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Chip McClureChairman, CEO and President
January 30, 2009
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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. There are risks and uncertainties relating to the planned disposition of ArvinMeritor’s LVS business, including the timing and certainty of completion and the terms of any transaction or transactions. In addition, 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, including the recent global economic crisis; 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); whether our liquidity will be affected by declining vehicle production volumes; availability and sharply rising cost of raw materials, including steel and oil; 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; potential adjustment of the value of deferred tax assets; 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; the outcome of actual and potential product liability and warranty and recall claims; 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 from time to time in 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.All earnings per share amounts are on a diluted basis. The company's fiscal year ends on the Sunday nearest Sept. 30, and its fiscal quarters end on the Sundays nearest Dec. 31, March 31 and June 30. All year and quarter references relate to the company's fiscal year and fiscal quarters, unless otherwise stated.
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3
Agenda
2008 Highlights
2009 Challenges and Opportunities
Product Focus and Technology Innovation
2009 Priorities
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4
2008 Financial Highlights(1)
Measure Full Yr. Q4 Comment
Sales $7,167 $1,720
$0.38
$103
Up 11% for the year (4% at constant exchange rates)
EPS from Cont. Ops. Before Special Items(2)
$1.60 Met original and recent guidance
Free Cash Flow(1) $(9)
Exceeded recent guidance and within $10 million of original guidance
(1) See Appendix – “Non-GAAP Financial Information”(2) GAAP diluted loss per share from continuing operations was $(1.26) for FY 2008 and $(2.29) for Q4
($ in Millions, except EPS)
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5
We Did What We Said We Would Do
2008 Promise Achievement Result
Sales of $6,750 to $6,950 million $7,167 mil.EBITDA(1) of $385 to $405 million $413 mil.EPS(1) of $1.40 to $1.60 $1.60
$75 million cost reduction from Performance Plus $75 mil.
$30 million contribution from Performance Plus growth initiativesImprove manufacturing efficiencyStrengthen remanufacturingCustomer sharing of premium costsConstantly review portfolio of businesses for optimal mix
Positive Free Cash Flow $(9) mil. –
(1) EBITDA and EPS are from continuing operations before special items. See Appendix – “Non-GAAP Financial Information.” GAAP loss from continuing operations was $(81) million or $(1.26) per share.
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6
Planning Assumptions Uncertain
Withdrawing guidance for FY 2009 due to inability to forecast industry production in the second half of the year
North America Other Regions/MetricsU.S. GDP growth (0.4)% Europe GDP growth (0.1)%Class 8 truck production (000)
200 - 220 (flat)
Europe medium & heavy truck production (000)
400 - 450(-25%)
Class 5-7 truck production (000)
115 - 130(-8%) Europe trailer production 160 - 180
(flat)
Trailer production (000) 170 - 190 (flat)
Asia medium & heavy truck production (000) -15%
CV aftermarket industry growth rate ex. pricing Flat S. America M & H truck
production (millions) Flat
Steel price change Slightly lower
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7
EUR Med. & Heavy Truck Industry(1)
2009 B/(W) than 2008 at Mid-point
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Oct 15 Nov 15 Dec 15 Jan 12
Source: Published forecasts of industry participants and investment banks
Build Expectations for Europe Continue to Decline
(1) Production levels represent external estimates only and are not intended to represent the Company’s production assumptions. The Company is unable to estimate full-year industry production at this time.
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8
22.7 22.7 22.5 22.0 22.0 21.720.3
17.8
1012141618202224
Apr May Jul Aug Sep Oct Nov Dec.
14.513.5 13.5 13.0
12.6 12.5 11.8
10.1
5
7
9
11
13
15
Apr May Jul Aug Sep Oct Nov Dec.
Expectation for 2009 North America production has fallen 32% since April
All other markets are deteriorating simultaneously
LVS will have a significant cash decrease in the fiscal first quarter
Source: CSM
Difficult Light Vehicle Markets(1)
2009 CY North America Light Vehicle Production Forecast(in millions)
(in millions)
2009 CY Europe Light Vehicle Production Forecast
(1) Production levels are provided for the purposes of this example only and are not intended to represent the Company’s production assumptions. The Company is unable to estimate full-year industry production at this time.
32%
(22)%
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9
Necessary Cost Reduction Actions
In addition to actions undertaken on 10/31/087% workforce reduction30% reduction in discretionary spendingTravel and expense restrictions (Coach class)
10% reduction in salary for all U.S. salaried executive-level 5% reduction in salary / U.S. salaried and non-production hourlySuspend merit increases for all U.S. employeesTemporary hold on U.S. 401-K matching programReduce company’s contribution to the charitable trust by 50%Significantly reduce discretionary spend
Addressing Market Conditions
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Light Vehicle Systems Update
Due to credit markets and volume weakness in the industry, cannot capture value for LVS by selling as a wholeNew LVS structure:
Body Systems – pursue sale separatelyChassis Systems – continue to explore and evaluate strategic alternatives for timely and orderly exit from this businessWheels – will retain this business
Remain firmly committed to our long-term strategyof focusing on the commercial vehicle on- and off-highway market segments for both OEMs
and aftermarket customers
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Key Growth Area – Military
ServiceOrders
2008 2009 2008 2009 2008 2009
FMTV MRAPFamily
FuturePrograms
Firm OrdersAnticipated Orders
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1212
Central Tire Inflation Systems
Aluminum Brake Calipers
Carbon Fiber Rotors
Magnesium Transfer Cases
Driving Independent Suspensions
Aluminum Control Arms
Adaptive Damping Shocks
Automatic Diff Lock ControlsTitanium
Knuckles
Suspension Height Control
Systems
Electronically Biasing
Differentials
Advanced Technology DevelopmentJLTV Program Innovations
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13
Xuzhou Joint Venture Facility
Construction - China JV >20% market share in axlesChina stimulus package
Includes infrastructureInvestment planned for off-highway business
Re-entering market segment (The Americas / Europe)
CustomersKalmarTerex
ProductsPlanetary AxlesDisc BrakesWheel Ends
Key Growth Area – Off-Highway
Crane Axle
Port Tractor Axle
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14
0
100
2006 2007 2008 2009
Up to 60% reduction
under example
scenarios
Inde
x (2
006
= 10
0)
North America Class 8 Production
ArvinMeritor N.A. Commercial Vehicle Aftermarket Sales
Key Growth Area – Aftermarket
Up25%Up
25%
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15
Key Growth Area – Aftermarket
EuropeRemanufacturingEmerging Markets
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16
Leading Drive Axle Technology
17X - Europe
14X – North America
Invest in Innovation and Technology
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17
Class 8 Hybrid Program
Invest in Innovation and Technology
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18
2009 Priorities
1. Accelerate restructuring and other cost reductions
2. Continue operational performance improvement
3. Execute Body and Chassis strategy4. Continue to grow high-margin segments5. Invest in innovation and technology