ArvinMeritor flying high on trucking’s wing

CHICAGO — Truck parts and components systems giant ArvinMeritor announced better-than-expected profits mainly due to surging demand in the heavy truck sector.

The Troy, Mich.-based supplier is fully in the black now that it has diminished its role in the volatile automotive aftermarket and concentrated mainly on sales straight to OEMs and the replacement heavy truck parts market, which is now an ever-expanding global business for the company.

ArvinMeritor, which manufacturers truck axles, brake systems, and a variety of cutting-edge vehicle systems, posted net income of $45 million, or 64 cents per share, for its second quarter, compared with a net loss of $33 million, or 48 cents per share, a year earlier, when it took restructuring charges, according to Reuters estimates.

ArvinMeritor says booming Asian and Indian markets
would likely offset a North American downturn in ’07

Last week, the company reported shares were up 17.65 percent so far in 2006.

“We have long been committed to the commercial vehicle industry, which is now stronger than ever,” says ArvinMeritor spokesperson Mike Pennington. “One of our long-time core competencies is serving commercial vehicle customers — OEs, dealers, end-users — with original OE components and systems for building trucks, as well as readily supplying aftermarket parts and services to keep those vehicles operating and generating revenue.”

In 2005 ArvinMeritor sold its filter and vehicle exhaust businesses in its replacement auto parts division and is on track to sell the rest of the unit by September, Chief Executive Chip McClure said in a conference call with analysts.

Knowing that roughly one-third of current 2006 sales is related to an industry wide pre-buy of new equipment, (the balance, says Pennington, is from increased freight tonnage) the company is already making plans for industry decline in North American heavy-duty truck demand after more expensive, low emission engines are required after Jan. 2007.

This time, however, ArvinMeritor is in a much better position to deal with a downturn than it was when the first round of EPA-mandated engines hit the market in 2002, says Pennington. “We are prepared for a downturn — as much as 30 percent — in class 8 linehaul North American sales,” he says.

However, surging business in other niche vocations and world markets would likely offset the decline in over-the-road equipment sales on this side of the pond, notes Pennington. “We still anticipate strong growth in aftermarket vehicle sales in China and India; and growth in Specialty markets like bus, coach, fire and refuse trucks, and military vehicles,” he says.