ArvinMeritor Inc. (ARM) said Wednesday it would suspend its dividend as the auto and truck part supplier reported a near-$1 billion first quarter loss.

The company highlighted the depth of the slowdown by outlining the planning scenarios it will initiate so it can meet its debt covenants, despite a 33% fall in North American light vehicle sales to just 9.2 million this year. Annualized industry sales last month fell below 10 million for the first time in 27 years. "We are experiencing a total transformation of our industry," said Chief Executive Chip McClure on a conference call.

"We are taking the tough steps to manage the business at these lower levels. We continue to plan for the worst and hope for the best."

ArvinMeritor has seen its credit rating downgraded deeper into junk territory by Standard & Poor's and placed on negative watch by Moody's, but said Wednesday it is complying with all debt covenants.

The company has taken a number of steps to boost liquidity, cutting 1,500 staff and renewing parts securitization deals despite the tight credit markets.

However, working capital is expected to be a drain on liquidity in the current quarter after what it described as "very late changes to production schedules" by customers left it with higher inventory.

The company earlier this month abandoned plans to operate its auto parts unit as a separate business unit and announced further job and production cuts.

The dividend suspension and dropping its 401(k) match is expected to save $330 million in 2009. In total, 1,560 jobs were cut during the fiscal first quarter.

McClure said he has positioned the company - which hasn't posted an annual profit in at least three years - to survive the 2009 downturn and all loan covenants will be met during the year.

For the quarter ended Dec. 28, the Troy, Mich.-based company reported a net loss of $991 million, or $13.71 a share, compared with a prior-year net loss of $12 million, or 17 cents a share. Excluding items including the light-vehicle write-down, the loss would have been 77 cents.

Revenue fell 18% to $1.37 billion, with 7 percentage points of the decline due to the weaker dollar.

Analysts polled by Thomson Reuters had been expecting a 6-cent loss on revenue of $1.14 billion.

ArvinMeritor's commercial-vehicle business had been holding up results, but sales there fell 11% in the latest quarter.

Revenue dropped 29% at the light-vehicle segment also known as the auto parts business. The company shelved plans this fall to spin off the segment, then said last month it would reorganize the unit and try to sell it off in pieces.

ArvinMeritor shares were down 7.2% at $1.68 having earlier hit a 52-week low of $1.63.

-By Jeff Bennett, Dow Jones Newswires; 248-204-5542; jeff.bennett@dowjones.com

(David Benoit and Katherine Wegert contributed to this report)

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary. You can use this link on the day this article is published and the following day.