ArvinMeritor, Inc. has announced that its Board has approved a plan to spin off its Light Vehicle Systems (LVS) business to ArvinMeritor shareholders, with the Commercial Vehicle Systems (CVS) business remaining with the company.“The plan to separate our two businesses is the result of a comprehensive strategic review to enhance the company’s long-term value for our shareholders,” said Chip McClure, Chairman, CEO and President. “We are confident that this transaction will not only unlock shareholder value, but will also significantly strengthen the competitive positions of both companies and better align them with their respective customer bases”.
According to him, each company will benefit from a greater strategic focus on its core business and growth opportunities as well as from increased recognition in each of its global market segments. In addition, the separate companies will offer more attractive and targeted investment opportunities, with incentives for management and employees that are more closely aligned with company performance and shareholder interests.
The planned spin-off of the LVS business – to be named Arvin Innovation, Inc. – would be implemented through a pro rata tax-free dividend to ArvinMeritor shareholders. Upon completion of the spin-off, the shareholders will own 100 per cent of the common stock of Arvin Innovation.
Approval of the spin-off by the shareholders is not required, and the company expects to complete the process within the next 12 months, contingent upon satisfactory financial and automotive market conditions as well as other customary approvals.
The President further said: “Our decision to spin off the LVS business is part of the company’s ongoing corporate transformation – our 3R strategy to rationalize, refocus and regenerate – that has been underway for the last three years. Separating these two businesses and successfully implementing our Performance Plus initiatives are major steps in the transformation to build two stronger, more competitive companies for the future”.
“Our LVS business group will have the right leadership team, a solid financial structure, market-leading positions in many of its product lines, a well-diversified customer mix and the global reach to grow this new company as a market leader going forward,” McClure concluded.
McClure will remain ArvinMeritor’s Chairman, CEO and President. James Marley, currently a Board member of ArvinMeritor, will lead Arvin Innovation’s Board of Directors as non-executive Chairman. Until the spin-off is completed, Marley, a retired Chairman of the Board of AMP Inc., will remain on the ArvinMeritor Board. Phil Martens, currently ArvinMeritor’s Senior Vice President, and President, Light Vehicle Systems, will become the President and CEO of Arvin Innovation.
Martens said: “As a separate independent unit, Arvin Innovation will be better positioned to drive specific growth initiatives, including improving our customer focus and expanding our global presence. With increased flexibility as a stand-alone business, Arvin Innovation will have an excellent opportunity to create next-generation systems technology solutions for our customers around the world. In addition, we look forward to the many new and enhanced opportunities the new organization will provide for our worldwide employees”.
Jim Donlon, Executive Vice President and CFO of ArvinMeritor, will immediately begin supporting ArvinMeritor’s LVS business group in the capacity of Chief Financial Officer as it prepares to become an independent company. Upon completion of the spin-off, he will become Executive Vice President and CFO of Arvin Innovation.
Jay Craig, Senior Vice President and Controller, will replace Donlon as ArvinMeritor’s Senior Vice President and CFO, effective immediately.
Rakesh Sachdev, Senior Vice President of ArvinMeritor, and President of Asia Pacific, will become Executive Vice President, Chief Administrative Officer and Managing Director of Emerging Markets of the new company upon completion of the spin-off. However, until a successor is named, he will continue to be responsible for ArvinMeritor’s Asia Pacific region.
When the spin-off is completed, Carsten Reinhardt, Senior Vice President of ArvinMeritor and President of the company’s Commercial Vehicle Systems business, will be named COO for ArvinMeritor.
ArvinMeritor will remain headquartered in Troy, Mich. whereas Arvin Innovation will be headquartered in Detroit, Mich., at the current location of the LVS Detroit Technology Center, with other corporate offices located in Europe, Asia Pacific and South America.
The spin-off is subject to customary conditions, including final approval by ArvinMeritor’s Board, completion of all required activities with employee representatives, receipt of applicable consents, effectiveness of a registration statement with the Securities and Exchange Commission, receipt of a tax ruling from the IRS; and the approval of applicable regulatory authorities.
ArvinMeritor’s LVS business is a leading global provider of dynamic motion and control automotive systems and components, with sales of $2.2 billion in 2007 – $2 billion of value-added sales and $200 million of pass-through sales. Of the value-added sales, more than 60 per cent were outside North America.
Through smart systems technologies, the intelligent application of controls and electronics, LVS’ traditional mechanical products are taking on new form and function at both the component and system levels. With advanced technology and systems design expertise – in body systems (roof, and door modules and systems, motors, latches, window regulators, and electronic controls); and chassis systems (chassis and suspension modules and systems, ride control products, electronic chassis control systems, global aftermarket chassis products and wheels) – LVS produces integrated, high-quality, cost-effective performance-based solutions for practically all car and light truck market segments. The business will have approximately 9,000 employees with 42 facilities in 16 countries. LVS has interests in eight joint ventures (three consolidated and five non-consolidated).
Upon completion of the spin-off, ArvinMeritor will continue as a market leader in the commercial vehicle systems business. ArvinMeritor’s commercial vehicle business is a leading supplier of drivetrain components and systems, including axles and drivelines, braking systems, suspension systems and ride control products for heavy- and medium-duty trucks, trailers, buses, off-highway and military vehicles as well as to the commercial vehicle aftermarket.
The CVS business will have 62 global locations, including manufacturing facilities, technical centers, warehouses and administrative offices. CVS has approximately 10,000 employees in 15 countries. In 2007, the CVS business recorded sales of more than $4.2 billion. CVS has interests in 11 joint ventures (five consolidated and six non-consolidated).
