arvinmeritor UBS_Debt_Conference_050907

UBS 2007 Leveraged Finance Conference
May 9, 2007

UBS 2007 Leveraged
Finance Conference

Mary Lehmann, Vice President and Treasurer

May 9, 2007

1

May 9, 2007

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

May 9, 2007

Highlights
• FY 2007 EPS guidance before special items of $0.70 to
$0.80
• Optimistic about 2008-2009 commercial vehicle volumes
• Light Vehicle Systems margins on improving trend
• Performance Plus profit improvement plan will add $150
million to EBITDA by 2009 with restructuring and cost
reductions alone
• Incremental opportunity from growth initiatives

• Sale of Emissions Technologies unit on track to close this
quarter
3

May 9, 2007

Status of Emissions Technologies Sale
• Transaction is on track to close this quarter
• Received anti-trust approvals from all jurisdictions
• All major elements of the deal are as reported on
February 2
• Proceeds to be used to improve balance sheet and
fund restructuring and growth initiatives

4

May 9, 2007

Second Quarter Income Statement from
Continuing Operations – Before Special Items(1)
(in millions, except per share amounts) Three Months Ended March 31,
Better/(Worse)
2007 2006
$ %
Sales $ 1,627) $ 1,629) $ (2) 0%
Cost of Sales (1,490) (1,477) (13) -1%
GROSS MARGIN 137) 152) (15) -10%
SG&A (99) (89) (10) -11%
OPERATING INCOME 38) 63) (25) -40%
Equity in Earnings of Affiliates 7) 7) -) 0%
Interest Expense, Net and Other (28) (35) 7) 20%
INCOME BEFORE INCOME TAXES 17) 35) (18) -51%
Provision for Income Taxes (2) (7) 5) 71%
Minority Interests (3) (4) 1) 25%
INCOME FROM CONTINUING OPERATIONS $ 12) $ 24) $ (12) -50%
DILUTED EARNINGS PER SHARE
Continuing Operations $ 0.17) $ 0.34) $ (0.17) -50%

(1) See Appendix – “Non-GAAP Financial Information”
5

May 9, 2007

Segment EBITDA Before Special Items(1)
Quarter Ended March 31,
(in millions)
Better/(Worse)
2007 2006 $ %
EBITDA
Light Vehicle Systems $ 30) $ 16) $ 14) 88%
Commercial Vehicle System 59) 88) (29) -33%
Segment EBITDA 89) 104) (15) -14%
Unallocated Corporate Costs (1) -) (1) -100%
ET Corporate Allocations (11) (6) (5) -83%
Total EBITDA $ 77) $ 98) $ (21) -21%

EBITDA Margins
Light Vehicle Systems (2) 5.2% 2.8% 2.4 pts
Commercial Vehicle System 5.5% 8.3% -2.8 pts
Segment EBITDA Margins 5.4% 6.4% -1.0 pts
Total EBITDA Margins 4.7% 6.0% -1.3 pts
6
(2) Adjusted to reflect the impact of reduced volumes in our Brussels operation

May 9, 2007

LVS EBITDA Margin Improvement Showcases
Improving Operational Excellence(1)
Fiscal Q2 2007 Compared to Fiscal Q2 2006

EBITDA Margin (2)

Fiscal Q2 2006 2.8 %

1.6
Cost Reductions Net of Pricing
North America Volume (1.1)
Other Volume 1.5
Other Improvements 0.4
Net Improvement 2.4%

Fiscal Q2 2007 5.2%
(2) Excluding gains or losses on divestitures, restructuring costs, and other special items
7

May 9, 2007

Discontinuation of Emissions Technologies
In millions; excludes asset impairment
1H After Divestiture
1H Before Divestiture
Revenue
COGS 38
Continuing
ET Specific SG&A
Operations
Corporate Costs (18)
Corporate Costs (18)

x
EBITDA 20 EBITDA (18)

Revenue
Discontinued
COGS 38
Operations
ET Specific SG&A

EBITDA 0 EBITDA 38
8

May 9, 2007

Free Cash Flow(1)
Quarter Ended
In millions
March 31,
2007 2006

Income (Loss) from Continuing Operations $ (13) $ 32

Net Spending (D&A less Capital Expenditures) 6 9
Pension and Retiree Medical Net of Contributions (63) 12
Performance Working Capital (2) (7) (56)
Off Balance Sheet Securitization and Factoring 17 5
Restructuring, Disc. Ops. and Other (11) (67)
Free Cash Flow $ (71) $ (65)

(2) Change in payables less changes in receivables, inventory and customer tooling
9

May 9, 2007

Balance Sheet Is a Competitive Strength(1)
Net debt Debt-to-capitalization ratio
(millions)
63%
61%
$1,629 Book value
59%
$1,368 56%
$1,338
55%
57%
56%
$1,007
$872 54%
51%
Market value

2003 2004 2005 2006 Mar. 31
2003 2004 2005 2006 Mar. 31

Unfunded pension liability Term debt due within 5 years
(millions) (millions)
$659 $948
$561
8-3/4% due
$696 March 2012
$469
$409
$368
$299
$265
Projected
$93
status at
9/30/07

2003 2004 2005 2006 2007 2003 2004 2005 2006 Mar. 31

(1) See Appendix – “Non-GAAP Financial Information” 10

May 9, 2007

Global Pension Plan Funded Status
In millions

2006 Year-End Underfunded Status $ (409)

Discount Rate (-50 bps in U.S and Canada) (85)
UK Elective Contribution (1) 40
Other Plan Year Activity (2) 124
Plan Freeze 30
ET Divestiture 35

Estimated 2007 Underfunded Status $ (265)
(1) $10 million pull-ahead and $30 million incremental 2007 contributions applied to
significantly reduce underfunding levy over next six years
(2) Includes other plan contributions and asset returns net of interest and service cost 11

May 9, 2007

Fiscal Year 2007 Outlook
Continuing Operations Before Special Items

FY 2007
Full Year Outlook (1)
(in millions except tax rate and EPS)
̶
Sales $ 6,000 $ 6,200
̶
EBITDA 275 295
̶
Interest Expense (95) (105)
̶
Effective Tax Rate 8% 12%
Income from Continuing ̶
$ 50 $ 57
Operations
̶
Diluted Earnings Per Share 0.70 0.80
̶
Free Cash Flow 50 100
12

May 9, 2007

FY 2007 Outlook vs. Prior
Continuing Operations Before Special Items

Sales Estimated
(millions) EPS (1)

Previous Guidance $5,900 – $6,100 $1.00 – $1.10

Weaker North America Truck Market (50) – (75) (0.10) – (0.15)
Lower Achievement of NA Offsets (25) – (50) (0.05) – (0.10)
Stronger European Truck Volumes 125 – 175 0.10 – 0.15
Lower EU Productivity & Volume Penalties (0.15) – (0.20)
Unrecovered Commodity Cost Increases (0.05)

Updated FY 2007 Guidance Range $6,000 – $6,200 $0.70 – $0.80

13

May 9, 2007

Improvement Factors
2007 2008 2009
CY -48% +47% +20%
North America
Class 8 Demand FY -35% +12% +25%
Performance Plus Cost +$75 +$75
Baseline
Initiatives (YOY) million million
Performance Plus
Baseline +$TBD +$TBD
Growth Initiatives
EBITDA EBITDA
Profitability Profitable
+50% +30%

Cash Flow Positive Improved Improved

14

May 9, 2007

Factors Affecting 2008-2009 Upturn
Tonnage Trends Improving
3.3 3.3
4.9 3.2
Industrial Real
3.4 2.6
2.3
3.7

Production(1) GDP
2.6
2.1

Growth(1)
'05 '06 '07 '08 '09 '05 '06 '07 '08 '09

8.0
7.9
1.9 8.0
1.6
2.1
Housing Fleet 7.9
1.5
1.5

Starts(1) Age(2) 7.7

'05 '06 '07 '08 '09 '05 '06 '07 '08 '09

Operating
Light 16.8
17.3
Cost of
Vehicle 16.4 16.4
16.5
2005 Truck
Sales(1)
'05 '06 '07 '08 '09 '05 '06 '07 '08 '09

15
(1) (2)
Global Insight April 2007 MacKay & Co.

May 9, 2007

Performance Plus
Goal

Top Quartile Financial Performance Among Peer Companies
Steering Committee
Corporate Officers

Operational Excellence Commercial Excellence
Approach

Cost Improvements Revenue Enhancement

Product
Strategy & Aftermarket
Materials Mfg. Overhead ER&D
Growth

C. P. Martens &
Sponsors C. Reinhardt J. Craig P. Martens J. Craig
Reinhardt M. Lehmann

Talent Excellence
Foundation

Sponsor: R. Ostrov

Program Office
Sponsors: J. Craig and J. Donlon

16

May 9, 2007

Performance Plus Profit Improvements
Run rate by 2009 in millions

Base Risk Net

COST
Reduce 8%-10%
$200-300 $150
Elements ~$350-$450
$5 Billion Base
(Addressable Costs)

REVENUE Grow $1.2 Billion
~$50-$150 TBD TBD
7-13% Margins
Elements

Improvement ~$400-$600

17

May 9, 2007

Performance Plus High-Confidence Improvement –
Adjusted for Emissions Technologies
EBITDA Before Special Items

2006 2007 2008 2009

Updated $365 $275-$295 $335-$380 $385-$445
Baseline

High-Confidence
75 150
Cost Savings

Growth Actions TBD
TBD

Total $365 $275-$295 $410-$455 $535-$595

18

May 9, 2007

Restructuring is a Subset of
Performance Plus
Calendarization of Restructuring Expenses and Benefits
2007 2008 2009 Total
(millions)
Restructuring Expense $65 $115 $100 $325

Restructuring Cash $50 $100 $80 $280

Cumulative Annual Run-
$5 $25-$30 $75-$80 $130-$140
Rate Benefits by 2011
A
Portion
Manufacturing Optimization
Run Rate
In millions
$45-$55 Engineering Research &
2009 EBITDA
Lever/Sub-Team Development
Target
In millions
Restructuring $35-$40
A 2009 EBITDA
Lever/Sub-Team
Lean 25-30
Target
Portion
Total $60-$70
Efficiency TBD
Consolidation TBD
Overhead
In millions Portfolio
Net of transition Rationalization/ TBD
Net of transition 2009 EBITDA
costs, but not Lever/Sub-Team Optimization
costs, but not Target
restructuring costs Total $TBD
restructuring costs Non-Manufacturing $35-$40
Indirect Materials 10-20
Activity/Process Labor 45-50
19
Total $90-$100

May 9, 2007

Performance Plus Restructuring
North
(millions except plants) Europe Total
America

Restructuring Expense $170 $155 $325

Restructuring Cash $155 $125 $280

Number of Plants Affected 9 4 13

$80 - 85 $50 - 55 $130 - $140

20

May 9, 2007

Calendarization of Expenses and Benefits

(millions) 2007 2008 2009 Total

Restructuring Expense $65 $115 $100 $325

Restructuring Cash $50 $100 $80 $280

$5 $25-$30 $75-$80 $130-$140

21

May 9, 2007

Personnel Reductions Include
Manufacturing and White Collar Workers
Manufacturing White Collar Total

High-Cost Sites
Positions Eliminated (2,400) (400) (2,800)
̶
Positions Added 900 900
Net (1,500) (400) (1,900)

Low-Cost Sites
Positions Added 800 TBD TBD

22

May 9, 2007

Detailed Cost Reduction Targets
Cost Reductions (millions) 2008 2009

Overhead $ 65 $ 100

Materials 100 200

Manufacturing (20) 65

Risk (70) (215)

High Confidence Net of Risk $ 75 $ 150

23

May 9, 2007

Overhead
In millions

2009 EBITDA
Lever / Sub-Team Opportunities
Target
- Travel and Entertainment
Non-Manufacturing $35 – $40
- Reduction in Energy Consumption
- Temp Labor
- Supplier Consolidation
- Re-bid Contracts
Indirect Materials 10 – 20
- Demand Management
- Commonization (SKU Reduction)
- Outsourcing

Activity / Process - Outsourcing
45 – 50
Labor - Foot Print Rationalization

Total $90 - $110
24

May 9, 2007

Material Optimization
In millions
Lever / Sub- 2009 EBITDA
Opportunities
Team Target
- Material / process standardization
- Design improvements for lower cost
Design
$70 – $75
- Key tools: competitive teardowns and
Optimization
supplier conferences
- Leverage spend across regions and product
lines to gain scale
55 – 60
LCCC Sourcing
- Invest time and resources to develop world-
class suppliers
- Understand detailed supplier cost structure
and “should-be” costs
Clean-Sheet
40 – 45
- Take a total cost approach
Negotiations
- Transparent and stable relationships with
suppliers to jointly eliminate waste
- Reduce freight rates across all modes
25 – 30
Freight
- Reduce frequency, costly modes, expedites

Total $190 – $210
25

May 9, 2007

Manufacturing Optimization
In millions

2009 EBITDA
Lever / Sub-Team Opportunities
Target

Restructuring $35 – $40
- Optimize manufacturing footprint

- Improve productivity through consistent
Lean 25 – 30
implementation of lean manufacturing
principles

Total $60 - $70

26

May 9, 2007

Progress to Revenue Improvement Target
Revenue growth in millions by 2010
Target

Identified
$1,000
Initiatives

Being
$400
Implemented

$0 $200 $400 $600 $800 $1,000 $1,200

27

May 9, 2007

Product Strategy & Growth:
$1 Billion Identified Growth Initiatives
• LVS New Products 30%
• Chassis systems: wheels, electronic ride control
• Apertures: joint product development (roofs/doors)
• Asia/Pacific 20%
• Increased China LVS OEM growth
• Global program awards manufactured in Asia
• Specialty and Trailer 20 %
• Strong organic growth
• Aftermarket/Other 30 %
• Global expansion underway
• Strong remanufacturing operations
• 100%

Clear Focus on Higher Margin Products and Growth in Asia
28

May 9, 2007

Engineering, Research & Development:
Increasing PD Capability and Throughput
• Achieve and sustain a competitive cost and technology position
• “One ArvinMeritor” Product Development system focused on global
synergies
• Underlying competencies in engineering delivery being strengthened to
support cost reduction efforts
• Focus on quality paramount in all technical areas
• Deliver “gotta have” products with increased focus on value add
• Electronic motors/electronic control systems common focus
• Technical acquisitions aimed at accelerating controls/ software development
under study
• Consolidate and leverage corporate technical capabilities to increase
speed to market
• Global capability being expanded and realigned to support new product
introductions and growth initiatives
29

May 9, 2007

Aftermarket Growth:
Building on an Existing Strength

• Double in three years, triple in five
• Leverage strong distribution channel for further
organic growth in North America
• Strengthen capability and offering in Europe and
Asia, replicating successful North American
formula
• Expand remanufacturing scale and scope

30

May 9, 2007

2008-2009 Opportunities
Success factors…
Market Addressing Pension and
Healthcare Issues
• Rebounding truck volumes
ahead of 2010 emissions • Changed U.S. retirement plan
change effective Jan. 1, 2008
• Implemented consumer-driven
Launched Performance
healthcare initiatives in Jan.
Plus Initiatives 2007
• Significant cost savings
Solid Balance Sheet
• Improve operating efficiency
• Develop products and • Reduced debt
technologies • Increased liquidity
Restructuring
Diversified
• Enhanced global footprint
• Customer base
• Consolidate LVS/CVS
• Global presence
engineering facilities
• Product portfolio
• Overhead

Sound Investment
31

May 9, 2007

32

May 9, 2007

Appendix

33

May 9, 2007

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.
34

May 9, 2007

Non-GAAP Financial Information
2nd Qtr FY 2006 Results before Special items
Q2 FY 06
Q2 FY 06 Debt BeforeSpecial
(in millions, except per share amounts) Reported Environmental Restructuring Extinguishment Income Taxes Items

Sales $ 1,629 $ - $ - $ - $ - $ 1,629

Gross Margin 152 - - - - 152

Operating Income 53 3 7 - 63

Income from Continuing Operations 32 2 4 6 (20) 24

Diluted Earnings Per Share - Continuing
Operations $ 0.46 $ 0.03 $ 0.06 $ 0.09 $ (0.30) $ 0.34

Segment EBITDA

Light Vehicle Systems $ 10 $ - $ 6 $ - $ - $ 16

- 1 - $ - 88
Commercial Vehicle Systems 87
Total Segment EBITDA $ 97 $ - $ 7 $ - $ - $ 104

Segment EBITDA Margins

Light Vehicle Systems 1.7% 2.8%

Commercial Vehicle Systems 8.3% 8.3%

Total Segment EBITDA Margins 6.0% 6.4%

35

May 9, 2007

2nd Qtr EBITDA Reconciliation

Quarter Ended
(in millions)
March 31,
2007 2006
$ 77 $ 98
Total EBITDA - Before Special Items
(37) (7)
Restructuring Costs
10 -
Fair Value Adjustment
6 -
Impact of Work Stoppages
- (3)
Environmental Remediation Costs
Loss on Sale of Receivables (1) -
Depreciation and Amortization (34) (32)
Interest Expense, Net and Other (34) (44)
Benefit for Income Taxes - 20
Income (Loss) From Continuing Operations $ (13) $ 32

36

May 9, 2007

Free Cash Flow

(in millions) Three Months Ended March 31,
2007 2006

Cash Used For Operating Activities $ (30) $ (25)
Less: Capital expenditures (41) (40)

Free Cash Flow $ (71) $ (65)

37

May 9, 2007

Net Debt

(in millions)

03/31/07 12/31/06 09/30/06 06/30/06 03/31/06

Short-term debt $ 17 $ 137 $ 56 $ 65 $ 217
Long-term debt 1,220 1,174 1,174 1,275 1,133

Total Debt 1,237 1,311 1,230 1,340 1,350
Less: Cash (222) (369) (350) (365) (236)

Less: Fair value adjustment of notes (8) (8) (8) (3) (7)

Net Debt $ 1,007 $ 934 $ 872 $ 972 $ 1,107

38

May 9, 2007

39

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