UPDATE:ArvinMeritor 1Q Loss Widens on Sliding Shares, Charges
February 04 2009 - 10:11AM
Dow Jones News
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)
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