The weak market for commercial trucks, and an easing in light vehicle production as well, drove a 64% drop in net income for ArvinMeritor.

The company reported fiscal year 2001 sales of $6.8 billion and net income before special items of $91 million. Sales declined $917 million, or 12%, and net income before special items decreased $163 million, or 64%, as compared to last year's results. Operating income before special items was $279 million, down 46% from last year, reflecting an operating margin of 4.1%, compared to last year's 6.7%.
"Our North American Commercial Vehicle Systems business has been affected by a market that continues to be weak," said ArvinMeritor Chairman and CEO Larry Yost. "The easing in North American light vehicle production has also contributed to our company's weaker results. We are seeing benefits from the restructuring actions we executed in fiscal year 2001, and we are continuing to implement a number of aggressive actions in response to the current market conditions."
Sales for the fourth quarter of fiscal year 2001 were $1.6 billion, down 7% from the same period last year. Net income before special items was $15 million. Operating income for the quarter before special items was $58 million, down 24% from last year's fourth quarter, reflecting an operating margin of 3.7%, down from last year's 4.5%.
The operating income and margin decline continue to be driven by the Commercial Vehicle Systems (CVS) segment, as revenues in this segment declined 20% from the same period a year ago, the company said.
A charge of $30 million ($21 million after-tax) related to restructuring and other items was recorded in the fourth quarter of fiscal year 2001. The fourth-quarter results include an employee separation charge of $12 million, a charge related to additional environmental liability of $5 million and restructuring costs totaling $13 million. The company continues to make progress in implementing restructuring plans, which were announced in November 2000.
Commercial Vehicle Systems sales were $505 million, down 20% from last year's fourth quarter. Operating margin was 1.2 %, compared to 4.8 % in last year's fourth quarter. The steep decline experienced in the Class 8 North American truck volumes continued to drive the margin decline. CVS sales were $2.2 billion in fiscal year 2001, a decrease of 25% from a year ago, and operating margin was 1.5%, down from the 7.9% reported for fiscal year 2000. The operating margin decline for the fourth quarter and full year are attributable to volume reductions outpacing the company's lowering of its fixed costs.
Light Vehicle Systems (LVS) sales were $806 million, up slightly from last year's fourth-quarter sales of $799 million. LVS operating margin fell to 4.7%, from 5% a year ago. Continued pricing pressures from the vehicle manufacturers, coupled with North American production declines and higher engineering costs associated with new product development, all contributed to the operating margin decline. LVS continues to offset these challenges through restructuring and other programs aimed at lowering fixed costs.
For the year, LVS sales were down $80 million to $3.6 billion. Excluding the $128 million negative impact of currency translation and the loss of $31 million of seat sales, LVS sales would have been up 2% as compared to last year. Fiscal year 2001 operating margin for LVS declined to 5.9%, from 6.3% last year, attributable to pricing pressures and declining markets in North America.
Light Vehicle Aftermarket (LVA) sales were $211 million, up slightly from $209 million in last year's fourth quarter. LVA operating margin was 7.6%, up significantly from 2.9%, as compared to last year's fourth quarter. For the year, LVA sales were $859 million, compared to $950 million in fiscal year 2000, and operating margin increased to 5.1 % from 4.5 % in 2000. The margin increase is the result of improved pricing and the impact of ongoing cost reductions.
The company generated $394 million in operating cash flow for fiscal year 2001, excluding the $211-million sales of accounts receivable, representing a $50-million increase over fiscal year 2000's operating cash flow. The increase reflects the company's continuing emphasis on cash generation. Due to the strong operating cash flow and the impact of the accounts receivable securitization program, the company was able to reduce debt and preferred capital securities by $320 million.
"We expect the North American commercial truck and trailer markets to continue to soften during our fiscal year 2002, and we anticipate North American Class 8 production at 130,000 units," Yost said. "There is greater uncertainty in the light vehicle original equipment markets, but our current expectations are for North American and Western European light vehicle production at 15.0 million and 15.8 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."