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arvinmeritor 2007ShareownersPresentation
1. Shareowners Meeting
Chip McClure
Chairman, CEO and President
January 26, 2007
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. Agenda
• 2006 Highlights
• Industry Challenges
and Opportunities
• Vision for Growth
and Profitability
3
4. Diverse Customer Base
Commercial Vehicle Customers Light Vehicle Customers
DaimlerChrysler
Other CVS
10%
Ford 1% 15%
53%
Volkswagen 1%
Light
Volkswagen
Vehicles
10%
General Motors 1%
Fiat 2%
PACCAR 2% General Motors
9%
International 3%
Asian Based
OEMs 3%
Ford 7%
Daimler
47% Chrysler
8% Asian Based OEMs
Commercial 3%
Vehicles Fiat 3%
Volvo 11%
BMW 2%
Other LVS 9%
4
5. Geographic/Customer Mix
of 2006 Sales
Asian OEMs Asian OEMs
North
and ROW * and ROW *
America
15% 23%
47%
Europe and
European- Europe and
North
based OEMs* European-
America
38% based OEMs*
44%
33%
+ Non-Consolidated
Consolidated
Joint Ventures
Revenue
* Includes local operations of companies
headquartered in North America and Europe
5
6. 2005 Restructuring Program Update
Original Program Updated
($ million)
Estimate Thru 9/30/06 Estimate
Restructuring Costs $135 $127 $132
Cash Restructuring $110 $99 $105
Run-rate annual benefits $50-60 $50 $60-65
• Goals of this program have been achieved
• Benefits to date have offset negative effect of raw materials
prices, production volumes and customer pricing
• Incremental benefits in 2007 are expected to partially offset
stainless steel pricing
6
7. Divestiture Status
Status Proceeds
Light Vehicle Aftermarket
Equity share in Purolator India Sold
N.A. Purolator filters Sold
N.A. Exhaust Sold
S. Africa Ride Control Sold
N.A. Motion Control Sold
In Process
N.A. Ride Control
In Process
LVA Europe
Total Light Vehicle Aftermarket $ 227million
Other Divestitures
CVS Off-Highway Brakes Sold $39 million
LVS MSSC suspension JV Evaluating N/A
7
8. Delivered on Commitments
2006 Goals Delivery Actual Result
Sales of $8.5 - $8.6 billion $9.2 billion
EPS of $1.50 - $1.70
$1.78
(before special items) (1)
Operating income of $250 - $265 million $262 million
Free cash flow of $100 - $150 million (1) $284 million
$501 million
Improve balance sheet
reduction in net debt
See appendix for reconciliation to GAAP number
(1)
8
9. Balance Sheet Strengthened
Net debt (1) Debt-to-capitalization ratio
(millions)
$1,648
63%
$1,383
$1,356 61%
59%
55%
$882
2003 2004 2005 2006
2003 2004 2005 2006
Term debt due within 5 years
Unfunded pension liability
(millions)
(millions) $948
$659
$696
$561
$299
$469
$409
$93
2003 2004 2005 2006 2003 2004 2005 2006
See appendix for definition of net debt
(1)
9
10. Challenges
• North America 2007 Class 8 truck downturn
• Light vehicle production cuts in North America
• Pricing pressures
• Increased material costs
10
11. Opportunities
• Booming growth in Asia
• Some competitors weakened
• Systems-based solutions
• Strong balance sheet and liquidity – a must during these
turbulent times
11
12. Vision for Growth and Profitability
• Be a global systems leader
in our target markets
• Develop scalable product
Mobility
technologies and
capabilities, focusing on
electronics and controls
• Accelerate growth in Asia
Safety and with Asian OEMs
• Accelerate growth in
Commercial Vehicle
Aftermarket
• Achieve top quartile
Environment financial performance
among peer companies
12
13. Medium-Term Goals
• 1/3 – 1/3 – 1/3 regional business mix
• Triple sales in Asia
• Triple the size of Aftermarket business
• Grow organically where margins are good
• Achieve ROIC of 13 – 15 percent
Growth with a Purpose
13
14. Strengthening Leadership Team
Rob Ostrov, Phil Martens, Jay Craig
Sr. VP HR President, LVS VP and
Controller
H. H. “Buddy” Wacaser, Carsten Reinhardt,
President, ET President, CVS
14
15. Goal
Top Quartile Financial Performance Among Peer Companies
Steering Committee
J. Craig J. Donlon P. Martens R. Ostrov C. Reinhardt R. Sachdev
Operational Excellence Commercial Excellence
Approach
Cost Improvements Revenue Enhancement
Product
Aftermarket
Materials Mfg. Overhead ER&D Growth
C. C.
Sponsors J. Craig P. Martens P. Martens J. Craig
Reinhardt Reinhardt
Talent Excellence
Foundation
Sponsor: R. Ostrov
Program Office
Sponsors: J. Craig and J. Donlon
15
16. Pathway to Change
Pillars of Performance
Top Quartile Financial Performance
Among Peer Companies
Manufacturing
Aftermarket
Overhead
Materials
Product
Growth
ER&D
Talent Excellence
16
17. Actions Already Underway
• Expansion of shared services (improved cost and
productivity)
• Reengineering projects for material savings
• Rationalization of engineering footprint
• Broadening of remanufacturing
• ET restructuring (not included in Performance Plus targets)
• Category crossover
17
18. Growth from Category Cross-Over
Crossing the Boundary
- Leverage technology
- Utilize capacity
- Innovate for leadership
Light Vehicles Commercial Vehicles
Steel wheels Medium truck wheels
Car and light truck axles Drive axles
and modules
DPFs, converters Commercial diesel emissions
Window regulators, door Truck and specialty vehicle
modules doors
Future State: Eliminate Boundaries
18
19. EBITDA Forecast with High Confidence
Improvement from Performance Plus
$ Millions Before Special Items
$625-$685
$700
$600 $456 $485-$530
$500 $375-$405
$400
$300
$200
$100
$0
FY 2006 FY 2007 FY 2008 FY 2009
Actual
19
20. 3R Long-Term Sustainable Strategy
Rationalize
2005-06
Refocus
2005-06
Regenerate • Expand global presence
2006+ • Diversify customer base
• Improve and develop
new technologies
• Invest in profitable
product lines
• Make selective bolt-on
acquisitions
• Deliver strong financial
results
20
21. Low-Energy Release Latch
Production Patented Electro-
Competitive
Mechanical Mechanical Opportunity
Advantage
• Central lock • Non-Contact switches
• Extremely low release • All major OEM footprints
addressed with 3 designs
efforts (5%) compared
• Superlock • Reduced size and • Step-change in cost and
to current technology
• Passive lock/unlock improved water functionality
• Low noise
resistance • Unprecedented customer
• Electric child safety • Engineered handle feel
interest
and power release • Provides automatic
• Latch evolution
• 25 million latches failsafe manual release continues…
produced annually
Replace Current High Volume Mechanical Products
With Electronic Margin Products
21
22. Axle Yoke Optimization
2005 & 2006 Driveline Engineering
• Margins pressured by rising costs
Cost Savings Thermometer
• Redesigned part for equivalent $3,200,000 GOAL
performance, reduced weight,
$2,800,000
$2,400,000
reduced machine time and lower Target
$2,000,000
cost
Savings
$2,915,666
$1,600,000
not yet
released
Savings
$1,200,000
• Continue to manage/optimize and released
$800,000
leverage for new business $400,000
$-
e
New forging
Old forging
13 lb.
23.4 lb.
22
23. Alternative Powered Vehicles
• Recently announced first heavy-duty
diesel-electric drivetrain for Wal-Mart
• Unicell commercial pick-up and
delivery program
– Zero emissions and fossil fuel
consumption
– 10% increase in driver productivity
from vehicle enhancements
– Certification testing and
commercialization continue
• Growing driveline and electric axle
products through system integration
of motors, gears and controls
Advance Efforts to Participate in Rapidly-Emerging
Commercial Alternative Powertrain Vehicle Segment
23
24. Summary
• Strong portfolio of businesses
• Process to generate more high growth products
• Strong and unified leadership team
• Performance Plus will transform the company
24
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,
diluted earnings per share and operating income and margins before special items, which are non-GAAP financial measures.
These non-GAAP measures are defined as reported income or loss from continuing operations, reported diluted earnings or
loss per share from continuing operations and operating income or loss plus or minus special items. Other non-GAAP
financial measures include “EBITDA before special items” and “free cash flow”. EBITDA is defined as earnings before interest,
income taxes, depreciation and amortization plus or minus special items. 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
EBITDA is a meaningful measure of performance as it is commonly utilized by management and investors to analyze operating
performance and entity valuation. Management, the investment community and the banking institutions routinely use EBITDA,
together with other measures, to measure operating performance in our industry. Management believes that free cash flow is
useful in analyzing the Company’s ability to service and repay its debt. 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.
EBITDA should not be considered as an alternative to net income as an indicator of our operating performance or to cash
flows as a measure of liquidity. Free cash flow should not be considered a substitute for cash provided by operating activities
or other cash flow statement data prepared in accordance with GAAP or as a measure of 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. 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 –
Full Year FY 2006 Results Before Special Items
Twelve Months Environmental, Before
(in millions, except per share amounts)
Reported Goodwill Gains on Tilbury Work Severance Retiree Debt Taxes, Special Items
09/30/06 Impairment Divestitures Restructuring Stoppage and Other Medical Extinguishment Other 09/30/06
Sales $ 9,195 $ -$ -$ -$ -$ -$ -$ -$ -$ 9,195
Operating Income (Loss) (119) 310 (28) 37 45 12 5 - - 262
Income (Loss) From Continuing Operations (174) 310 (17) 23 28 8 3 6 (62) 125
Diluted Earnings (Loss) Per Share
Continuing Operations $ (2.51) $ 4.42 $ (0.24) $ 0.33 $ 0.40 $ 0.11 $ 0.04 $ 0.08 $ (0.85) $ 1.78
Total Operating Margins -1.3% 2.8%
27
28. Non-GAAP Financial Information –
Free Cash Flow
Twelve Months
Ended
(in millions)
09/30/06
Cash Provided By Operating Activities $ 440
Less: Capital expenditures (156)
Free Cash Flow $ 284
28
29. Non-GAAP Financial Information –
EBITDA – before special items
Twelve Months Ended
September 30, 2006
(in millions)
EBITDA Before Special Items $ 456
Gains on Divestitures 28
Tilbury Work Stoppage (45)
Restructuring (37)
Environmental, Severance and Other (12)
Retiree Medical (5)
Goodwill Impairment (310)
Depreciation and Amortization (172)
Interest Expense, Net and Other (133)
Benefit for Income Taxes 56
Loss From Continuing Operations $ (174)
29
