ArvinMeritor Posts $162 Million Quarterly Loss
This story appears in the Aug. 10 print edition of Transport Topics.
Manufacturer ArvinMeritor Inc. said it lost $162 million in the April-to-June quarter, while also announcing last week it has found a buyer for its light-vehicle wheels business and has stepped up its marketing effort for truck disc and drum brakes ahead of the government’s new truck stopping-distance rule.
The Troy, Mich., company said its per-share loss was $2.33 for the three months, as the global recession reduced demand for its commercial-vehicle parts, components and systems. Its revenue was $933 million.
“Our results reflect the significant impact the economy is having on truck purchases and shipments worldwide,” Chairman and CEO Charles “Chip” McClure said during the company’s conference call on earnings.
“The year-over-year decline was significant in both North America and Europe. North America remains weak and volumes were lower than we expected in the [fiscal] third quarter. But over the last several months, we’ve begun to see a slight increase in orders in North America,” McClure said.
In the comparable quarter last year, ArvinMeritor had net income of $44 million, or 60 cents a share, on revenue of $1.88 million.
The company said Iochpe-Maxion SA, which is based in Brazil, is the probable buyer of ArvinMeritor’s light-vehicle wheels business. The two companies have entered into a purchase-and-sale agreement, ArvinMeritor said. The deal should bring in about $180 million by Sept. 30.
ArvinMeritor spokeswoman Lin Cummins said the company’s wheel business also is based in Brazil, with an additional plant in Mexico.
Earlier this year ArvinMeritor sold most of its light-vehicle chassis business (7-6, p. 26; click here for previous story).
ArvinMeritor management said in May 2008 it wanted to spin off its light-vehicle business as a new company so the parent company could concentrate on its work for trucking. However, that plan was canceled by the end of the year because of the financial panic in September and October that affected the stock market.
Since then, ArvinMeritor has been selling off its light-vehicle portfolio on a piecemeal basis.
Cummins said the remaining segment for sale is the light-vehicle body business, including roofs and doors. She said the body business generated about 60% to 65% of light-vehicle revenue in fiscal 2008.
The company’s cumulative fiscal year results, for the nine months ended June 30, show a much steeper loss: $1.2 billion, or $16.55 a share, on revenue of $3.28 billion. Most of that came from the company’s $944 million in noncash charges taken during the October-to-December period to create reserves for tax obligations and write down accounting goodwill valuations.
As a result, shareowners’ equity — or corporate net worth — has fallen from a $462 million surplus Sept. 30, the end of the last fiscal year, to a deficit of $872 million on June 30.
During his conference call remarks, McClure emphasized ArvinMeritor’s financial liquidity.
“Our free cash flow was $73 million in the third quarter, up $14 million from the same period last year — and up $211 million quarter over quarter,” he said.
“Our free cash flow from continuing operations before restructuring and repayment of off-balance-sheet factoring and securitization debt was $175 million,” McClure said. “As of June 28 we had $76 million in cash on hand and $456 million unborrowed under our revolving credit facility.”
On the issue of truck brakes, the National Highway Traffic Safety Administration said it will decrease the maximum stopping distance for a loaded tractor traveling 60 mph to 250 feet from 355 feet in August 2011 (7-27, p. 1; click here for previous story).
ArvinMeritor said July 28 it has been working on its Meritor Q-Plus drum brakes for three years so that an updated version will meet the new NHTSA standard. The corporation also sells air disc brakes through its Meritor Wabco joint venture with Wabco Holdings, which has headquarters in Belgium.
ArvinMeritor spokesman Mike Pennington said the Meritor Wabco disc brakes already meet the new standard. Disc brakes generally stop more efficiently than drum brakes, but the drawback has been the higher cost of discs.
ArvinMeritor cites a NHTSA report that conversion from current-model drums to discs costs $1,475, whereas updating to newer drums that meet the standard would cost only $211.
Pennington said that ArvinMeritor’s sales force will be having discussions both with truck makers and fleet owners about the effects of the new brake rule.
