ArvinMeritor announced that in the third quarter of fiscal year 2009, it posted sales of $993 million, down from $1.9 billion, or 47 percent, from the same period last year (42 percent excluding effects of foreign currency). The company said this decrease in sales is due to significantly lower production volumes in most original equipment markets globally.
Net loss was $162 million compared to net income of $44 million; net loss includes losses from discontinued operations of $134 million primarily related to noncash after-tax charges of about $90 million associated with the divestiture of several of the company’s chassis businesses.
“Although sales are down significantly, our performance this quarter demonstrates a continued diligence to improve ArvinMeritor’s liquidity position through proactive management of working capital, improved operational performance and ongoing cost reduction actions,” said Chip McClure, chairman, chief executive officer and president of the Troy, Mich.-based company. “With the completion of several divestitures, we moved closer to our objective of becoming a commercial vehicle company, enabling us to focus on expanding our leadership position in both on- and off-highway markets, as demonstrated by the new contracts we announced this quarter.”
Free cash flow was $73 million in the third quarter, an increase of $211 million from the second fiscal quarter of this year. The company said this increase is due to continued reductions in working capital levels, primarily in accounts receivable and inventory.
The company also recently announced that it entered into a purchase-and-sale agreement to divest the entirety of its Wheels business – previously a division of the company’s LVS segment – to Iochpe-Maxion S.A., a Brazilian producer of wheels and frames for commercial vehicles, railway freight cars and castings. The base purchase price is $180 million; actual closing proceeds may vary depending on taxes and the net cash or debt position of the business at closing.
The closing and funding of the entire adjusted purchase price is expected to be on or before Sept. 23, prior to the end of ArvinMeritor’s fourth fiscal quarter. The agreement also requires certain true-up payments for working capital and other miscellaneous adjustments, on a post-closing basis.
The completion of the transaction is subject to several conditions, including the clearance or waiver of applicable competition law waiting periods in the United States and Mexico, and the fulfillment of Iochpe-Maxion’s committed financing. Iochpe-Maxion will be pursuing corporate approvals, which are required under Brazilian law.
ArvinMeritor remains committed to remaining a strong and growing manufacturer and supplier in South America, McClure said. Addressing a group of South American journalists today, Aug. 10, he said the company is focused on becoming a global commercial vehicle company with expanded leadership in original equipment and aftermarket for both the on- and off-highway global markets.
McClure said the company is planning an up to a $10 million (U.S.) investment for its commercial vehicle business in Brazil, which will support its expansion into new product segments as well as new manufacturing technology such as advanced gear-making and efficient high-quality equipment to make parts and components. While ArvinMeritor is impacted by unprecedented economic changes, its production in South America is up 9 percent quarter-over-quarter, McClure said.
“While we anticipate market conditions will remain tough through our fourth fiscal quarter, we are taking appropriate actions that should help offset the impact and allow us to remain in compliance with our yearend credit line financial covenant,” McClure said. “We will continue to proactively manage working capital levels, execute key initiatives and reduce costs, while at the same time positioning the company for a recovery in our key markets.”