ArvinMeritor today, Feb. 4, reported financial results for its first fiscal quarter ended Dec. 28:
“Although significant volume declines and charges associated with the LVS business negatively affected our results this quarter, we are aggressively executing a series of actions to help mitigate the effects of the ongoing economic crisis,” said Chip McClure, chairman, chief executive officer and president of the Troy, Mich.-based company. “Through continued focus on reducing costs, strengthening the aftermarket business and gaining new military contracts, the Commercial Vehicle Systems business performed well. Despite the severe downturn in heavy truck markets in most regions of the world, the CVS team was able to offset the negative volumes with minimal impact on performance. These results clearly underscore the validity of our aggressive Performance Plus cost savings and growth initiatives.”
ArvinMeritor said it has implemented a number of initiatives to help manage cash, and is prepared to take additional actions if needed. Initiatives in process include work force reductions of more than 1,500 employees, extended shutdowns and reduced work weeks at all plants, and reduced and rebalanced capital spending.
The company also initiated a 10 percent salary reduction for all U.S. executive-level employees, and a 5-percent reduction in salary for all other U.S. salaried employees, in addition to similar actions in other parts of the world; eliminated matching contribution to the U.S. 401(k); suspended merit increases for fiscal year 2009; reduced discretionary spending by about 30 percent year-over-year; reduced board of directors’ annual compensation by 10 percent; and suspended its quarterly dividend.
As previously announced, economic conditions do not support the company’s strategy to divest the entire LVS business at this time. “Due to continued deterioration in the global markets, it is now our priority to complete the divestiture of these businesses separately at acceptable returns to shareowners,” McClure said.
In January, the company executed multiple actions to reduce fixed costs within the LVS business, which are expected to result in $57 million in annual savings. These actions included the elimination of the LVS divisional organization, resulting in a headcount reduction of more than 100 positions. The Body and Chassis businesses now are being managed to realize maximum cost efficiencies, with additional actions currently under consideration. The Wheels business, located in Brazil and Mexico, will be retained by ArvinMeritor.
At the end of the first quarter, the company said it had $158 million in cash and cash equivalents, and that it is in compliance with the financial covenants in its material borrowing arrangements, including its $664 million revolving credit facility, of which $141 million (including $38 million in letters of credit) was utilized at the end of the quarter. ArvinMeritor said it maintains full access to committed securitization lines.
