ArvinMeritor to Cut Workforce 7% to Save $125 million in 2009

ArvinMeritor Inc., which manufactures components and assemblies for commercial truck, trailer and specialty OEMs, says it is “responding aggressively to weakness in global business conditions” with comprehensive restructuring and cost-reduction plans. Chairman and CEO Chip McClure said the company sees weakness in all of its customer markets and is further challenged by weak foreign currencies.

In response, ArvinMeritor has initiated layoffs and discretionary cost cuts aiming to save $125 million in 2009. It also says it is reconsidering an earlier plan to spin off its Light Vehicle Systems business unit, and may sell the group instead.

Specifically, ArvinMeritor said it is eliminating 450 salaried and 800 hourly positions, or approximately 7% of its workforce worldwide. In its most recent statements, ArvinMeritor has reported it has more than 19,000 employees in 24 countries. Now, the company says majority of its restructuring actions have already been completed, while the remainder are in process.

At the same time, the company is implementing “proactive cost reduction actions” in order to enhance its cash flow. This will include controlling global inventory, pursuing working capital improvements, and reducing discretionary spending.

Other strategies outlined in the company’s statement include “prudent steps” to maintain profitability and positive cash flow; retaining “strong liquidity” renewing credit lines with partner banks; focusing on growth strategies and investing in critical product offerings; and “repositioning” cash for maximum flexibility.

According to McClure, these steps and others in recent years will improve ArvinMeritor’s structure to endure market weaknesses. “I am confident that when the global economies and our industry stabilize we will be a stronger, more focused company," the chairman stated.

The plan to spin off the Light Vehicle Systems unit to shareholders was announced last May. Now, ArvinMeritor says it is studying alternative plans to effect the separation, including a sale. "We continue to believe that separating our two business groups will unlock significant value for our shareowners and strengthen the competitive position of both businesses, but due to today's difficult environment we are pursuing additional approaches to achieve a separation," McClure said.