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arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL
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arvinmeritor ARM_at_JPMorgan_Harbour_2007_FINAL

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  • 1. JPMorgan Harbour Auto Conference August 6, 2007 Jay Craig Senior Vice President and Controller 1
  • 2. Forward-Looking Statements This presentation contains statements relating to future results of the company (including certain projections and business trends) that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words or phrases such as “believe,” “expect,” “anticipate,” “estimate,” “should,” “are likely to be,” “will” and similar expressions. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to global economic and market cycles and conditions; the demand for commercial, specialty and light vehicles for which the company supplies products; risks inherent in operating abroad (including foreign currency exchange rates and potential disruption of production and supply due to terrorist attacks or acts of aggression); availability and cost of raw materials, including steel; OEM program delays; demand for and market acceptance of new and existing products; successful development of new products; reliance on major OEM customers; labor relations of the company, its suppliers and customers, including potential disruptions in supply of parts to our facilities or demand for our products due to work stoppages; the financial condition of the company’s suppliers and customers, including potential bankruptcies; possible adverse effects of any future suspension of normal trade credit terms by our suppliers; potential difficulties competing with companies that have avoided their existing contracts in bankruptcy and reorganization proceedings; successful integration of acquired or merged businesses; the ability to achieve the expected annual savings and synergies from past and future business combinations and the ability to achieve the expected benefits of restructuring actions; success and timing of potential divestitures; potential impairment of long-lived assets, including goodwill; competitive product and pricing pressures; the amount of the company’s debt; the ability of the company to continue to comply with covenants in its financing agreements; the ability of the company to access capital markets; credit ratings of the company’s debt; the outcome of existing and any future legal proceedings, including any litigation with respect to environmental or asbestos-related matters; rising costs of pension and other post-retirement benefits and possible changes in pension and other accounting rules; as well as other risks and uncertainties, including but not limited to those detailed herein and from time to time in other filings of the company with the SEC. These forward-looking statements are made only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law. 2
  • 3. Fiscal Third Quarter Highlights(1) • Earned $0.25 per share from continuing operations before special items, equal to consensus • Light Vehicle Systems year-over-year margin expansion continues • Commercial Vehicle Systems profitable in the trough of the 2007 downturn • Completed the sale of Emissions Technologies on May 17 • Performance Plus teams on track to achieve goals • FY 2007 EPS guidance before special items of $0.75 to $0.80 compared to $0.70 to $0.80 previously • Cash flow guidance reduced to a range of $50 million to $100 million outflow reflecting working capital investments for growth outside North America and timing of ET post-closing adjustments (1) See Appendix – “Non-GAAP Financial Information” 3
  • 4. Segment EBITDA Before Special Items(1) Quarter Ended June 30, (in millions) Better/(Worse) $ % 2007 2006 EBITDA Light Vehicle Systems $ 31) $ 23) $ 8) 35% Commercial Vehicle System 65) 87) (22) -25% Segment EBITDA 96) 110) (14) -13% Unallocated Corporate Costs (2) (2) - 0% ET Corporate Allocations (9) (7) (2) -29% Total EBITDA $ 85) $ 101) $ (16) -16% EBITDA Margins Light Vehicle Systems (2) 4.9% 3.8% 1.1 pts Commercial Vehicle System 6.2% 7.7% -1.5 pts Segment EBITDA Margins 5.8% 6.3% -0.5 pts Total EBITDA Margins 5.1% 5.8% -0.7 pts • See Appendix – “Non-GAAP Financial Information” • Adjusted to reflect the impact of reduced volumes in our Brussels operation 4
  • 5. Q3 Earnings Frequently Asked Questions: (1) What happened to free cash flow this quarter? (Q3 2007, in millions) Free Cash Flow Discontinued Operations (primarily ET) $ (114) CVS and LVS Receivables Volume/Mix Shift from NA to ROW (52) Performance Net of Factoring and Securitization (26) Total Receivables (78) Other Working Capital (4) Retiree Benefit Contributions Net of Expense (14) EBITDA, Restructuring, Cash Taxes and Other 54 Total Free Cash Flow $ (156) (1) See Appendix – “Non-GAAP Financial Information” 5
  • 6. Impact of Sales Mix on Accounts Receivable (in millions) Typical Sales in Sales in Receivables Terms (Days) Second Quarter Third Quarter North America 60 - 90 51% 47% Rest of World 90 - 120 49% 53% 6
  • 7. Q3 Earnings Frequently Asked Questions: Why was the Disc Ops cash outflow so large? 1. ET business deteriorated, leading directly to outflows before closing 2. Deterioration increased our motivation to complete closing, leading us to include other assets ET EBITDA in Millions (1) $70 $60 $50 $40 5.2 multiple $30 7.4 multiple $20 $10 $0 Fiscal Year 2006 Last 12 Months (4/30/2007) (1) Including corporate allocations 7
  • 8. Q3 Earnings Frequently Asked Questions: What is the source of the tax benefit in Q4? (Q4 2007 in millions) Projected Tax Benefit Resolution of Certain Tax Contingencies $ 7 Deferred Tax Assets from State Tax Law Change 4 Total Discrete Items $ 11 8
  • 9. Q3 Earnings Frequently Asked Questions: How do I know Performance Plus is working? • The Performance Plus team reports that ideas implemented to date are on the glide path to $75 million savings in 2008 net of execution, raw material and pricing risks • We will report annual run-rate savings of ideas implemented through the fourth quarter at our earnings in mid-November • This will allow us to verify savings are reaching the accounted actuals − Finance team to audit actions-to-results − Verify that actions are not double-counted in other variance categories − Simultaneously verify/revise baseline (annual plan before Performance Plus) 9
  • 10. JPMorgan Harbour Auto Conference August 6, 2007 Chris Snodgrass Vice President Manufacturing and Supply Chain, CVS 10
  • 11. North America Class 8 Volumes (Thousands of vehicles) FY2007 = 238K vehicles FY2008 = 250K vehicles 310 89 70 70 71 220 60 50 42 36 28* FY2009 FY2010 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 CY2007 = 198K Vehicles * Previous forecast 11
  • 12. Management of Cycles 1. ArvinMeritor Production System and lean manufacturing 2. Investments in core processes 3. Footprint optimization timing 4. Other new investments 12
  • 13. ArvinMeritor Production System A version of the Toyota Production Wave 1 Lean Fundamentals: – Performance Metrics Board – System, tailored to fit ArvinMeritor’s Visual Management business model: – Key Process Indicators (KPIs) – Customer driven design – 5S specifications – Eight Wastes – Value Stream Mapping – Higher fluctuation in market – First Time Through (FTT) demand – Kaizen and TPM Workshops – High product variability and – Total Preventative Maintenance complexity – Diverse manufacturing platforms – Traditional manufacturing culture Productivity Wave 1 step change Time 13
  • 14. Principles of ArvinMeritor Production System • Performance and health Principles management • Relentless loss elimination • Organizational design • End-to-end design • Priority on people– health • Capability building processes and safety • Support function processes Management • Continuous improvement systems infrastructure Operating systems • Focus – compelling purpose • Material flows and clear direction • Information flows • Execution – people work well Mindsets, • Quality systems together day-to-day to get Behaviors & • Maintenance systems things done Capabilities • Manpower systems • Skills – people work effectively in their roles • Improvement – relentless drive to do better 14
  • 15. Benefits of ArvinMeritor Production System S Q D C P Safety Quality Delivery Cost People Sub-Systems Tools 15
  • 16. Lean Efforts Have Resulted In Significant Improvement with Minimal (or no) Investment Housing Production Units • Production trend increased significantly • Achieved 15% average improvement to throughput • Painting throughput has increased to >900 pieces per day Gear Machining Units • Gear machining production trend increased • Achieved 35% average improvement to throughput 16
  • 17. Management of Cycles 1. ArvinMeritor Production System and lean manufacturing 2. Investments in core processes 3. Footprint optimization timing 4. Other new investments 17
  • 18. Investing in Core Processes Layered Capacity Model 2006 Industry 350K Units Layer 2 Layer 3 Layer 2 Layer 2 Layer 1 Layer 2 Layer 1 Layer 1 Layer 1 Class 8 Industry 250K-280K ArvinMeritor Capacity Process Process Process Process Assembly A B C D Core Process Model Layer 1 Layer 1 Class 8 Industry Non-Core: Core: Non-Core: Core: 300K+ Outsource Invest Outsource Invest Process Process Process Process Assembly A B C D 18
  • 19. Core Process Example: Gear Cutting • High value add • High leverage to quality and capability • Invest in the latest technology • Invest in capacity Average Age of • $25 million investment Gear-Cutting Machines approved Before Project After Project 19
  • 20. Management of Cycles 1. ArvinMeritor Production System and lean manufacturing 2. Investments in core processes 3. Footprint optimization timing 4. Other new investments 20
  • 21. Footprint Optimization Timing • Performance Plus restructuring intended to shift capacity toward locations with lower total delivered cost • Plan includes realignment/consolidation of processes and new capacity in low-cost locations • Open new plants to support 2009 pre-buy • Announcing new axle plant for northern Mexico – Expected to open second half of 2008 – 150K – 250K square feet 21
  • 22. Management of Cycles 1. ArvinMeritor Production System and lean manufacturing 2. Investments in core processes 3. Footprint optimization timing 4. Other new investments 22
  • 23. Expansion of Axles JV in India Automotive Axles, Ltd. • Automotive Axles, Ltd. (AAL) is the Bharat largest commercial vehicle axle Forge, ARM, 35% 35% manufacturer in India • Traded on the Indian Stock Exchange • Sells through 51% ARM-owned JV Publicly Held, • Customers include Ashok Leyland, 30% Mahindra & Mahindra and Tata • FY 2007 sales of about $150 million Sales in Rupees • Announcing a significant investment to expand AAL’s manufacturing capacity to support strong market and customer growth in India and elsewhere in Asia 1998 1999 2000 2001 2002 2003 2004 2005 2006 23
  • 24. JPMorgan Harbour Auto Conference August 6, 2007 Jay Craig Senior Vice President and Controller Chris Snodgrass Vice President Manufacturing and Supply Chain, CVS 24
  • 25. Appendix 25
  • 26. Use of Non-GAAP Financial Information In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”) included throughout this presentation, the Company has provided information regarding income from continuing operations and diluted earnings per share before special items, which are non-GAAP financial measures. These non-GAAP measures are defined as reported income or loss from continuing operations and reported diluted earnings or loss per share from continuing operations plus or minus special items. Other non-GAAP financial measures include “EBITDA,” “net debt” and “free cash flow”. EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and losses on sales of receivables, plus or minus special items. Net debt is defined as total debt less the fair value adjustment of notes due to interest rate swaps, less cash. Free cash flow represents net cash provided by operating activities less capital expenditures. Management believes that the non-GAAP financial measures used in this presentation are useful to both management and investors in their analysis of the Company’s financial position and results of operations. In particular, management believes that net debt is an important indicator of the Company’s overall leverage and free cash flow is useful in analyzing the Company’s ability to service and repay its debt. EBITDA is a meaningful measure of performance commonly used by management, the investment community and banking institutions to analyze operating performance and entity valuation. Further, management uses these non-GAAP measures for planning and forecasting in future periods. These non-GAAP measures should not be considered a substitute for the reported results prepared in accordance with GAAP. Neither net debt nor free cash flow should be considered substitutes for debt, cash provided by operating activities or other balance sheet or cash flow statement data prepared in accordance with GAAP or as a measure of financial position or liquidity. In addition, the calculation of free cash flow does not reflect cash used to service debt and thus, does not reflect funds available for investment or other discretionary uses. EBITDA should not be considered an alternative to net income as an indicator of operating performance or to cash flows as a measure of liquidity. These non-GAAP financial measures, as determined and presented by the Company, may not be comparable to related or similarly titled measures reported by other companies. Set forth on the following slides are reconciliations of these non-GAAP financial measures, if applicable, to the most directly comparable financial measures calculated and presented in accordance with GAAP. 26
  • 27. Non-GAAP Financial Information Income Statement Special Items Walk 3Q 2007 Product Before Disruptions Income GAAP Special Items and Restructuring Taxes Q3 2007 Q3 2007 Sales $ 1,662 $ - $ - $ 1,662 Gross Margin 136 2 - 138 Operating Income 19 26 - 45 Income (Loss) Before Income Taxes 2 26 - 28 Income (Loss) From Continuing Operations (4) 16 6 18 DILUTED EARNINGS (LOSS) PER SHARE Continuing Operations $ (0.06) $ 0.23 $ 0.08 $ 0.25 Diluted Shares Outstanding 70.8 71.8 71.8 71.8 EBITDA Light Vehicle Systems $ 12 $ 19 $ - $ 31 2 - 65 Commercial Vehicle Systems 63 Segment EBITDA 75 21 - 96 Unallocated Corporate Costs (7) 5 - (2) - - (9) (9) ET Corporate Allocations $ 59 $ 26 $ - $ 85 Total EBITDA 27
  • 28. Non-GAAP Financial Information Income Statement Special Items Walk 3Q 2006 Tilbury Before Taxes, GAAP Work Special Items other Q3 2006 Stoppage Sheffield Restructuring Q3 2006 Sales $ 1,735 $ - $ - $ - $ - $ 1,735 Gross Margin 117 45 - - - 162 Operating Income 24 45 (5) 1 - 65 Income Before Income Taxes 6 45 (5) 1 - 47 Income From Continuing Operations 4 28 (3) 1 1 31 DILUTED EARNINGS (LOSS) PER SHARE Continuing Operations $ 0.06 $ 0.40 $ (0.04) $ 0.01 $ 0.01 $ 0.44 Diluted Shares Outstanding 70.1 70.1 70.1 70.1 70.1 70.1 EBITDA Light Vehicle Systems $ 28 $ - $ (5) $ - $ - $ 23 45 - 1 - 87 Commercial Vehicle Systems 41 Segment EBITDA 69 45 (5) 1 - 110 Unallocated Corporate Costs (2) - - - - (2) ET Corporate Allocations (7) - - - - (7) $ 60 $ 45 $ (5) $ 1 $ - $ 101 Total EBITDA 28
  • 29. Non-GAAP Financial Information 3Q EBITDA Reconciliation Quarter Ended June 30, 2007 2006 $ 85 $ 101 Total EBITDA - Before Special Items (24) (1) Restructuring Costs (2) (45) Product Disruptions Gain on Divestitures - 5 Loss on Sale of Receivables (3) - Depreciation and Amortization (32) (30) Interest Expense, Net (27) (28) Benefit (Provision) for Income Taxes (1) 2 Income (Loss) From Continuing Operations $ (4) $ 4 29
  • 30. Non-GAAP Financial Information Free Cash Flow Three Months Ended June 30, 2007 2006 Cash provided by (used for operating activities) $ (127) $ 186 (29) (31) Less: Capital Expenditures (1) $ (156) $ 155 Free Cash Flow (1) Includes capital expenditures of discontinued operations. 30
  • 31. 31

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