ArvinMeritor Inc.: Company profile - Just-Auto.com

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ArvinMeritor Inc.: 

Company profile 

2005 edition 

© 2004 All content copyright Arog Ltd. All rights reserved.

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ArvinMeritor Inc.: 

Company profile 

2005 edition 

January 2005 

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Page iii 

Table of contents 

Single-user licence edition.......................................................................................... ii 

Copyright statement ..................................................................................................ii 

Table of contents ........................................................................................................ iii 

List of tables................................................................................................................ iv 

List of figures ............................................................................................................... v 

just-auto.com’s research portfolio ............................................................................ vi 

Incredible ROI for your budget – single and multi-user licences..............................vi 

just-auto.com membership ....................................................................................... vii 

Chapter 1: Company Dossier...................................................................................... 1 

Chapter 2: Worldwide Locations ................................................................................ 4 

Chapter 3: Financial Analysis ..................................................................................... 6 

Chapter 4: Competitor Analysis ................................................................................ 8 

Chapter 5: Key Events ............................................................................................... 9 

Chapter 6: SWOT Analysis........................................................................................ 11 

Strengths................................................................................................................ 11 

Weaknesses........................................................................................................... 12 

Opportunities.......................................................................................................... 12 

Threats ................................................................................................................... 13 

Chapter 7: Customers.............................................................................................. 14 

Chapter 8: Products................................................................................................... 18 

Chapter 9: Product Development ............................................................................. 20 

Chapter 10: Prospects............................................................................................... 22 

Online sources of information.................................................................................. 24 

Free email newsletters ........................................................................................... 24 

Other research reports ........................................................................................... 24 

Global news and feature articles............................................................................ 24 

Search the web ...................................................................................................... 24 

Your feedback ............................................................................................................ 25 


Page iv 

List of tables 

1 

Table 1: ArvinMeritor’s key consolidated financial performance, 2000-2004 (US$ 

millions, unless otherwise indicated)........................................................................ 6 

Table 2 : ArvinMeritor’s sales by geographical region, 2003-2004 ....................... 16 


Page v 

List of figures 

Figure 1: ArvinMeritor’s 2003 sales by geographical region (% of net sales) ........ 16 

Figure 2: ArvinMeritor’s 2004 sales by geographical region (% of net sales) ........ 17 

Figure 3: ArvinMeritor’s 2003 sales by OEM sector (% of net sales)..................... 19 

Figure 4: ArvinMeritor’s 2004 sales by OEM sector (% of net sales)..................... 19 


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Chapter 1 Company Dossier Page 1 

Chapter 1: Company Dossier 

Company name 

ArvinMeritor, Inc. 

Business Activity 

ArvinMeritor, Inc., headquartered in Troy, Michigan, USA, is one of the leading 

manufacturers and suppliers of a wide range of high-quality integrated systems and 

automotive components & modules to the global motor vehicle industry. Recently, the 

company decided to divest its non-core business groups and focus on the core business 

groups, namely, Light Vehicle Systems (LVS) and Commercial Vehicle Systems (CVS). 

It sold off its coil coating business in November 2004 and announced plans to divest the 

Light Vehicle Aftermarket (LVA) segment in October 2004. For the year ended 

September 2004, the company reported sales of US$8,033 million, of which US$4,818 

million (or 60%) was generated by the LVS segment. 

Stock symbol 

ArvinMeritor’s shares are traded on the New York Stock Exchange under the stock 

symbol, ARM. 

Key executives 

Charles G. “Chip” McClure, Chairman, CEO and President 

Vernon G. Baker, Senior Vice President and General Counsel 

Brian P. Casey, Vice President and Treasurer 

Linda M. Cummins, Senior Vice President, Communications 

William K. Daniel, Senior Vice President and President, Light Vehicle Aftermarket 

Juan L. De La Riva, Senior Vice President and President, Light Vehicle Systems 

Thomas A. Gosnell, Senior Vice President and President, Commercial Vehicle Systems 

Perry L. Lipe, Senior Vice President and Chief Information Officer 

Terrence E. O’Rourke, President and Chief Operating Officer 

Rakesh Sachdev, Vice President and Controller 

Debra L. Shumar, Senior Vice President, Continuous Improvement, Quality, Engineering 

and Technology 



S.Carl Soderstrom, Jr., Senior Vice President and Chief Financial Officer 

Ernest T. Whitus, Senior Vice President, Human Resources 

Bonnie Wilkinson, Vice President and Secretary 

Summary financials 

US$ millions 2002 2003 2004 

Net sales 5,790 6,723 8,033 

Net income/(loss) 107 133 (42) 

Capital expenditure (129) (173) (152) 

Key competitors 

ArvinMeritor competes with several small and large manufacturers and marketers of 

automotive components and systems. Major competitors of the company’s LVS business 

group include Tenneco, Faurecia, Webasto, Brose, Kiekert, Stabilus, Thyssen-Krupp, 

Kayaba and Hayes-Lemmerz. Key competitors of the company’s CVS business group 

are Eaton Corporation, Haldex Braking Systems, Knorr/Bendix, Hendrickson, Dana 

Corporation and Holand-Neway. The LVA business group competes primarily with 

Tenneco, Kayaba, Goerlich’s, Honeywell and Champion Laboratories. 

Key customers 

ArvinMeritor’s major customer for LVS and CVS is DaimlerChrysler AG, which 

comprises companies such as Chrysler, Mercedes-Benz AG and Freightliner 

Corporation. DaimlerChrysler AG contributed to 16% of the total sales in 2003. Products 

supplied to DaimlerChrysler include air and emission transmissions, windows and roofs, 

undercarriage suspensions and wheels. 

General Motors Corporation is a major customer for LVS and accounted for 12% of 

ArvinMeritor’s total sales in 2003. Products supplied to GM include air and emission 

transmissions and undercarriage suspension systems. 



Outlook 

ArvinMeritor is continuing to consolidate its LVS businesses to deal with the challenges 

in the automotive supplier industry and put its businesses in a competitive position. Total 

restructuring costs during 2005 are expected to be around US$16 million. Restructuring 

activities could include additional business consolidations, facility closures and workforce 

downsizing. 

Since 2002, ArvinMeritor has tried to mitigate the risks of cyclicality through 

diversification of revenues, customers and global presence. In line with this strategy, the 

company’s CVS segment recently formed two joint ventures with the Volvo Group to 

produce axles in France. Similar to fiscal 2004, growth in fiscal 2005 is expected to be 

driven by the CVS business. 

The divestment of LVA business (which had been making losses in the recent years) will 

allow the company to pool in more resources for the growth of its LVS and CVS 

businesses. The operating margins and the debt situation are also expected to improve 

as a result of this disinvestment. 

Overall, the restructuring initiatives including the recent divestments are expected to 

generate significant cash savings for the company in the near-term. However, the 

slowdown in the light vehicle production, lack of availability and increasing prices of raw 

materials, especially steel, are continuing to have a negative impact on the company’s 

revenues and profitability. 


Chapter 3 Financial Analysis Page 4 

Chapter 2: Worldwide Locations 

Headquartered in Troy, Michigan, ArvinMeritor employs more than 31,000 people 

worldwide. The company operates more than 150 manufacturing establishments in 27 

countries including the US, Canada, Mexico, South Africa, and Australia; and regions 

viz., South America, Europe and Asia Pacific. Of the company’s approximately 29.2 

million square feet of total floor place, close to 26% was leased and the rest owned as of 

September 2004. The operating facilities of the company’s LVS and CVS operating 

segments in various locations are as follows: 

LVS facilities 

Approximately, 40% and 42% of the total LVS facilities in terms of floor space are 

located in Europe and the US, respectively. 

• The Americas 

• Manufactures roof systems, motion control products, window regulators for 

heavy-duty CV and LV firms. and the company manufactures/assembles access 

control systems. 

• Manufactures coil springs, torsion bars and stabiliser bars. 

• Manufactures fabricated and bend-seat steel wheel products for the LV OEM 

market. 

• Europe 

• Manufactures roof systems, window regulators, access control systems and 

suspension components for European LV market; struts and mini-struts; and 

corner modules. 

• Asia Pacific 

• Manufactures roof systems and window regulators. 



CVS facilities 

Approximately, 56% and 19% of the total CVS facilities in terms of floor space are 

located in the US and Europe; respectively. 

• The Americas 

• Manufactures truck axles including front steer axles (drive and non-drive), rear 

drive axles (single and tandem), and front steers for light and heavy commercial 

vehicles. 

• Manufactures air and hydraulic brakes for heavy and medium vehicle OEMs. 

• Manufactures foundation air brakes, hubs, rotors and drums. 

• Manufactures anti-lock braking systems. 

• Europe 



vehicles. 

• Manufactures foundation air brakes, hubs, rotors and drums. 

• Asia Pacific 



vehicles 



Chapter 3: Financial Analysis 

In 2004, ArvinMeritor posted a 19.5% increase in sales to US$8 billion, thanks primarily 

to the strong performance of its CVS business segment. While the acquisition of Zeuna 

Starker contributed to US$240 million in revenues, divestment of APA reduced revenues 

by US$165 million. In addition, favourable exchange rate fluctuations augmented 

revenues by US$395 million. Sales of LVS and CVS were up by 12% to US$4.8 billion 

and 32.7% to US$3.2 billion, respectively. The growth in CVS segment is attributable to 

the 30% growth in the truck and trailer volume in North America. 

As a percentage of sales, selling, general and administrative expenses declined to 4.8% 

owing to the company’s prudent initiatives to reduce costs. Overall operating income 

increased by US$14 million to US$309 million while operating profit margin declined by 

0.5 percentage points to 3.2% in 2004. Operating expenses included the tender 

withdrawal costs of US$16 million for Dana Corporation and environmental remediation 

costs of US$11 million. The company reported net losses of US$42 million compared to 

net income of US$133 million in 2003. 

Table 1: ArvinMeritor’s key consolidated financial performance, 2000-2004 1 (US$ 

millions, unless otherwise indicated) 

2000 2001 2002 2003 2004 

Net sales 5,513 6,805 5,790 6,723 8,033 

Cost of sales 4,423 6,106 5,227 6,132 7,366 

Net income 218 35 107 133 (42) 

Capital expenditures 225 206 129 173 152 

Cash and cash equivalents 116 101 56 103 132 

Working capital 356 286 233 736 713 

Total shareholders' equity 793 651 741 925 988 

Total assets 4,720 4,362 4,651 5,448 5,639 

Long-term debt 1,611 1,370 1,474 1,541 1,487 

Number of employees 36,000 33,000 32,000 32,000 31,000 

Source: ArvinMeritor, Inc. 

1 

Fiscal years ended 30 th September 



In the fourth quarter of fiscal 2004, ArvinMeritor posted sales of US$2 billion, an increase 

of 19% year-on-year due to higher commercial truck and trailer volumes in North 

America. Despite the increase, the gross margins were negatively impacted due to 

higher steel costs. Including discontinued operations, the company reported net losses 

of US$153 million during the quarter. 


Chapter 4 Competitor Analysis Page 8 

Chapter 4: Competitor Analysis 

ArvinMeritor’s LVS and CVS business groups compete with numerous automotive 

component and system suppliers in North America as well as other global markets. The 

company competes on various parameters such as pricing, customer loyalty, quality, 

customised service, delivery time, efficiency of production processes, and product 

development lead time. The company is regarded as the world’s leading manufacturer of 

axles as well as air and emissions systems. The company holds the number one or 

number two position in several of its LVS markets and an 11% market share in the CVS 

segment. 

Major competitors of the company’s air and emission system product line include 

Faurecia, Eberspaecher and Tenneco. Hilex, Magna, Grupo Antolin and Brose compete 

with ArvinMeritor in door and access control systems category; Inalfa and Webasto 

compete in roof systems while Suspa and Stabilus compete in motion control products; 

The company’s competitors for latch systems include Kiekert, Aisinseiki and Valeo while 

those for ride control systems include Tenneco, Sachs and Kayaba. Rassini, Thyssen- 

Krupp and NHK Spring compete with the company in suspension systems while Michelin 

and Hayes-Lemmerz in wheel products. 

Prime competitors of the company’s CVS business group in case of braking systems 

include Haldex Braking Systems and Knorr/Bendix, while Dana Corporation competes 

with ArvinMeritor in truck axles and drivelines. Holland-Neway and Hendrickson compete 

with Arvin in suspension systems. Eaton Corporation is a competitor in case of the 

transmission systems product category. 

The LVA business group of the company competes with several independent component 

providers and OEMs in North America and Europe including Tenneco, Bosal, Goerlich’s, 

Flowmaster, Remus and Sebring in exhaust products. Competitors for filtration products 

include Honeywell, Champion Laboratories, Dana Corporation, Sogefi Filtration, Mann & 

Hummel and Mahle. Tenneco, Kayaba and Sachs are competitors of ArvinMeritor in ride 

control products. 


Chapter 5 Key Events Page 9 

Chapter 5: Key Events 

ArvinMeritor, Inc. was formed as a result of the merger between Meritor Automotive, Inc. 

and Arvin Industries, Inc. in 2000. 

Meritor Automotive, Inc. was formed in 1909 as Timken Detroit Axle Co., which was later 

acquired by Wisconsin Parts Company. Willard Rockwell, in 1953, merged Standard 

Steel and Spring, Timken Detroit and Wisconsin Parts to create Rockwell Spring and 

Axle Company. Rockwell Automotive acquired the steel wheel company Fumagalli in 

1973. In the late 1980s and early 1990s, Meritor extended its product line by supplying 

two-speed and single-speed drive axles, families of speed on-highway transmission 

systems, and anti-lock braking systems for trailers and tractors. In the period from 1993 

to 1999, Meritor made a spate of acquisitions, including those of Skoda Miada Boleslav 

in the Czech Republic, Dura Automotive Systems’ window regulator business, Volvo’s 

heavy vehicle axle manufacturing plants in Sweden, Euclid Industries and LucasVarity’s 

Heavy Vehicle Braking systems business. In 1996, Rockwell Automotive launched its 

state-of-the-art Engine Synchro Shift (ESS) transmission system. 

Arvin Industries was formed in 1921 as Indianapolis Air Pump Company. The company 

initially produced car heaters, mufflers and catalytic converters. The acquisition of 

Calspan Corporation in 1978 helped Arvin to enter into aeronautical wind tunnel testing, 

government research and automotive accident research. In 1986, the company became 

the world’s largest producer of valves for tires and tubes through the acquisition of 

Schrader Automotive. The same year, Arvin expanded its shock absorber business by 

acquiring Maremount Corporation and Gabriel, followed by Spain’s AP Amortiguadores, 

SA in 1989. Through several joint ventures, Arvin expanded its operations in Thailand, 

China, Taiwan, Malaysia and India. Also, the company acquired a 49% stake in Zeuna 

Starker in 1998. The acquisition of WorldSource, Purolator and Camloc Gas Springs in 

1999 was a major strategic initiative in Arvin’s history. 

Subsequent to the creation of ArvinMeritor, the company acquired the remaining 51% 

stake in Zeuna Starker in late 2002. In 2003, the company divested its shock absorber 

business and sold off its light-tube manufacturing facilities. The same year, the company 

also restructured its Mexican joint venture and increased its ownership share to 49.99%. 


Chapter 5 Key Events Page 10 

In late 2003, the company sold off its 75% interest in the Spanish joint venture to 

Kayaba. 

In March 2004, the CVS segment signed a strategic alliance agreement with Shenzhen 

CIMC Heavy Industries Co., Ltd. (SCHI) in China to supply trailer systems. As per the 

contract, the company would deliver 20,000 trailer axles per year. 

During fiscal 2004, the company pursued its strategy to reduce vertical integration in 

order to extend focus on core processes. In this regard, the company sold its Kenton 

CVS trailer beam fabrication facility in Ohio during the third quarter of fiscal 2004. Also 

during the year, the company terminated its participation in AP Amortiguadores, a joint 

venture with Kayaba, and dissolved a commercial vehicle joint venture with ZF. In the 

fourth quarter of 2004, ArvinMeritor formed a joint venture with STEC to produce 

passenger vehicle sunroofs for a Volkswagen facility in Shanghai, China. This was 

followed by the announcement of two joint ventures with AB Volvo to manufacture 

commercial vehicle drive axles at a facility in France. 

As part of its plans to divest its non core operations, ArvinMeritor sold its coil-coating 

operations to an affiliate of Willis Stein & Partners. Similarly, the company is looking to 

sell off its LVA business also. Through these divestments, the company intends to 

mobilise more resources for building its core competencies and hence provide increased 

support for its OEM customers. In December 2004, the company also disposed its 

components manufacturing operation in Columbus, Indiana. 


Chapter 6 SWOT Analysis Page 11 

Chapter 6: SWOT Analysis 

Strengths 

ArvinMeritor is one of the premier suppliers of a broad array of integrated systems, 

modules and components to the motor vehicle industry. The company serves light 

vehicle, commercial truck, trailer and specialty original equipment manufacturers and 

related aftermarkets. 

The company enjoys a global footprint with more than 150 manufacturing facilities in 27 

countries including the United States, Canada, Mexico, South Africa and Australia; and 

regions viz., South America, Europe and Asia Pacific. 

ArvinMeritor has strong presence in major international markets, thanks to its 

acquisitions and joint ventures. With almost half of its revenues coming from outside 

North America, ArvinMeritor balances risks associated with the cyclic nature of the 

industry. 

The LVS is currently one of the industry leaders in emission technologies that reduce air 

pollutants and offer improved fuel economy. 

The company’s return on invested capital is far higher than many of its peers in the 

industry. 



Weaknesses 

Though sales at ArvinMeritor have registered a CAGR of 17.8% between 2002 and 

2004, most of the company’s growth tends to come from acquisitions. Organic growth 

has been very small and the frequent acquisitions and divestures make it very difficult to 

measure the operational performance of the company. 

Majority of the company's components are relatively based on simple technology, 

leaving little scope for any significant product differentiation. Hence, ArvinMeritor 

competes with a large number of players that result in severe pricing pressure. 

Opportunities 

The company has immense opportunities to look for additional joint ventures in growing 

markets such as China, Latin and South America. The company also perceives 

expansion opportunities in Europe and North America in CVS, which is showing signs of 

strong growth. 

ArvinMeritor is well poised to capitalise on the trend favouring increased outsourcing and 

demand for integrated systems and modules by OEMs. 

The company intends to make the most of opportunities for cross-selling of products and 

operating synergies between its light vehicle and commercial vehicle businesses. 

The acquisition of Zeuna Starker is expected to significantly help the company to meet 

the growing demand for diesel engines in Europe. 

Furthermore, the restructuring and reorganisation process carried out in the recent years 

is expected to provide significant cost savings to ArvinMeritor in the near-term, thus 

having a positive impact on its operating margins. 



Threats 

The rising steel prices, energy costs and continuous pressure from customers to reduce 

prices could hamper the margins of the company. 


Chapter 7 Customers Page 14 

Chapter 7: Customers 

ArvinMeritor supplies to a wide range of original equipment customers worldwide 

including light vehicle OEMs, truck OEMs, specialty vehicle manufacturers, trailer 

producers and aftermarkets. Other customers include dealers, distributors, fleets and 

aftermarket end-users. The company’s customers can be classified into three 

categories: 

Light vehicle systems 

The LVS business group of the company supplies aperture systems, air and emission 

systems and undercarriage systems for light trucks, passenger cars, motorcycles, sports 

utility vehicles and all-terrain vehicles. The LVS customer base of the company consists 

of automobile giants such as General Motors, DaimlerChrysler, Ford, BMW, Renault, 

Volkswagen, Nissan, Peugeot and Toyota. 

Commercial vehicle systems 

The CVS business group produces drive-train systems and components such as axles 

and drivelines, suspension systems, braking systems and ride control products for 

trailers, heavy and medium duty trucks, and specialty vehicles to the commercial vehicle 

aftermarket and OEMs. Top OEM customers for the CVS products include Volvo, Mack, 

Renault Trucks, DaimlerChrysler, Paccar Inc, Fiat, GM and Wabash National. 

In 2003, ArvinMeritor was awarded the Fiat Best Supplier Award and Honda Best 

Suppliers Award for lightweight wheels. The same year, the company also achieved the 

Intermodal Achievement Award for the Meritor Tire Inflation System. In addition, 

ArvinMeritor was awarded NAPA Canada 2003 Vendor of the Year award for the light 

vehicle aftermarket. Other awards and accolades include PACCAR Preferred Supplier 

award for ride control products and Toyota Total Quality Award for LVS, exhaust 

systems, roof systems, modules and wheels. 



ArvinMeritor’s ten largest customers contributed close to 74% of the total revenues in 

2004. DaimlerChrysler AG, which owns Mercedes-Benz AG, Chrysler and Freightliner 

Corporation, contributed to 19% of the total revenues in 2004. Sales to customers such 

as General Motors Corporation (13%), Ford Motor Company (10%) and Volkswagen 

Group (10%) also accounted for considerable portion of the company’s revenues. 

In fiscal 2004, the company’s LVS business won a US$90 million multi-year contract 

from a European OEM for the supply of large opening three-panel sun-roof system. 

Production for this roof-module business is expected to begin in 2006. 

During the year, the CVS business segment entered into agreements with North 

American Bus Industries, Inc. for the supply of axle and brake systems and with Tradisa, 

a Spanish transport carrier, for the supply of full range of axle products. The CVS also 

won more disc rake axle business from De Bock, a Belgium transport company. 

In fiscal 2004, North America and Europe accounted for 50% and 39% of the total 

revenues, respectively. The following table illustrates the company’s revenues across 

geographical regions. 



Table 2 : ArvinMeritor’s sales by geographical region, 2003-2004 

Country/region 2003 2004 

US 38.8 37.7 

Canada 7.2 6.8 

Mexico 4.8 5.6 

Total North America 50.8 50.1 

Germany 9.2 9.2 

UK 7.6 6.5 

France 5.6 6.1 

Other Europe 16.1 17.5 

Total Europe 38.6 39.4 

Asia/Pacific 5.2 4.9 

Other 5.5 5.6 

Total Sales 100 100 

Source: ArvinMeritor 

Figure 1: ArvinMeritor’s 2003 sales by geographical region (% of net sales) 

2003 

Asia/Pacific 

5.2% 

Other 

5.5% 

Total North America 

50.8% 

Total Europe 

38.5% 



Figure 2: ArvinMeritor’s 2004 sales by geographical region (% of net sales) 

2004 

Asia/Pacific 

4.9% 

Other 

5.6% 

Total North 

America 

50.1% 

Total Europe 

39.4% 


Chapter 8 Products Page 18 

Chapter 8: Products 

ArvinMeritor is engaged in the manufacturing of a broad range of integrated system 

components for light, specialty and commercial auto vehicles. The company claims that 

it has an unmatched system integration expertise compared to its competitors. The 

company manufactures its products under three business groups. 

The LVS business group of the company provides integrated system modules to 

passenger cars and light vehicle OEMs. Products include air and emission systems, 

aperture systems and undercarriage systems. Air and emission systems include 

mufflers, air induction and filtration systems, exhaust pipes, exhaust manifolds and 

catalytic converters. Aperture systems include complete roof modules manufactured 

using the patented LVS sunroof technology, door systems and motion control products. 

The company’s roof module finds application in DaimlerChrysler’s SMART car. 

Undercarriage systems include suspension systems, ride control systems and wheel 

products. 

The CVS business group of the company manufactures drive-train systems, braking 

systems, specialty products, suspension systems, trailer products, and transmissions. 

To address strict regulatory standards concerning nitrogen oxide emissions and diesel 

particulate matter, the CVS segment of the company is developing advanced technology 

products such as thermal regenerator, selective catalytic reduction system, and 

hydrogen-assisted regeneration technology. CVS has supply contracts with Blue Bird 

and Workhorse for integrated axles and suspension systems, and Freightliner for 

providing integrated axles and wheel ends. In addition, CVS supplies specialty products 

including off-highway vehicle products (for material handling, construction, mining, 

agriculture and forestry), government products (for use in heavy- and medium duty 

military tactical wheeled vehicles) and specialty vehicle products. 

The LVA business group manufactures mufflers, tail pipes and exhaust pipes, catalytic 

converters, automotive oil, struts, fuel and air filters. The muffler and filter products are 

sold under the Arvin and Purolator brands, respectively. 


Chapter 8 Products Page 19 

Other products manufactured by the company include coil coatings, and coated steel 

and aluminium substrates. 

Figure 3: ArvinMeritor’s 2003 sales by OEM sector (% of net sales) 

2003 

CVS 

36.0% 

LVS 

64.0% 

Figure 4: ArvinMeritor’s 2004 sales by OEM sector (% of net sales) 

2004 

CVS 

40.0% 

LVS 

60.0% 

2003 2004 

US$ million % US$ million % 

LVS 4,301 64% 4,818 60% 

CVS 2,422 36% 3,215 40% 

Total 8,033 100% 6,723 100% 

Source: ArvinMeritor, Inc. 


Chapter 9 Product Development Page 20 

Chapter 9: Product Development 

As part of its growth strategy, the company continues to offer engineering and design 

expertise, develop new products and improve existing products that match customer 

requirements. The company is integrating its existing product lines and collaborating with 

technology partners to promote higher-value modules and systems. In fiscal 2004, 

ArvinMeritor spent US$156 million or 2% of the total revenues for R&D. At present, the 

company’s R&D department employs around 1,725 scientists and professional 

engineers. Recent development projects of the company include: 

• Development of diesel emission systems for six main light vehicle European 

OEMs abiding EURO IV regulations and experimentation of systems meeting the 

EURO V standards. 

• Co-working arrangements with leading European OEMs to use metallic substrate 

for catalytic converters to mitigate emission levels and improve vehicle 

performance 

• Development of complete suspension systems and integrated corner modules by 

leveraging company’s expertise in auto components such as wheels, torsion bars 

and shock absorbers. 

• The products and applications include the Diesel Oxidation Catalysts, Thermal 

Regenerator, Catalysed Diesel Particulate filter, Selective catalytic Reduction 

(SCR) System. 

• With the regulations for diesel particulate matter and nitrogen oxide emissions 

becoming more and more stringent, ArvinMeritor is focusing on the development 

of advanced technology products such as thermal regenerator, selective catalytic 

reduction system, and hydrogen-assisted regeneration technology to strictly 

address this important need of OEMs.. The CVS segment is focusing on 

adapting products and technologies, made by the LVS emission technologies 

unit, in the development of emissions control products for its commercial vehicle 

customers. 


Chapter 9 Product Development Page 21 

• Development of modules and systems such as integrated axle-suspension 

systems for International Truck and Engine, fully-dressed wheel-end modules for 

Freightliner Corporation and emission management systems for Caterpillar, 

thereby reducing vehicle weight and increasing vehicle durability and 

performance. 

• Development of next-generation air disc brakes for Volvo and Renault heavy 

trucks. 

LVS is currently supplying complete roof modules using its sunroof technology. The 

company’s roof modules are currently used in DaimlerChrysler’s Smart car. While one 

system is developed using long fibre injection technology, the other system features fullglass 

appearance. In the door systems category, the company’s glass motion module is 

currently being assessed by all major automakers, including Japanese OEMs. Under a 

contract with Hyundai, the company is to provide latches, door modules, motors, 

speakers, wire harnesses and window regulators for the production of Hyundai’s Sonata 

and Santa Fe models commencing in 2005. 

In 2003, the company entered into a development contract with LiteFlex LLC to become 

the latter’s only distributor of trailer and truck composite mechanical springs. At the Mid- 

America Trucking Show held in March 2004, ArvinMeritor and ZF Sachs (its clutch 

technology partner) unveiled TwinXTend 15.5”, self adjusting clutch for class 8 vehicles. 

The twin-plate clutch was developed to reduce the expense and downtime related with 

manual clutch systems. Also during the show, the company revealed a new version of its 

RideStar RHP trailer air suspension system that features an optimised upper control arm 

assembly and new axle design. 


Chapter 10 Prospects Page 22 

Chapter 10: Prospects 

ArvinMeritor is continuing to consolidate its LVS businesses to deal with the challenges 

in the automotive supplier industry and to enhance its competitive position. The 

restructuring charges of US$15 million during 2004 included the employee termination 

costs associated with the reduction of around 975 hourly employees and 300 salaried 

employees. With the intention of strengthening its core competencies, the company 

wants to carry forward its restructuring activities into fiscal 2005. This can include 

additional business consolidations, facility closures and workforce downsizing. Total 

restructuring costs during 2005 are expected to be around US$16 million. Since 2002, 

ArvinMeritor has tried to mitigate the risks of cyclicality through diversification of 

revenues, customers and global presence. As part of this strategy, the company’s CVS 

business recently formed two joint ventures with the Volvo Group to produce axles in 

France. 

Similar to fiscal 2004, growth in fiscal 2005 is expected to be driven by the CVS 

business. ArvinMeritor expects to capitalise on the North American heavy-duty truck 

segment where the production is expected to increase by 17% to 275,000 units in 2005. 

Similarly, LV production in Western Europe and North America is expected to be 16.8 

and 15.9 million in fiscal 2005. 

Moreover, the divestment of LVA business, which had been making losses in the recent 

years, will allow the company to pool in more resources for the growth of its LVS and 

CVS businesses. The operating margins and the debt situation are also expected to 

improve as a result of this divestment. 

ArvinMeritor is also striving to derive maximum benefit out of the recent trend favouring 

outsourcing of bigger and more complex modules and integrated systems. Overall, the 

restructuring initiatives including the recent divestments are expected to generate 

significant cash savings for the company in the near-term. However, the slowdown in the 

light vehicle production, lack of availability and increasing prices of raw materials, 

especially steel, are continuing to have a negative impact on the company’s revenues 

and profitability. To mitigate the effect, ArvinMeritor is considering several alternatives, 


Chapter 10 Prospects Page 23 

including the search for new global steel sources, identifying substitutes, and negotiating 

with customers to recover certain costs. Hence in the coming years, ArvinMeritor’s ability 

to bring down its dependence on steel by reengineering its products might dictate future 

margin levels. 


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