant continuing involvement in the business component. The results of discontinued operations are aggregated and presented separately in the consolidated statement of income and consolidated statement of cash flows. Assets and liabilities of the disposal group, are aggregated and reported separately as assets and liabilities of discontinued operations in the consolidated balance sheet (see Note 3).

Revenue Recognition

Revenues are recognized upon shipment of product and transfer of ownership to the customer. Provisions for customer sales allowances and incentives are recorded as a reduction of sales at the time of product shipment.

Allowance for Doubtful Accounts

An allowance for uncollectible trade receivables is recorded when accounts are deemed uncollectible based on consideration of write-off history, aging analysis, and any specific, known troubled accounts.

Earnings per Share

Basic earnings (loss) per share is calculated using the weighted average number of shares outstanding during each year. The diluted earnings (loss) per share calculation includes the impact of dilutive common stock options, restricted stock, and convertible securities, if applicable.

A reconciliation of basic average common shares outstanding to diluted average common shares outstanding is as follows (in millions):



	Year Ended September 30,
	2012	2011	2010
Basic average common shares outstanding	95.9	94.1	84.7
Impact of stock options	—	0.1	—
Impact of restricted shares and share units	1.3	2.7	2.9
Diluted average common shares outstanding	97.2	96.9	87.6

At September 30, 2012, 2011, and 2010 options to purchase 0.7 million, 0.5 million, and 1.4 million shares of common stock, respectively, were not included in the computation of diluted earnings per share because their exercise price exceeded the average market price for the twelve month period and thus their inclusion would be anti-dilutive. The company’s convertible senior unsecured notes are excluded from the computation of diluted earnings per share for each period presented, as the company’s average stock price during each period is less than the conversion price.

Other

Other significant accounting policies are included in the related notes, specifically, goodwill (Note 4), inventories (Note 8), property and depreciation (Note 10), capitalized software (Note 11), product warranties (Note 13), financial instruments (Note 16), equity based compensation (Note 18), retirement medical plans (Note 19), retirement pension plans (Note 20), income taxes (Note 21) and environmental and asbestos-related liabilities (Note 22).

New accounting standards to be implemented

In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The new guidance allows an entity to present components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements. The guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. This new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The company plans to adopt this guidance at the beginning of its first quarter of fiscal year 2013. The company does not believe the adoption of the new guidance will have a significant impact on the company’s consolidated financial statements.

In July 2012, the FASB issued ASU No. 2012-02, Intangibles - Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. The guidance provides an option for companies to use a qualitative approach to test indefinite-lived intangible assets for impairment if certain conditions are met. The amendment is effective for annual and interim impairment tests of indefinite-lived intangible assets for fiscal years beginning after September 15, 2012. The company does not believe the adoption of the new guidance will have a significant impact on the company’s consolidated financial statements.

Accounting standards implemented in fiscal year 2012

In September 2011, the Financial Accounting Standards Board (the FASB) issued ASU No. 2011-08: Testing Goodwill for Impairment. Under the revised guidance, entities testing for goodwill impairment have an option of performing a qualitative assessment before calculating the fair value for the reporting unit, i.e., Step 1 of the goodwill impairment test. If an entity determines, on the basis of qualitative factors, that the fair value of the reporting unit is more-likely-than-not less than the carrying amount, the first step of the two-step impairment test would be required. If it is not more-likely-than-not that the fair value of the reporting unit is less than the carrying value, then goodwill is not considered to be impaired. ASU No. 2011-08 does not change how goodwill is calculated or assigned to reporting units, nor does it revise the requirement to test goodwill at least annually for impairment. This ASU is effective for interim and annual periods beginning after December 15, 2011 with early adoption permitted. The company has adopted the revised guidance provided in this ASU effective with its second quarter of fiscal year 2012 and has started applying it accordingly. The adoption of this new guidance did not have any effect on the company's goodwill impairment assessments.

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). This ASU is intended to result in convergence between U.S. GAAP and IFRS requirements for measurement of and disclosures about fair value. The guidance amends current fair value measurement and disclosure guidance to include increased transparency around valuation inputs and investment categorization. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011. The company has adopted this new guidance effective with its second quarter of fiscal year 2012 and has provided required disclosures in Note 16 and 20 to the consolidated financial statements.

DISCONTINUED OPERATIONS

12 Months Ended

Sep. 30, 2012

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

Results of the discontinued operations are summarized as follows (in millions):



	Year Ended September 30,
	2012			2011			2010
Sales	$	2		$	368		$	1,353
Operating income, net	$	—		$	11		$	27
Net gain (loss) on sales of businesses	(1		)	19			5
Long-lived asset impairment charges	—			—			(2		)
Charge for contingency and indemnity obligation (see Note 22)	(10		)	(4		)	—
Restructuring costs	(1		)	(9		)	(6		)
Environmental remediation charges (see Note 22)	(3		)	(4		)	(2		)
LVS divestiture costs	—			(1		)	(9		)
Other	(6		)	(11		)	(13		)
Income (loss) before income taxes	(21		)	1			—
Benefit (provision) for income taxes	3			(3		)	(2		)
Loss from discontinued operations attributable to Meritor, Inc.	$	(18	)	$	(2	)	$	(2	)

In conjunction with the company’s long-term strategic objective to focus on supplying the commercial vehicle on- and off-highway markets for original equipment manufacturers, aftermarket and industrial customers, the company divested its Light Vehicle Systems (LVS) business groups in various transactions. In November 2011, the company sold its damper business located in Leicester, England. With the sale of this business, the company completed the divestiture of its LVS businesses. Results of the company’s LVS businesses are reflected in discontinued operations for all periods presented.

Prior Period Divestitures

EU Trailer

In the second quarter of fiscal year 2011, the company announced the planned closure of its EU Trailer business which was part of the company’s Aftermarket & Trailer segment. All manufacturing operations and use of productive assets ceased prior to September 30, 2011. The company sold certain long-lived and current assets of the business to a third party and recognized a loss of approximately $2 million during the fourth quarter of fiscal year 2011 in connection with the sale. In addition, the company recognized $8 million of restructuring charges associated with the closure of EU Trailer business in fiscal year 2011. Additional restructuring charges of $1 million were recognized in fiscal year 2012. These charges are included in loss from discontinued operations in the accompanying consolidated statement of income. Total sales from this business were $59 million and $64 million in fiscal years 2011 and 2010, respectively.

Gabriel Europe

On February 6, 2011, the company sold its Gabriel Europe (Bonneval) facility to TRW Automotive Holdings France. Gabriel Europe manufactured ride control parts (shock absorbers) for sale in Europe. In connection with the sale, the company made a cash capital contribution of $15 million to Gabriel Europe prior to the completion of the sale transaction. This capital contribution is included in net investing cash flows used for discontinued operations in the accompanying consolidated statement of cash flows. In connection with the sale of Gabriel Europe business, the company recognized a pre-tax loss of $13 million ($13 million after tax) in fiscal year 2011.

Body Systems

On January 3, 2011, the company completed the sale of its Body Systems business to Inteva Products Holding Coöperatieve U.A., an assignee of 81 Acquisition LLC and an affiliate of Inteva Products, LLC. Pursuant to the sale agreement signed in August 2010, total consideration was approximately $35 million, subject to certain potential adjustments for items such as working capital fluctuations. The actual purchase price at the closing was $27 million (excluding estimated closing expenses for outside advisory fees of $12 million), consisting of $12 million in cash at closing (adjusted for estimated balances in working capital and other items at the time of the closing) and a five-year, 8-percent promissory note for $15 million, payable in five annual installments beginning in January 2012. The current portion of the promissory note is included in receivables, trade and other, net in the accompanying consolidated balance sheet. The long-term portion of the note is included in other assets in the accompanying consolidated balance sheet.

In addition to the purchase price, the company was entitled to receive the cash held at the time of the sale by the Body Systems entities operating in China and Brazil of approximately $33 million, before applicable taxes and other withholding, at such time as it becomes available for distribution, as provided in the sale agreement. At September 30, 2011, the company recognized a receivable of approximately $28 million, net of applicable taxes and other withholding, for cash balances available for distribution based on the then-current distribution capacity. The company expects to recognize a receivable for the remaining amount of approximately $3 million, before applicable taxes and other withholding, at such time when the balance becomes available for distribution by the respective entities. During fiscal year 2012, the company received approximately $24 million, net of withholdings, of cash balances for which a receivable was recorded at September 30, 2011. The receivable recognized at September 30, 2012 and 2011 is included in receivables, trade and other, net in the accompanying consolidated balance sheet. Cash flows associated with the receipt of cash balances in fiscal year 2012 and outflows associated with the sale of Body Systems are included in net investing cash flows provided by (used for) for discontinued operations in the accompanying consolidated statement of cash flows.

In connection with the sale of Body Systems business, the company recognized a pre-tax gain of $32 million ($32 million after tax) in fiscal year 2011. Upon sale of the Body Systems business, net accumulated foreign currency translation gains of $62 million were recognized into income and included in the gain on sale of this business. These net accumulated foreign currency translation gains were previously deferred and included in accumulated other comprehensive loss in the condensed consolidated statement of equity (deficit).

The sale agreement contains certain customary representations, warranties and covenants of the seller and the purchaser as further set forth in the agreement. The agreement also includes provisions governing post-closing indemnities between the seller and the purchaser for losses arising from specified events. At September 30, 2012 and 2011, the company has recognized estimates for such indemnities, primarily related to income tax matters, of $4 million and $5 million, respectively. This amount is included in other liabilities in the accompanying consolidated balance sheet.

Meritor Suspension Systems Company (MSSC)

On June 24, 2009, the company entered into a binding letter of intent to sell its 57 percent interest in MSSC, a joint venture that manufactured and supplied automotive coil springs, torsion bars and stabilizer bars in North America, to the joint venture partner, a subsidiary of Mitsubishi Steel Mfg. Co., LTD (MSM). The sale transaction closed in October 2009. The purchase price was $13 million, which included a cash dividend of $12 million received by the company in June 2009. The remaining purchase price was received by the company at the time of closing. In connection with the sale of its interest in MSSC, the company provided certain indemnifications to the buyer for its share of potential obligations related to pension funding shortfall, environmental and other contingencies, and valuation of certain accounts receivable and inventories. The company’s estimated exposure under these indemnities at September 30, 2012 and September 30, 2011 is approximately $14 million and $15 million, respectively, and is included in other current liabilities and other liabilities in the consolidated balance sheet.

The following summarizes significant items included in loss from discontinued operations in the consolidated statement of income for the fiscal years ended September 30, 2012, 2011 and 2010:

Sales from discontinued operations in fiscal years 2012, 2011 and 2010 were $2 million, $368 million and $1,353 million, respectively. Sales in fiscal year 2012 were related to our damper business located in Leicester, England, which was sold in November 2011. Sales in the fiscal year 2011 included $298 million in Body Systems and $59 million in EU Trailer. The remaining sales in fiscal year 2011 were in Gabriel Europe and the damper business in Leicester, England. Sales in the fiscal year 2010 included $1,186 million in Body Systems, $64 million in EU Trailer and remainder in other LVS businesses.

Operating loss, net from discontinued operations represents income from normal operating activities of businesses included in discontinued operations.

Net gain (loss) on sale of business: The loss on sale of business in fiscal year 2012 relates to the sale of the company's damper business located in Leicester, England during the first quarter. During the second quarter of fiscal year 2011, the company recognized a pre-tax gain of $32 million ($32 million after tax) on the sale of its Body Systems business and a pre-tax loss of $13 million ($13 million after tax) on the sale of its Gabriel Europe business.

In connection with the sale of the company’s interest in MSSC, the company recognized a pre-tax gain on sale of $16 million ($16 million after tax), net of estimated indemnity obligations as described above during fiscal year 2010. The company recognized $3 million of pre-tax losses ($3 million after tax) on the sale of certain other LVS businesses during the fourth quarter of fiscal year 2010. Also included in net gain on sale of businesses for the fiscal year 2010 are $8 million of charges associated with the Gabriel Ride Control working capital adjustments recognized in the first quarter of fiscal year 2010. Gabriel Ride Control business was sold in fiscal year 2009.

Long-lived asset impairment charges: During fiscal year 2010, the company recognized $2 million of long-lived asset impairment charges in its EU Trailer business.

Restructuring costs: In fiscal years 2012 and 2011, the company recognized $1 million and $8 million, respectively, of restructuring charges associated with the closure of its EU Trailer business. The remaining restructuring charges in fiscal year 2011 were related to employee severance costs at the company's Gabriel Europe business prior to the sale in the second quarter. Restructuring costs recognized in fiscal year 2010 were related to charges associated with actions in the company’s Body Systems business and other LVS businesses.

LVS divestiture costs are related to actions in connection with the separation of the LVS businesses from the company, and include third-party costs associated with divestiture activities and costs associated with the previously planned spin-off of the LVS business.

Other: During the fourth quarter of fiscal year 2011, the company recognized $2 million of losses associated with the sale of certain assets in connection with the closure of its EU Trailer business. The company also recognized $4 million of costs associated with the sale of Body Systems business during the second quarter of fiscal year 2011. The remaining charges primarily relate to changes in estimates and adjustments to certain assets and liabilities retained from previously sold businesses and indemnities provided at the time of sale.

- Definition

The entire disclosure for the facts and circumstances leading to the completed or expected disposal, manner and timing of disposal, the gain (loss) recognized in the income statement and the income statement caption that includes that gain (loss), amounts of revenues and pretax profit or loss reported in discontinued operations, the segment in which the disposal group was reported, and the classification (whether sold or classified as held for sale) and carrying value of the assets and liabilities comprising the disposal group. Includes all disposal groups, including those classified as components of the entity (discontinued operations).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1361-107760

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1436-107760

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1510-107760

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1474-107760

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 45
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6892542&loc=d3e1020-107759

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 45
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6892542&loc=d3e957-107759

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 45
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=6892542&loc=d3e1012-107759

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 360
-SubTopic 10
-Section 45
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=8077374&loc=d3e2443-110228

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 360
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6391110&loc=d3e2941-110230

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 144
-Paragraph 43-48
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

+ Details

GOODWILL

12 Months Ended

Sep. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL

In accordance with FASB Accounting Standards Codification (ASC) Topic 350-20, “Intangibles – Goodwill and Other”, goodwill is reviewed for impairment annually during the fourth quarter of the fiscal year or more frequently if certain indicators arise. If business conditions or other factors cause the operating results and cash flows of a reporting unit to decline, the company may be required to record impairment charges for goodwill at that time.

In September 2011, the FASB issued revised guidance which allows entities to perform an initial qualitative evaluation to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The results of this qualitative assessment determine whether it is necessary to perform step one of the required two-step impairment test.

Excluding the qualitative evaluation discussed above, the goodwill impairment review is a two-step process. Step one consists of a comparison of the fair value of a reporting unit with its carrying amount. An impairment loss may be recognized if the review indicates that the carrying value of a reporting unit exceeds its fair value. Estimates of fair value are primarily determined by using discounted cash flows and market multiples on earnings. If the carrying amount of a reporting unit exceeds its fair value, step two requires the fair value of the reporting unit to be allocated to the underlying assets and liabilities of that reporting unit, resulting in an implied fair value of goodwill. If the carrying amount of the goodwill of the reporting unit exceeds the implied fair value, an impairment charge is recorded equal to the excess.

The impairment review is highly judgmental and involves the use of significant estimates and assumptions. These estimates and assumptions have a significant impact on the amount of any impairment charge recorded. Discounted cash flow methods are dependent upon assumptions of future sales trends, market conditions and cash flows of each reporting unit over several years. Actual cash flows in the future may differ significantly from those previously forecasted. Other significant assumptions include growth rates and the discount rate applicable to future cash flows. For fiscal years 2012, 2011 and 2010, the fair value of the company’s reporting units exceeded their carrying values.

A summary of the changes in the carrying value of goodwill is presented below (in millions):



	Commercial Truck			Industrial		Aftermarket & Trailer			Total
Balance at September 30, 2010	$	151		$	109	$	172		$	432
Foreign currency translation	(1		)	—		—			(1		)
Balance at September 30, 2011	150			109		172			431
Foreign currency translation	3			—		(1		)	2
Balance at September 30, 2012	$	153		$	109	$	171		$	433

RESTRUCTURING COSTS

12 Months Ended

Sep. 30, 2012

Restructuring and Related Activities [Abstract]

Restructuring Costs

RESTRUCTURING COSTS

At September 30, 2012 and 2011, $15 million and $19 million, respectively, of restructuring reserves primarily related to unpaid employee termination benefits remained in the consolidated balance sheet. Asset impairment charges relate to manufacturing facilities that will be closed or sold and machinery and equipment that became idle and obsolete as a result of these actions.

The following table summarizes changes in restructuring reserves (in millions):



	Employee Termination Benefits			Asset Impairment			Plant Shutdown & Other			Total
Balance at September 30, 2009	$	28		$	—		$	—		$	28
Activity during the period:
Charges to continuing operations, net of reversals of $1	3			2			1			6
Charges to discontinued operations, net of reversals of $3⁽¹⁾	6			—			—			6
Asset write-offs	—			(2		)	—			(2		)
Reclassifications to liabilities of discontinued operations	(6		)	—			—			(6		)
Cash payments – continuing operations	(13		)	—			(1		)	(14		)
Other ⁽²⁾	(7		)	—			—			(7		)
Balance at September 30, 2010	11			—			—			11
Activity during the period:
Charges to continuing operations	19			2			1			22
Charges to discontinued operations, net of reversals of $1⁽¹⁾	7			—			2			9
Asset write-offs	—			(2		)	—			(2		)
Cash payments – continuing operations	(12		)	—			(1		)	(13		)
Cash payments – discontinued operations	(6		)	—			(2		)	(8		)
Balance at September 30, 2011	19			—			—			19
Activity during the period:
Charges to continuing operations	18			19			2			39
Charges to discontinued operations⁽¹⁾	—			—			1			1
Asset write-offs	—			(19		)	—			(19		)
Cash payments – continuing operations	(20		)	—			(2		)	(22		)
Cash payments – discontinued operations	(2		)	—			(1		)	(3		)
Total restructuring reserves, end of year	15			—			—			15
Less: non-current restructuring reserves	(4		)	—			—			(4		)
Restructuring reserves – current, at September 30, 2012	$	11		$	—		$	—		$	11

____________________


(1)	Charges to discontinued operations are included in discontinued operations in the consolidated statement of income.


(2)	Includes $8 million of payments associated with restructuring reserves for discontinued operations.

Restructuring costs included in the company’s business segment results during fiscal years 2012, 2011 and 2010 are as follows (in millions):



	Commercial Truck		Aftermarket & Trailer		Industrial		Total⁽¹⁾
Fiscal year 2012:
Performance Plus actions	$	24	$	—	$	—	24
Fiscal Year 2012 European Action	7		—		—		7
Variable Labor Reductions	5		—		—		5
Other	—		2		—		2
Total restructuring costs	$	36	$	2	$	—	$	38
Fiscal year 2011:
Performance Plus actions	$	16	$	—	$	—	$	16
Fiscal year 2010:
Performance Plus actions	$	5	$	—	$	—	$	5
Other	—		—		1		1
Total restructuring costs	$	5	$	—	$	1	$	6

____________________


(1)	Total segment restructuring costs do not include those recorded at the company's corporate locations. These costs were $1 million and $6 million in fiscal years 2012 and 2011, respectively, primarily related to employee termination benefits. There were no corporate restructuring costs in fiscal year 2010.

Performance Plus: During fiscal year 2007, the company launched a long-term profit improvement and cost reduction initiative called “Performance Plus.” As part of this program, the company identified significant restructuring actions which would eliminate up to 2,800 positions in North America and Europe and consolidate and combine certain global facilities. The company’s continuing operations recognized restructuring costs in its Commercial Truck segment of $24 million, $16 million and $5 million in fiscal years 2012, 2011 and 2010, respectively, related to Performance Plus. Fiscal year 2012 Performance Plus costs include $19 million of non-cash charges, including an impairment charge of $17 million for assets held for sale at December 31, 2011. In connection with the then-planned sale of St. Priest, France manufacturing facility to Renault Trucks SAS, the company classified certain assets and associated liabilities as held for sale (collectively the “Disposal Group”) at December 31, 2011. Upon comparing the carrying value of the Disposal Group to its fair value less cost to sell, an impairment was identified. The sale of Disposal Group was completed on January 2, 2012. In addition, other restructuring charges of approximately $5 million associated with employee headcount reduction and plant rationalization costs were recognized in connection with the sale of St. Priest facility. Performance Plus costs recognized in fiscal years 2011 and 2010 were also related to employee headcount reductions, asset write-downs and facility rationalization at the company's St. Priest location.

Cumulative restructuring costs recorded for this program as of September 30, 2012 are $186 million, including $93 million reported in discontinued operations in the consolidated statement of income. These costs primarily relate to employee severance and related costs of $117 million, asset impairment charges of $41 million and $28 million primarily associated with pension termination benefits. The company’s Commercial Truck segment has recognized cumulative restructuring costs associated with Performance Plus of $82 million. Cumulative restructuring costs of $11 million were recognized by corporate locations and the company’s Aftermarket & Trailer segment. Restructuring actions associated with Performance Plus were complete as of September 30, 2012.

Fiscal Year 2012 European Action: During the second quarter of fiscal year 2012, the company approved a European headcount reduction plan in response to the ongoing economic weakness and uncertainty in that region. The company recognized approximately $7 million of restructuring costs associated with this plan in its Commercial Truck segment. Restructuring actions associated with this plan were substantially complete as of September 30, 2012.

Variable Labor Reductions: The company is executing a variable labor headcount reduction program in response to market conditions in certain regions and recognized approximately $5 million of costs in its Commercial Truck segment associated with employee terminations in fiscal year 2012 (see Note 26).

Other Actions: The remaining restructuring costs incurred during the fiscal year 2012 were primarily associated with the company’s previously announced executive headcount reduction.

- Definition

The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled.

+ References + Details

ACCOUNTS RECEIVABLE FACTORING	12 Months Ended
ACCOUNTS RECEIVABLE FACTORING	Sep. 30, 2012
Accounts Receivable Securitization and Factoring Disclosure [Abstract]
ACCOUNTS RECEIVABLE FACTORING	ACCOUNTS RECEIVABLE FACTORING AND SECURITIZATION Off-balance sheet arrangements Sweden Factoring Facility: The company has an arrangement to sell trade receivables due from AB Volvo through one of its European subsidiaries. Under this arrangement, which was renewed on June 19, 2012, and which now terminates on June 28, 2013, the company can sell up to, at any point in time, €150 million of eligible trade receivables. The receivables under this program are sold at face value and are excluded from the consolidated balance sheet. The company had utilized €119 million ($154 million) and €107 million ($146 million) of this accounts receivable factoring facility as of September 30, 2012 and 2011, respectively. U.S. Factoring Facility: The company has an arrangement to sell trade receivables due from AB Volvo and its subsidiaries. Under this arrangement, which was renewed on September 28, 2012, and which now terminates on October 29, 2013, the company can sell up to, at any point in time, €65 million ($84 million) of eligible trade receivables. The receivables under this program are sold at face value and are excluded from the consolidated balance sheet. The company had utilized €51 million ($66 million) and €46 million ($62 million) of this accounts receivable factoring facility as of September 30, 2012 and 2011, respectively. The above facilities are backed by 364-day liquidity commitments from Nordea Bank which were renewed through October 2013. The commitments are subject to standard terms and conditions for these types of arrangements. United Kingdom Factoring Facility: On February 2, 2012, the company entered into an arrangement to sell trade receivables from AB Volvo and its European subsidiaries through one of its United Kingdom subsidiaries. Under this arrangement, which expires in February 2013, the company can sell up to, at any point in time, €25 million of eligible trade receivables. The receivables under this program are sold at face value and are excluded from the consolidated balance sheet. The company had utilized €9 million ($12 million) of this accounts receivable factoring facility as of September 30, 2012. The commitment is subject to standard terms and conditions for these types of arrangements including a sole discretion clause whereby the bank retains the right to not purchase receivables, which has not been invoked since the inception of the program. Italy Factoring Facility: On March 15, 2012, the company entered into an arrangement to sell trade receivables from AB Volvo and its European subsidiaries through one of its Italian subsidiaries. Under this arrangement, which expires in June 2017, the company can sell up to, at any point in time, €30 million of eligible trade receivables. The receivables under this program are sold at face value and are excluded from the consolidated balance sheet. The company had utilized €13 million ($16 million) of this accounts receivable factoring facility as of September 30, 2012. The commitment is subject to standard terms and conditions for these types of arrangements including a sole discretion clause whereby the bank retains the right to not purchase receivables, which has not been invoked since the inception of the program. In addition, several of the company’s subsidiaries, primarily in Europe, factor eligible accounts receivable with financial institutions. Certain receivables are factored without recourse to the company and are excluded from accounts receivable in the consolidated balance sheet. The amount of factored receivables excluded from accounts receivable was $7 million and $8 million at September 30, 2012 and 2011, respectively. Total costs associated with these off-balance sheet arrangements were $9 million, $10 million and $3 million in fiscal years 2012, 2011 and 2010, respectively, and are included in selling, general and administrative expenses in the consolidated statement of income. On-balance sheet arrangements On June 18, 2012, the company entered into a new $100 million U.S. accounts receivables securitization facility, which expires on June 18, 2015. This program is provided by PNC Bank, National Association (PNC), as Administrator, Market Street Funding, LLC, and the other Purchasers and Purchaser Agents from time to time (participating lenders), which are party to the agreement. Under this program, the company has the ability to sell an undivided percentage ownership interest in substantially all of its trade receivables (excluding the receivables due from AB Volvo and subsidiaries eligible for sale under the U.S. Factoring Facility and certain other receivables) of certain U.S. subsidiaries to ArvinMeritor Receivables Corporation (ARC), a wholly-owned, special purpose subsidiary. ARC funds these purchases with borrowings from participating lenders under a loan agreement. This program also includes a letter of credit facility pursuant to which ARC may request the issuance of letters of credit issued for the company's U.S. subsidiaries (originators) or their designees, which when issued will constitute a utilization of the facility for the amount of letters of credit issued. Amounts outstanding under this agreement are collateralized by eligible receivables purchased by ARC and are reported as short-term debt in the consolidated balance sheet. At September 30, 2012, no amounts, including letters of credit, were outstanding under this program. This program contains a financial covenant related to the company's priority-debt-to-EBITDA ratio, which is identical to the corresponding covenant in the company's revolving credit facility as it exists on the date of the agreement. In addition, this securitization program contains a cross default to the company's revolving credit facility. At September 30, 2011, the company had a $125 million U.S. accounts receivables financing arrangement which was provided on a committed basis by a syndicate of financial institutions led by Ally Commercial Finance LLC and was due to expire in October 2013. In connection with entering into the new U.S. Securitization Program discussed above, the company terminated this receivables financing arrangement. No amounts were outstanding under this program at September 30, 2011.

GAIN ON SALE OF PROPERTY, OTHER OPERATING INCOME (EXPENSE),net AND OTHER INCOME (EXPENSE), net	12 Months Ended
	Sep. 30, 2012
Other Income and Expenses [Abstract]
GAIN ON SALE OF PROPERTY, OTHER OPERATING INCOME (EXPENSE),net AND OTHER INCOME (EXPENSE), net	GAIN ON SALE OF PROPERTY, OTHER OPERATING EXPENSE, NET AND OTHER INCOME, NET The company recognized a gain on sale of property of $16 million during fiscal year 2012. This gain is associated with the sale of excess land at the company's facility at Cwmbran, Wales. Other operating expense, net for fiscal years 2012, 2011 and 2010 primarily relates to environmental remediation costs incurred by the company (see Note 22). Other income, net for fiscal year 2012 includes a $3 million non-operating gain related to the sale of the company’s remaining ownership interest in Gabriel India, Ltd during the first quarter of fiscal year 2012. The company’s ownership interest in Gabriel India, Ltd was a legacy investment accounted for under the cost method that the company deemed non-core upon the completion of the sale of its light vehicle businesses. Other income, net for fiscal year 2011 includes a $5 million non-operating gain on the collection of a note receivable related to a previously divested business and a $5 million non-operating gain on the termination of certain foreign currency option contracts.

INVENTORIES

12 Months Ended

Sep. 30, 2012

Inventory Disclosure [Abstract]

Inventories

INVENTORIES

Inventories are stated at the lower of cost (using FIFO or average methods) or market (determined on the basis of estimated realizable values) and are summarized as follows (in millions):



	September 30,
	2012		2011
Finished goods	$	185	$	183
Work in process	48		63
Raw materials, parts and supplies	205		214
Total	$	438	$	460

OTHER CURRENT ASSETS

12 Months Ended

Sep. 30, 2012

Other Current Assets Disclosure [Abstract]

OTHER CURRENT ASSETS

Other current assets are summarized as follows (in millions):



	September 30,
	2012		2011
Current deferred income tax assets (see Note 21)	$	27	$	28
Asbestos-related recoveries (see Note 22)	11		9
Deposits and collateral	4		11
Prepaid and other	19		18
Assets of discontinued operations	—		4
Other current assets	$	61	$	70

NET PROPERTY

12 Months Ended

Sep. 30, 2012

Property, Plant and Equipment [Abstract]

NET PROPERTY

Property is stated at cost. Depreciation of property is based on estimated useful lives, generally using the straight-line method. Estimated useful lives for buildings and improvements range from 10 to 50 years and estimated useful lives for machinery and equipment range from 3 to 20 years. Significant improvements are capitalized, and disposed or replaced property is written off. Maintenance and repairs are charged to expense in the period they are incurred. Company-owned tooling is classified as property and depreciated over the shorter of its expected life or the life of the related vehicle platform, generally not to exceed three years.

In accordance with the FASB guidance on property, plant and equipment, the company reviews the carrying value of long-lived assets, excluding goodwill, to be held and used, for impairment whenever events or changes in circumstances indicate a possible impairment. An impairment loss is recognized when a long-lived asset’s carrying value is not recoverable and exceeds estimated fair value.

Net property at September 30, 2012 and 2011 is summarized as follows (in millions):



	September 30,
	2012			2011
Property at cost:
Land and land improvements	$	39		$	47
Buildings	253			264
Machinery and equipment	909			897
Company-owned tooling	156			153
Construction in progress	65			74
Total	1,422			1,435
Less accumulated depreciation	(1,005		)	(1,014		)
Net property	$	417		$	421

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

+ References + Details

OTHER ASSETS

12 Months Ended

Sep. 30, 2012

Other Assets, Noncurrent [Abstract]

Other Assets

OTHER ASSETS

Other assets are summarized as follows (in millions):



	September 30,
	2012		2011
Investments in non-consolidated joint ventures (see Note 12)	$	169	$	174
Asbestos-related recoveries (see Note 22)	63		67
Unamortized debt issuance costs (see Note 15)	29		25
Capitalized software costs, net	29		23
Non-current deferred income tax assets (see Note 21)	12		12
Prepaid pension costs (see Note 20)	11		9
Other	40		42
Other assets	$	353	$	352

In accordance with FASB ASC Topic 350-40, costs relating to internally developed or purchased software in the preliminary project stage and the post-implementation stage are expensed as incurred. Costs in the application development stage that meet the criteria for capitalization are capitalized and amortized using the straight-line basis over the estimated economic useful life of the software.

INVESTMENTS IN NON-CONSOLIDATED JOINT VENTURES

12 Months Ended

Sep. 30, 2012

Equity Method Investments and Joint Ventures [Abstract]

INVESTMENTS IN NON-CONSOLIDATED JOINT VENTURES

The company’s non-consolidated joint ventures and related direct ownership interest at September 30, 2012 are as follows:



Meritor WABCO Vehicle Control Systems (Commercial Truck)	50	%
Master Sistemas Automotivos Ltda. (Commercial Truck)	49	%
Suspensys Sistemas Automotivos Ltda.⁽¹⁾ (Aftermarket & Trailer)	24	%
Sistemas Automotrices de Mexico S.A. de C.V. (Commercial Truck)	50	%
Ege Fren Sanayii ve Ticaret A.S. (Commercial Truck)	49	%
Automotive Axles Limited (Industrial)	36	%

____________________


⁽¹⁾	Total direct and indirect ownership interest of 50 percent.

The company’s investments in non-consolidated joint ventures are as follows (in millions):



	September 30,
	2012		2011
Commercial Truck	$	121	$	123
Industrial	20		19
Aftermarket & Trailer	28		32
Total investments in non-consolidated joint ventures	$	169	$	174

The company’s equity in earnings of non-consolidated joint ventures is as follows (in millions):



	Year Ended September 30,
	2012		2011		2010
Commercial Truck	$	42	$	51	$	33
Industrial	3		5		3
Aftermarket & Trailer	7		14		12
Total equity in earnings of affiliates	$	52	$	70	$	48

The summarized financial information presented below represents the combined accounts of the company’s non-consolidated joint ventures related to its continuing operations (in millions):



	September 30,
	2012		2011
Current assets	$	510	$	652
Non-current assets	292		273
Total assets	$	802	$	925
Current liabilities	$	266	$	387
Non-current liabilities	146		124
Total liabilities	$	412	$	511



	Year Ended September 30,
	2012		2011		2010
Sales	$	1,787	$	1,977	$	1,474
Gross profit	215		274		216
Net income	123		177		126

Dividends received from the company’s non-consolidated joint ventures were $47 million in fiscal year 2012, $45 million in fiscal year 2011 and $11 million in fiscal year 2010.

The company had sales to its non-consolidated joint ventures of approximately $6 million, $8 million and $5 million in fiscal years 2012, 2011 and 2010, respectively. These sales exclude sales of $165 million, $182 million and $96 million in fiscal years 2012, 2011 and 2010, respectively, to a joint venture in the company’s Commercial Truck segment, which are eliminated as the company purchases these components back after value add provided by the joint venture. The company had purchases from its non-consolidated joint ventures of approximately $973 million, $1,161 million and $612 million in fiscal years 2012, 2011 and 2010, respectively. Additionally, the company leases space and provides certain administrative and technical services to various non-consolidated joint ventures. The company collected $3 million, $1 million and $1 million for such leases and services during fiscal years 2012, 2011 and 2010, respectively.

Amounts due from the company’s non-consolidated joint ventures were $18 million and $48 million at September 30, 2012 and 2011, respectively, and are included in Receivables, trade and other, net in the consolidated balance sheet. Amounts due to the company’s non-consolidated joint ventures were $83 million and $125 million at September 30, 2012 and 2011, respectively and are included in Accounts payable in the consolidated balance sheet.

The fair value of the company’s investment in its Automotive Axles Limited joint venture was approximately $42 million at September 30, 2012 and 2011 based on quoted market prices as this joint venture is listed and publicly traded on the Bombay Stock Exchange in India.

The company holds a variable interest in a joint venture accounted for under the equity method of accounting. The joint venture manufactures components for commercial vehicle applications primarily on behalf of the company. The variable interest relates to a supply arrangement between the company and the joint venture whereby the company supplies certain components to the joint venture on a cost-plus basis. The company is not the primary beneficiary of the joint venture, as the joint venture partner has shared or absolute control over key manufacturing operations, labor relationships, financing activities and certain other functions of the joint venture. Therefore, the company does not consolidate the joint venture. At September 30, 2012, the company’s investment in the joint venture was $38 million representing the company’s maximum exposure to loss. This amount is included in investments in non-consolidated joint ventures (see Note 11).

- Definition

The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.

+ References + Details

OTHER CURRENT LIABILITIES

12 Months Ended

Sep. 30, 2012

Other Current Liabilities Disclosure [Abstract]

OTHER CURRENT LIABILITIES

Other current liabilities are summarized as follows (in millions):



	September 30,
	2012		2011
Compensation and benefits	$	136	$	148
Income taxes	15		23
Taxes other than income taxes	41		38
Product warranties	16		19
Restructuring (see Note 5)	11		16
Asbestos-related liabilities (see Note 22)	19		18
Other	75		66
Other current liabilities	$	313	$	328

The company records estimated product warranty costs at the time of shipment of products to customers. Warranty reserves are primarily based on factors that include past claims experience, sales history, product manufacturing and engineering changes and industry developments. Liabilities for product recall campaigns are recorded at the time the company’s obligation is known and can be reasonably estimated. Product warranties, including recall campaigns, not expected to be paid within one year are recorded as a non-current liability.

A summary of the changes in product warranties is as follows (in millions):



	2012			2011			2010
Total product warranties – beginning of year	$	48		$	54		$	109
Accruals for product warranties	22			23			23
Payments	(18		)	(22		)	(28		)
Change in estimates and other	(8		)	(7		)	(11		)
Product warranty activity related to discontinued operations⁽¹⁾	—			—			1
Reclassifications to liabilities of discontinued operations	—			—			(40		)
Total product warranties – end of year	44			48			54
Less: non-current product warranties (see Note 14)	(28		)	(29		)	(26		)
Product warranties – current	$	16		$	19		28

____________________


(1)	Product warranty activity related to discontinued operations includes accruals for product warranties of $10 million and payments of $9 million in fiscal year 2010.

OTHER LIABILITIES

12 Months Ended

Sep. 30, 2012

Other Liabilities Disclosure [Abstract]

Other Liabilities

OTHER LIABILITIES

Other liabilities are summarized as follows (in millions):



	September 30,
	2012		2011
Asbestos-related liabilities (see Note 22)	$	93	$	78
Non-current deferred income tax liabilities (see Note 21)	101		92
Liabilities for uncertain tax positions (see Note 21)	27		35
Product warranties (see Note 13)	28		29
Environmental (see Note 22)	10		9
Indemnity obligations (see Note 22)	32		41
Other	47		41
Other liabilities	$	338	$	325

LONG-TERM DEBT

12 Months Ended

Sep. 30, 2012

Debt Disclosure [Abstract]

LONG-TERM DEBT

Long-Term Debt, net of discounts where applicable, is summarized as follows (in millions):



	September 30,
	2012			2011
8-3/4 percent notes due 2012⁽¹⁾	$	—		$	84
8-1/8 percent notes due 2015	250			250
10-5/8 percent notes due 2018	247			246
4.625 percent convertible notes due 2026⁽²⁾	300			300
4.0 percent convertible notes due 2027⁽²⁾	200			200
Term loan	98			—
Lines of credit and other	13			8
Unamortized gain on interest rate swap termination	10			14
Unamortized discount on convertible notes	(58		)	(68		)
Subtotal	1,060			1,034
Less: current maturities	(18		)	(84		)
Long-term debt	$	1,042		$	950


(1)	During the quarter ended March 31, 2012, the company retired its $84 million 8-3/4 percent notes due 2012 at par value.


(2)	The 4.625 percent and 4 percent convertible notes contain a put and call feature, which allows for earlier redemption beginning in 2016 and 2019, respectively.

Revolving Credit Facility

At September 30, 2011, the company had a revolving credit facility of $441 million which was slated to mature in January 2014. The availability under this facility was dependent upon various factors, including principally performance against certain financial covenants. The $441 million revolving credit facility included $100 million of availability for the issuance of letters of credit.

On April 23, 2012, the company amended and restated its revolving credit facility. Pursuant to the revolving credit facility agreement as amended, the company has a $429 million revolving credit facility, $14 million of which matures in January 2014 for a bank not electing to extend its commitments under the revolving credit facility existing at September 30, 2011 and the remaining $415 million of which matures in April 2017. The April 2017 maturity date is also subject to the following springing maturity conditions: if on June 1, 2015, the outstanding principal amount of the company's $250 million bonds due 2015 is greater than $100 million, the maturity date becomes June 10, 2015, and if on November 1, 2015, the outstanding principal amount of the company's $300 million 4.625 percent convertibles notes due 2026 is greater than $100 million and the conversion price of $20.98 is greater than the then current Meritor common stock price, the maturity date becomes November 15, 2015. The availability under this facility is dependent upon various factors, including principally performance against certain financial covenants as highlighted below.

The availability under the revolving credit facility is subject to certain financial covenants based on (i) the ratio of the company's priority debt (consisting principally of amounts outstanding under the revolving credit facility, U.S. accounts receivable securitization and factoring programs, and third-party non-working capital foreign debt) to EBITDA and (ii) the amount of annual capital expenditures. The company is required to maintain a total priority-debt-to-EBITDA ratio, as defined in the agreement, of (i) 2.50 to 1.00 as of the last day of the fiscal quarter commencing with the fiscal quarter ending on or about March 31, 2012 through and including the fiscal quarter ending on or about September 30, 2012, (ii) 2.25 to 1.00 as of the last day of each fiscal quarter commencing with the fiscal quarter ending on or about December 31, 2012 through and including the fiscal quarter ending on or about September 30, 2013, and (iii) 2.00 to 1.00 as of the last day of each fiscal quarter thereafter. At September 30, 2012, the company was in compliance with all covenants under its credit agreement with a ratio of approximately 0.55x for the priority debt-to-EBITDA covenant.

Availability under the amended and extended revolving credit facility is also subject to a collateral test, pursuant to which borrowings on the revolving credit facility cannot exceed 1.0x the collateral test value. The collateral test is performed on a quarterly basis. At September 30, 2012, the revolving credit facility was collateralized by approximately $611 million of the company's assets, primarily consisting of eligible domestic U.S. accounts receivable, inventory, plant, property and equipment, intellectual property and the company's investment in all or a portion of certain of its wholly-owned subsidiaries.

Borrowings under the revolving credit facility are subject to interest based on quoted LIBOR rates plus a margin and a commitment fee on undrawn amounts, both of which are based upon the company's current corporate credit rating for senior secured facilities. At September 30, 2012, the margin over LIBOR rate was 425 basis points, and the commitment fee was 50 basis points. Although a majority of our revolving credit loans are LIBOR based, overnight revolving credit loans are at the prime rate plus a margin of 325 basis points.

Certain of the company's subsidiaries, as defined in the credit agreement, irrevocably and unconditionally guarantee amounts outstanding under the revolving credit facility. Similar subsidiary guarantees are provided for the benefit of the holders of the publicly-held notes outstanding under the company's indentures (see Note 27).

No borrowings were outstanding under the revolving credit facility at September 30, 2012 and September 30, 2011. The amended and extended revolving credit facility includes $100 million of availability for the issuance of letters of credit. At September 30, 2012, $1 million of letters of credit were outstanding under the revolving credit facility. No letters of credit were outstanding on September 30, 2011.

Term Loan

As part of the amendment and restatement of the revolving credit facility, on April 23, 2012 the company entered into a $100 million term loan agreement with a maturity date of April 23, 2017. The maturity date of April 23, 2017 is also subject to the same springing maturity conditions discussed under "Revolving Credit Facility" above. The term loan will amortize over a period of 5 years from the effective date as follows: $5 million principal to be repaid during year one, $10 million principal to be repaid in each of the years two, three and four; and the remaining principal balance to be paid in year five. Principal payments will be made on a quarterly basis for the duration of the term loan. As of the effective date of the term loan, the margin over LIBOR rate was 425 basis points. The company has the ability to prepay the term loan at any time without penalty or premium. At September 30, 2012, the outstanding balance on the term loan was $98 million.

Debt Securities

On March 3, 2010, the company completed a public offering of debt securities consisting of the issuance of $250 million 8-year fixed rate 10-5/8 percent notes due March 15, 2018. The offering was made pursuant to a shelf registration statement filed with the Securities and Exchange Commission on November 20, 2009, which became effective December 23, 2009, registering $750 million aggregate debt and/or equity securities that may be offered in one or more series on terms to be determined at the time of sale. The notes were issued at a discounted price of 98.024 percent of their principal amount. The proceeds from the sale of the notes, net of discount, were $245 million and were primarily used to repurchase $175 million of the company’s previously outstanding $276 million 8-3/4 percent notes due 2012.

On March 23, 2010, the company completed the debt tender offer for its 8-3/4 percent notes due March 1, 2012. The notes were repurchased at 109.75 percent of their principal amount. The repurchase of $175 million of 8-3/4 percent notes was accounted for as an extinguishment of debt and, accordingly, the company recognized a net loss on debt extinguishment of approximately $13 million, which is included in interest expense, net in the consolidated statement of income. The loss on debt extinguishment was primarily related to the $17 million paid in excess of par to repurchase the $175 million of 8-3/4 percent notes, partially offset by a $6 million gain associated with the acceleration of previously deferred unamortized interest rate swap gains associated with the 8-3/4 percent notes.

On June 15, 2010, the company purchased in the open market $17 million of its 8-3/4 percent notes due March 1, 2012. The notes were repurchased at 104.875 percent of their principal amount. On June 17, 2010, the company purchased in the open market $1 million of its 8-1/8 percent notes due September 15, 2015. The notes were repurchased at 94.000 percent of their principal amount.

In February 2012, we filed a shelf registration statement with the Securities and Exchange Commission, which was amended in November 2012, registering up to $750 million of debt and/or equity securities that we may offer in one or more series on terms to be determined at the time of sale.

Convertible Securities

In February 2007, the company issued $200 million of 4.00 percent convertible senior unsecured notes due 2027 (the 2007 convertible notes). In March 2006, the company issued $300 million of 4.625 percent convertible senior unsecured notes due 2026 (the 2006 convertible notes). The 2007 convertible notes bear cash interest at a rate of 4.00 percent per annum from the date of issuance through February 15, 2019, payable semi-annually in arrears on February 15 and August 15 of each year. After February 15, 2019, the principal amount of the notes will be subject to accretion at a rate that provides holders with an aggregate annual yield to maturity of 4.00 percent. The 2006 convertible notes bear cash interest at a rate of 4.625 percent per annum from the date of issuance through March 1, 2016, payable semi-annually in arrears on March 1 and September 1 of each year. After March 1, 2016, the principal amount of the notes will be subject to accretion at a rate that provides holders with an aggregate annual yield to maturity of 4.625 percent.

In May 2008, the FASB issued guidance contained in Accounting Standards Codification (ASC) Topic 470-20, “Debt with Conversion and Other Options” which applies to all convertible debt instruments that have a “net settlement feature”, which means that such convertible debt instruments, by their terms, may be settled either wholly or partially in cash upon conversion. This topic requires issuers of convertible debt instruments that may be settled wholly or partially in cash upon conversion to separately account for the liability and equity components in a manner reflective of the issuers’ nonconvertible debt borrowing rate.

This guidance impacted the company’s accounting for the convertible notes issued in 2006 and 2007. On October 1, 2009, the company adopted this guidance and applied its impact retrospectively to all periods presented. Upon adoption, the company recognized the estimated equity component of the convertible notes of $108 million ($69 million after tax) in additional paid-in capital. In addition, the company allocated $4 million of unamortized debt issuance costs to the equity component and recognized this amount as a reduction to additional paid-in capital. The company also recognized a discount on convertible notes of $108 million, which is being amortized as non-cash interest expense over periods of ten and twelve years for the 2006 convertible notes and 2007 convertible notes, respectively.

Upon recognition of the equity component of the convertible notes, the company also recognized a deferred tax liability of $39 million as the tax effect of the basis difference between carrying and notional values of the convertible notes. The carrying value of this deferred tax liability was offset with certain net deferred tax assets in the first quarter of fiscal year 2009 for determining valuation allowances against those deferred tax assets (see Note 21).

At September 30, 2012 and 2011, the carrying amount of the equity component recognized upon adoption was $67 million. The following table summarizes the principal amounts and related unamortized discount on convertible notes (in millions):



	September 30, 2012			September 30, 2011
Principal amount of convertible notes	$	500		$	500
Unamortized discount on convertible notes	(58		)	(68		)
Net carrying value	$	442		$	432

The following table summarizes other information related to the convertible notes:



	2006 Convertible Notes		2007 Convertible Notes
Total amortization period for debt discount (in years):	10		12
Remaining amortization period for debt discount (in years):	4		7
Effective interest rates on convertible notes:	7.0	%	7.7	%

The following table summarizes interest costs recognized on convertible notes (in millions):



	Year Ended September 30,
	2012		2011		2010
Contractual interest coupon	$	22	$	22	$	22
Amortization of debt discount	10		9		8
Total	$	32	$	31	$	30

Conversion Features – convertible securities

The 2007 convertible notes are convertible into shares of the company’s common stock at an initial conversion rate, subject to adjustment, equivalent to 37.4111 shares of common stock per $1,000 initial principal amount of notes, which represents an initial conversion price of approximately $26.73 per share. If converted, the accreted principal amount will be settled in cash and the remainder of the company’s conversion obligation, if any, in excess of such accreted principal amount will be settled in cash, shares of common stock, or a combination thereof, at the company’s election. Holders may convert their notes at any time on or after February 15, 2025. The maximum number of shares of common stock the 2007 convertible notes are convertible into is approximately 7 million.

The 2006 convertible notes are convertible into shares of the company’s common stock at an initial conversion rate, subject to adjustment, equivalent to 47.6667 shares of common stock per $1,000 initial principal amount of notes, which represents an initial conversion price of approximately $20.98 per share. If converted, the accreted principal amount will be settled in cash and the remainder of the company’s conversion obligation, if any, in excess of such accreted principal amount will be settled in cash, shares of common stock, or a combination thereof, at the company’s election. Holders may convert their notes at any time on or after March 1, 2024. The maximum number of shares of common stock the 2006 convertible notes are convertible into is approximately 14 million.

Prior to February 15, 2025 (2007 convertible notes) and March 1, 2024 (2006 convertible notes), holders may convert their notes only under the following circumstances:


•	during any calendar quarter, if the closing price of the company’s common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 120 percent of the applicable conversion price;


•	during the five business day period after any five consecutive trading day period in which the average trading price per $1,000 initial principal amount of notes is equal to or less than 97 percent of the average conversion value of the notes during such five consecutive trading day period;


•	upon the occurrence of specified corporate transactions; or


•	if the notes are called by the company for redemption.

Redemption Features – convertible securities

On or after February 15, 2019, the company may redeem the 2007 convertible notes, in whole or in part, for cash at a redemption price equal to 100 percent of the accreted principal amount plus any accrued and unpaid interest. On each of February 15, 2019 and 2022, or upon certain fundamental changes, holders may require the company to purchase all or a portion of their 2007 convertible notes at a purchase price in cash equal to 100 percent of the accreted principal amount plus any accrued and unpaid interest.

On or after March 1, 2016, the company may redeem the 2006 convertible notes, in whole or in part, for cash at a redemption price equal to 100 percent of the accreted principal amount plus any accrued and unpaid interest. On each of March 1, 2016, 2018, 2020, 2022 and 2024, or upon certain fundamental changes, holders may require the company to purchase all or a portion of their 2006 convertible notes at a purchase price in cash equal to 100 percent of the accreted principal amount plus any accrued and unpaid interest.

The 2007 and 2006 convertible notes are fully and unconditionally guaranteed by certain subsidiaries of the company that currently guarantee the company’s obligations under its senior secured credit facility and other publicly-held notes (see Revolving Credit Facility above).

Capital Leases

On March 20, 2012, the company entered into an arrangement to finance equipment acquisitions for various U.S. locations. Under this arrangement, the company can request financing from GE Capital Commercial, Inc. (GE Capital) for progress payments for equipment under construction, not to exceed $10 million at any point in time. The financing rate is equal to the 30-day LIBOR plus 575 basis points per annum. Under this arrangement, the company can also enter into lease arrangements with GE Capital for completed equipment. The lease term is 60 months and the lease interest rate is equal to the 5-year Swap Rate published by the Federal Reserve Board plus 564 basis points. As of September 30, 2012, the company had $6 million outstanding under these arrangements.

Letter of Credit Facilities

The company entered into a five-year credit agreement dated as of November 18, 2010 with Citicorp USA, Inc., as administrative agent and issuing bank, the other lenders party thereto and the Bank of New York Mellon, as paying agent. Under the terms of this credit agreement, as amended, the company has the right to obtain the issuance, renewal, extension and increase of letters of credit up to an aggregate availability of $30 million. This facility contains covenants and events of default generally similar to those existing in the company’s public debt indentures. At September 30, 2012 and 2011, $30 million of letters of credit were outstanding under this facility. In addition, the company had $18 million and $2 million of letters of credit outstanding through other letters of credit facilities at each of September 30, 2012 and 2011.

Accounts Receivable Securitization

On June 18, 2012, the company entered into a new $100 million U.S. accounts receivables securitization facility, which expires on June 18, 2015. This program is provided by PNC Bank, National Association (PNC), as Administrator, Market Street Funding, LLC, and the other Purchasers and Purchaser Agents from time to time (participating lenders), which are party to the agreement. Under this program, the company has the ability to sell an undivided percentage ownership interest in substantially all of its trade receivables (excluding the receivables due from AB Volvo and subsidiaries eligible for sale under the U.S. Factoring Facility and certain other receivables) of certain U.S. subsidiaries to ArvinMeritor Receivables Corporation (ARC), a wholly-owned, special purpose subsidiary. ARC funds these purchases with borrowings from participating lenders under a loan agreement. This program also includes a letter of credit facility pursuant to which ARC may request the issuance of letters of credit issued for the company's U.S. subsidiaries (originators) or their designees, which when issued will constitute a utilization of the facility for the amount of letters of credit issued. Amounts outstanding under this agreement are collateralized by eligible receivables purchased by ARC and are reported as short-term debt in the consolidated balance sheet. At September 30, 2012, no amounts, including letters of credit, were outstanding under this program. This program contains a financial covenant related to the company's priority-debt-to-EBITDA ratio, which is identical to the corresponding covenant in the company's revolving credit facility as it exists on the date of the agreement. In addition, this securitization program contains and a cross default to the company's revolving credit facility. The weighted average interest rate on borrowings under this arrangement was approximately 1.59 percent at September 30, 2012.

At September 30, 2011, the company had a $125 million U.S. accounts receivables financing arrangement which was provided on a committed basis by a syndicate of financial institutions led by Ally Commercial Finance LLC and was due to expire in October 2013. In connection with entering into the new U.S. Securitization Program discussed above, the company terminated this receivables financing arrangement. No amounts were outstanding under this program at September 30, 2011.

Interest Rate Swap Agreements

In August 2012, the company entered into a four-year interest rate swap arrangement that effectively converted the variable interest rate on its term loan expressed as a LIBOR-based rate into a variable interest rate based on U.S.federal funds rate. The notional amount of the arrangement is $50 million, which is approximately 50 percent of the amount outstanding under our term loan. The arrangement does not meet the hedge accounting requirements; therefore, the mark-to-market adjustments related to the fair value of derivative are recorded as interest expense in the consolidated statement of income. Fair value of the derivative related to this arrangement was not significant at September 30, 2012.

In March 2010, the company entered into an interest rate swap agreement that effectively converted $125 million of the company’s 8-1/8 percent notes due 2015 to variable interest rates. The swap was designated as a fair value hedge and the impact of the changes in its fair values was offset by an equal and opposite change in the carrying value of the related notes. Under the terms of the swap agreement, the company received a fixed rate of interest of 8-1/8 percent on notional amounts of $125 million and paid a variable rate based on U.S. dollar six-month LIBOR plus a spread of 4.61 percent. The payments under the swap agreement coincided with the interest payment dates on the hedged debt instrument, and the difference between the amounts paid and received is included in interest expense, net. In July 2010, the company terminated the interest rate swap agreement and received proceeds from the termination of approximately $7 million.

The unamortized fair value adjustment of the notes associated with terminated interest rate swaps was $10 million and $14 million at September 30, 2012 and 2011, respectively. The fair value adjustment of the notes is classified as long-term debt in the consolidated balance sheet and is amortized to earnings as a reduction of interest expense over the remaining term of the debt.

Operating Leases

The company has various operating leasing arrangements. Future minimum lease payments under these operating leases are $17 million in 2013, $14 million in 2014, $13 million in 2015, $12 million in 2016, $12 million in 2017 and $23 million thereafter.

FINANCIAL INSTRUMENTS

12 Months Ended

Sep. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

FINANCIAL INSTRUMENTS

The company’s financial instruments include cash and cash equivalents, short-term debt, long-term debt, interest rate swaps and foreign exchange forward contracts. The company uses derivatives for hedging and non-trading purposes in order to manage its interest rate and foreign exchange rate exposures.

Foreign Exchange Contracts

As a result of the company’s substantial international operations, it is exposed to foreign currency risks that arise from normal business operations, including in connection with transactions that are denominated in foreign currencies. In addition, the company translates sales and financial results denominated in foreign currencies into U.S. dollars for purposes of its consolidated financial statements. As a result, appreciation of the U.S. dollar against these foreign currencies generally will have a negative impact on reported revenues and operating income, while depreciation of the U.S. dollar against these foreign currencies will generally have a positive effect on reported revenues and operating income. For fiscal year 2012, the company's reported financial results were adversely affected by appreciation of the U.S. dollar against foreign currencies, whereas during fiscal years 2011 and 2010, reported financial results benefited from depreciation of the U.S. dollar against foreign currencies.

The company has a foreign currency cash flow hedging program to reduce the company’s exposure to changes in exchange rates on foreign currency purchases and sales. The company uses foreign currency forward contracts to manage the company’s exposures arising from foreign currency exchange risk. Gains and losses on the underlying foreign currency exposures are partially offset with gains and losses on the foreign currency forward contracts. Under this foreign currency cash flow hedging program, the company has designated the foreign exchange contracts (the “contracts”) as cash flow hedges of underlying forecasted foreign currency purchases and sales. The effective portion of changes in the fair value of the contracts is recorded in Accumulated Other Comprehensive Loss (AOCL) in the consolidated balance sheet and is recognized in operating income when the underlying forecasted transaction impacts earnings. The terms of the foreign exchange contracts generally require the company to place cash on deposit as collateral if the fair value of these contracts represents a liability for the company. The fair values of the foreign exchange derivative instruments and any related collateral cash deposits are presented on a net basis as the derivative contracts are subject to master netting arrangements. The company’s foreign exchange contracts generally mature within twelve months.

At September 30, 2012, the notional amount of the company's foreign exchange contracts outstanding under its foreign currency cash flow hedging program was $113 million. At September 30, 2011, the company’s foreign exchange contracts outstanding under its foreign currency cash flow hedging program were not significant. The company classifies the cash flows associated with the contracts in cash flows from operating activities in the consolidated statement of cash flows. This is consistent with the classification of the cash flows associated with the underlying hedged item.

The company generally has not hedged against its foreign currency exposure related to translations to U.S. dollars of its financial results denominated in foreign currencies. However, in the fourth quarter of fiscal years 2011 and 2010, due to the volatility of the Brazilian real as compared to the U.S. dollar, the company entered into foreign currency option contracts to mitigate volatility in the translation of Brazilian real earnings to U.S. dollars. Gains and losses on these option contracts are recorded in other income (expense), net, in the consolidated statement of income, generally reducing the exposure to translation volatility during a full-year period. During fiscal year 2011, the company recognized net gains of approximately $5 million associated with its Brazilian real foreign currency option contracts which are included in other income in the consolidated statement of income. During fiscal year 2012, net gains recognized were not significant. The company did not have any outstanding option contracts at September 30, 2012 and 2011.

The following table summarizes the impact of the company’s derivatives instruments on comprehensive income for fiscal years ended September 30 (in millions):



	Location of Gain (Loss)	2012		2011			2010
Derivatives designated as hedging instruments:
Amount of gain recognized in AOCL (effective portion)	AOCL	$	3	$	—		$	3
Amount of gain (loss) reclassified from AOCL into income (effective portion)	Cost of Sales	3		(1		)	1
Derivatives not designated as hedging instruments: Amount of gain (loss) recognized in income	Other Income	—		5			(1		)

Fair Value

Fair values of financial instruments are summarized as follows (in millions):



	September 30, 2012				September 30, 2011
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	257	$	257	$	217	$	217
Short-term debt	18		17