ArvinMeritor on Tuesday, May 5, reported financial results for its second fiscal quarter ended March 31. Among the quarterly highlights were:
“We are proud of the strong performance from our global operations teams despite continued low volumes in the commercial and light vehicle markets,” said Chip McClure, chairman, chief executive officer and president of the Troy, Mich.-based company. “While revenues are down in the OE light vehicle, truck and trailer businesses, compared to the first quarter, we are reporting more favorable earnings due to a continued focus on cost-reduction efforts and strong performance from our specialty and aftermarket groups.”
During the first half of fiscal year 2009, the company executed various actions to reduce costs and manage cash. The company said these actions are expected to result in savings of about $430 million on an annual basis, or $311 million for fiscal year 2009. Cost-reduction actions include the elimination of the Light Vehicle Systems (LVS) divisional organization, temporary or permanent reduction of about 3,000 employees globally, salary reductions, suspension of annual salary increases, elimination of the 401(k) match, extended plant shutdowns across the company’s global operations, the elimination of all nonessential discretionary spending, and savings driven by the company’s Performance Plus program.
In January, the company announced that difficulties in the credit markets and continued volume weakness in most markets prevented the sale of Body and Chassis as one entity at an acceptable value; therefore, the company said it has remained focused on managing both the Body Systems and Chassis businesses for maximum cost efficiencies. In addition, the company continues to aggressively pursue exit strategies for its Chassis businesses; ArvinMeritor said it anticipates finalizing the first transaction for a significant unit of Chassis in the near future.
ArvinMeritor said that as of April 29, it had $7 million of outstanding receivables subject to Chrysler’s U.S. bankruptcy proceedings; of that amount, only $3 million are expected to be outside of administrative claim status. Management has determined that if some or all of these receivables ultimately are not collectible, the impact on the company’s second-quarter results would not be material. ArvinMeritor said it will be impacted by Chrysler’s announcement to idle its facilities during the bankruptcy process; the company anticipates a 30- to 60-day shutdown to have a negative impact on EBITDA in the range of $2 million to $5 million.
ArvinMeritor said that while current market conditions remain depressed, North America and South America are showing signs of stabilization, and certain markets in Asia are indicating slight signs of improvement, offsetting continued declines in Europe. For the third quarter, the company said it anticipates revenue to be about flat; loss per share, before special items, to be greater; free cash flow, before reductions in sales of receivables, to be positive; and total free cash flow to be slightly negative.
“ArvinMeritor was proactive in taking aggressive steps to preserve liquidity through this downturn and continues to be diligent in maintaining all of the actions put into place in the past six months,” McClure said. “We will continue to operate with that same rigor, while maintaining a constant focus on the company’s financial position. We anticipate that we will begin to see positive signs of improvement in some markets during the second half of this year.”
