ArvinMeritor continues to be affected by the soft market for heavy trucks, but nevertheless posted a first-quarter profit higher than the year before.

ArvinMeritor reported net income before special items of $21 million for its first fiscal quarter ending Dec. 31, 2001. Sales for the quarter were $1.6 billion. In comparison, for first quarter 2000 the company had net income of $20 million before special items, on sales of $1.7 billion.
“Our Commercial Vehicle Systems business unit continues to be affected by reduced build rates for North America Class 8 trucks,” said ArvinMeritor Chairman and CEO Larry Yost. “The softening in North American and Western European light vehicle production has also contributed to our company's weaker results.” But Yost also noted that the company is seeing some benefits from restructuring actions executed last year.
Operating income before special items was $63 million, compared to $70
million for the same period last year. The operating margin was 4%, compared to 4.2% a year ago. Most of the margin decline was attributed to Light Vehicle Systems. Sales for that segment were $852 million, down $18 million from the first quarter of fiscal year 2001. LVS operating margin fell from 6.2% to 5.2%, due mainly to continued pressures from the vehicle manufacturers and production declines. In addition, start-up costs associated with the new Detroit manufacturing facility, as well as higher engineering and launch costs associated with new product development, negatively impacted first-quarter results by approximately $6 million.
Commercial Vehicle Systems sales were $483 million, down $69 million, or 13 percent, from last year's first quarter. Operating margin was 2.3%, compared to 2.7% in last year's first quarter. The continued decline in Class 8 North American truck volumes was the major factor in the sales decrease. CVS has been able to offset much of the impact of the sales decline on its margins by lowering its fixed-cost structure through restructuring programs and other cost-reduction activities, the company said.
Light Vehicle Aftermarket sales were $194 million, down slightly from $197 million in last year's first quarter. While the markets remained weak for aftermarket parts, LVA was able to increase its operating margin to 4.6%, up from 2% in the prior year's first quarter, as the result of improved pricing and the impact of ongoing cost reductions.
The first quarter of fiscal year 2002 includes a restructuring charge of $15 million relating to employee severance benefits for 450 salaried employees. The company expects to recover these costs in less than one year and estimates these actions, when fully implemented, will reduce annual operating costs by approximately $24 million ($16 million after-tax). ArvinMeritor's Light Vehicle Systems is expected to account for approximately 50% of the annual savings, Commercial Vehicle Systems about 42%, and Light Vehicle Aftermarket and other business about 8%.
Special charges also include the cumulative effect of a goodwill accounting change of $42 million. Special items in the prior year's first quarter included restructuring charges of $46 million ($30 million after-tax).
"Our vehicle production outlook for the North American Class 8 truck market remains unchanged at 130,000 units for fiscal year 2002," Yost said. "There is still great uncertainty in the light vehicle original equipment markets, but our current estimates are for North American and Western European light vehicle production at 15.1 million and 16 million vehicles, respectively. We also believe the light vehicle replacement market will remain weak over the same period. As a result, we expect fiscal year 2002 consolidated sales to be down about 4% from fiscal year 2001.
"We remain cautious regarding the current market outlook for the second quarter and the remainder of fiscal year 2002. We have realized significant cost savings from our fiscal year 2001 synergy-related actions, and we will continue to realize incremental savings from restructuring actions implemented in the latter part of fiscal year 2001 and in this fiscal year.”


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