ArvinMeritor, Inc., headquartered in Troy, Michigan, is a premier global supplier of a broad range of integrated systems, modules and components to original equipment manufacturers ("OEMs") and the aftermarket for the commercial vehicle, transportation and industrial sectors. The company serves commercial truck, trailer, off-highway, military, bus and coach and other industrial OEMs and certain aftermarkets, and light vehicle original equipment manufacturers. ArvinMeritor common stock is traded on the New York Stock Exchange under the ticker symbol ARM.

Fiscal year 2009 was extremely difficult for us and the industries in which we participate. We believe that the substantial uncertainty and significant deterioration in the worldwide credit markets, the global economic downturn and the current climate in the U.S. and other economies have impacted the demand for the products of our customers as highlighted in the production volumes summarized below. Many of our customers have experienced sharp declines in production and sales volumes, which started in November 2008 and have continued through September 2009 and are expected to continue at reduced levels in the near term with recovery varying by region. These decreases in production and sales volumes had a significant impact on our revenues and operating results in the fiscal year ended September 30, 2009 and will continue to negatively impact our revenue and operating results until production levels return to historically normal levels. Our business was adversely affected in fiscal year 2009 by decreased volumes in all major markets with most of the declines occurring in North America and Europe.

The following table reflects estimated commercial vehicle and automotive production volumes for selected original equipment (OE) markets for the fiscal year ended September 30, 2009 and 2008 based on available sources and management's estimates.

                                                                    Year Ended September 30,
                                                            2009     2008     2007     2006     2005
Estimated Commercial Vehicle production (in thousands):
   North America, Heavy-Duty Trucks                          128      194      246      352      324
   North America, Medium-Duty Trucks                          74      122      176      216      208
   United States and Canada, Trailers                         93      176      275      312      327
   Western Europe, Heavy- and Medium-Duty Trucks             247      562      480      439      421
   South America, Heavy- and Medium- Duty Trucks             118      161      127      107      112

Estimated Light Vehicle production (in millions):
   North America                                             8.5     13.7     15.1     15.7     15.6
   South America                                             3.4      4.0      3.3      3.0      2.7
   Western Europe (including Czech Republic)                12.1     15.6     16.5     16.4     16.4
   Asia/Pacific                                             25.8     29.6     26.7     24.8     22.7

º Weakened financial condition of original equipment manufacturers and suppliers;

º Disruptions in the financial markets and its impact on the availability and cost of credit;

º Excess capacity;

º Consolidation and globalization of OEMs and their suppliers;

º Fluctuating costs for steel and other raw materials;

º Higher energy and transportation costs;

º OE pricing pressures;

º Pension and retiree medical health care costs; and

º Currency exchange rate volatility.

We continue to implement and execute our long-term profit improvement and cost reduction initiative called "Performance Plus", which was launched in fiscal year 2007. In addition, we further responded to the weakness in global business conditions in fiscal year 2009 by aggressively lowering our 'break-even' point through comprehensive restructuring and cost-reduction initiatives as discussed below. We continue to focus on improving cash flow by maintaining tight controls on global inventory, pursuing working capital improvements, reducing capital spending and significantly reducing discretionary spending. These initiatives were crucial to our success in fiscal year 2009 in weathering the global recession and preparing for future economic recovery. During this recessionary period we were able to complete the divestitures of certain businesses as discussed below and execute the other actions needed to enable us to meet covenants in our senior secured credit facility, and thus retain our availability of that facility. In September 2009, in anticipation of the expiration of our existing U.S. accounts receivable securitization arrangement, we entered into a new, two-year U.S. receivables financing arrangement. We also renewed significant factoring lines. We intend to remain focused on ensuring access to adequate liquidity throughout this challenging business climate and to fund future growth.

While we have been unable to fully offset recent market declines, we are focused on actions to improve our market share and diversification strategies to help offset the decline. These strategies are also expected to position us well as markets recover. We expect the lower cost base that we have established through the above disciplined approach to cost reductions to serve us well not only through the current difficult environment but also during an economic recovery in the future.

Since October 2008, we have implemented a number of immediate restructuring and cost reduction initiatives aimed at mitigating current market conditions. These actions include:

º Temporary or permanent workforce reductions of approximately 3,000 employees, including full-time, contract and temporary workers;

º Plant level furlough programs, including government supported programs;

º Extended shutdowns at all plants;

º Temporary pay reductions for salaried employees, which were achieved through temporary base salary adjustments and/or curtailed production schedules;

º Temporary suspension of the matching contribution for the U.S. 401(k) plan;

º Temporary suspension of fiscal year 2009 merit increases for all employees; and

º Temporary reduction of Board of Directors annual compensation by 10 percent.

The majority of these actions have already been completed. We have recognized in our continuing operations approximately $44 million of restructuring costs in connection with these actions for severance and related benefits, of which $36 million was paid in fiscal year 2009.

In fiscal year 2009, our Core Business achieved an estimated $195 million in savings related to these significant actions. We estimate approximately $48 million of these savings are related to temporary cost reduction measures associated with the suspension of annual variable incentive compensation, 401(k) employer matching contributions and salary reductions. In addition, approximately $50 million of these savings are related to variable labor which would be expected to increase as market volumes recover.

As part of Performance Plus, in fiscal year 2009, we closed our commercial vehicle manufacturing facility in Tilbury, Ontario, Canada (Tilbury). We recognized restructuring costs of approximately $30 million in the second quarter of fiscal year 2009 associated with the Tilbury closure for estimated employee severance benefits, including pension termination benefits under the terms of the Tilbury retirement plans and certain asset impairment charges. We expect a significant portion of the cash payments associated with this closure to be incurred in fiscal years 2010 through 2012. In the third fiscal quarter of 2009, the company announced the closure of its commercial vehicle facility in Carrollton, Kentucky and recognized approximately $2 million of restructuring costs. This facility is expected to close in the first quarter of fiscal year 2010.

After significant strategic review, we announced in 2008 our intention to separate our Commercial Vehicle Systems (CVS) and Light Vehicle Systems (LVS) businesses. We subsequently attempted to complete the separation through a spin-off of the LVS business via a tax-free distribution to ArvinMeritor stockholders. During fiscal years 2009 and 2008, we incurred approximately $19 million and $9 million of costs, respectively, associated with these spin-off related activities, which are included in selling, general and administrative expenses in the consolidated statement of operations included in the Consolidated Financial Statements under Item 1. Financial Statements and Supplementary Data. The unprecedented challenges in the credit markets, deterioration in the automotive markets and other factors prompted us to investigate other alternatives for the separation, including a potential sale of all or portions of the LVS business. In the second quarter of fiscal year 2009, we announced our intention to reorganize the LVS business into separate product lines consisting of Body Systems, Chassis and Wheels, with the intention to pursue exit strategies as market and other conditions support such actions. In the third quarter of fiscal year 2009, we completed (or entered into agreements to complete) the sale of most of the Chassis businesses, as discussed below. In September 2009, we completed the sale of the Wheels business, also discussed below. The results of operations and cash flows of these businesses are presented in discontinued operations in the consolidated statements of operations and consolidated statement of cash flows and prior periods have been recasted to reflect this presentation. The Body Systems business is included in our continuing operations. We are continuing to strategically evaluate all options with respect to divesting our Body Systems business, including a sale of the entire business, multiple sales of portions of the business, shut downs of portions of the business or a combination of partial sales and shut downs. We expect that the divestiture process will extend until the end of 2010 or beyond. There are significant risks, uncertainties and costs inherent in any options we may pursue, including the terms upon which any sale agreement with respect to any portion of the business may be entered into (including potential substantial costs) and the amount of any exit costs. See Item 1A. Risk Factors.

In September 2009, we completed the sale of the Wheels business to Iochpe-Maxion, S. A., a Brazilian producer of wheels and frames for commercial vehicles, railway freight cars and castings, and affiliates. The gross purchase price was $180 million. Net proceeds after taxes and adjustments for working capital and net debt were $166 million (net of cash on hand of $3 million). The agreement also requires certain true-up payments for working capital and other miscellaneous adjustments, on a post-closing basis.

In fiscal year 2009, with respect to the LVS Chassis businesses, we accomplished the following:

º completed the sale of our 51 percent interest in Gabriel de Venezuela to the joint venture partner;

º completed the sale of our Gabriel Ride Control Products North America business;

º entered into a binding letter of intent to sell our 57 percent interest in Meritor Suspension Systems Company (MSSC) to the joint venture partner, a subsidiary of Mitsubishi Steel Mfg. Co., LTD (MSM). We completed the sale of our interest in MSSC on October 30, 2009.

These transactions largely complete the divestiture of our Chassis businesses. The remaining Chassis businesses primarily represent our suspension module assembly business which is expected to run-off over the next two years as various vehicle programs come to a conclusion. Sales from our remaining Chassis businesses were approximately $106 million in fiscal year 2009.

As a result of the Chassis and Wheels divestitures described above, LVS now consists primarily of our body systems' business composed of roofs and doors products. In order to better reflect the importance of our remaining core CVS businesses and a much smaller LVS business and to reflect the manner in which management reviews information regarding our business, we have revised our reporting segments as follows:

º The Commercial Truck segment supplies drivetrain systems and components, including axles drivelines and braking and suspension systems, primarily for medium- and heavy-duty trucks in North America, South America and Europe;

º The Industrial segment supplies drivetrain systems including axles, brakes and drivelines and suspension for off-highway, military, construction, bus and coach, fire and emergency, and other industrial applications. This segment also includes all of our business in Asia Pacific, including all on- and off-highway activities.

º The Aftermarket & Trailer segment supplies axles, brakes, drivelines, suspension parts and other replacement and remanufactured parts, including transmissions, to commercial vehicle aftermarket customers. This segment also supplies a wide variety of undercarriage products and systems for trailer applications; and

We refer to our three segments other than LVS as, collectively, our "Core Business". All prior period amounts have been recasted to reflect our revised reporting segments.

Our cash and liquidity needs have been impacted by the level, variability and timing of our customers' worldwide vehicle production and other factors outside of our control. In addition, although our long term strategy is to become primarily a commercial vehicle and industrial company, the financial and economic environment has made this difficult to accomplish in its entirety in the short term and has left us with servicing the cash outflows of certain of our light vehicle businesses, which have been substantial. The divestiture of several of our light vehicle Chassis businesses, in addition to restructuring actions and other cost reductions taken during the fiscal year, are expected to limit the cash outflow of our LVS businesses going forward. However the cash needs of the remaining LVS businesses could be significant while we continue to operate these businesses. In addition, potential cash costs to sell or shut down all or portions of our Body Systems business may be substantial dependent on the timing and specific actions to complete this process.

Cash flow in fiscal year 2009 was negatively affected by decreased earnings due to lower sales and will continue to be negatively impacted due to continued lowered production and the current volatility in the financial markets, which could affect certain of our customers or vendors. We saw our usage of the revolving credit facility throughout the first six months of the fiscal year increase significantly to meet working capital requirements, including reductions in accounts receivable factoring programs. However, stronger cash flow, improved regional cash efficiencies and the sale of certain LVS businesses allowed us to reduce usage of the revolver, including letters of credit, by $300 million at fiscal year end as compared to second quarter end. At September 30, 2009, we had $95 million in cash and cash equivalents and an undrawn amount of $611 million under the revolving credit facility. Our availability under the revolving credit facility is subject to a senior secured debt to EBITDA ratio covenant, as defined in the agreement, which will likely limit our borrowings under the agreement as of each quarter end. As long as we are in compliance with this covenant as of the quarter end, we have full availability under the revolving credit facility every other day during the quarter. We were in compliance with this covenant as of September 30, 2009.

Our future liquidity is subject to a number of factors, including access to adequate funding under our senior secured credit facility, vehicle production schedules and customer demand and access to other borrowing arrangements such as factoring or securitization facilities. Even taking into account these and other factors, and with the assumption that the current trends in the commercial vehicle and automotive industries continue, management expects to have sufficient liquidity to fund our operating requirements through the term of our existing revolving credit facility in June 2011.

Other significant factors that could affect our results and liquidity in fiscal year 2010 include:

º Volatility in financial markets around the world;

º Timing and extent of recovery of the production and sales volumes in commercial and light vehicle markets around the world;

º A significant further deterioration or slow down in economic activity in the key markets we operate;

º Further lower volume of orders from key customers;

º The financial strength of our suppliers and customers, including potential bankruptcies;

º Higher than planned price reductions to our customers;

º Volatility in price and availability of steel and other commodities;

º Any unplanned extended shutdowns or production interruptions by us, our customers or our suppliers;

º Our ability to successfully complete the separation of our light vehicle businesses from our commercial vehicle business, with respect to our Body Systems business;

º The impact of our recent divestitures;

º Additional restructuring actions and the timing and recognition of restructuring charges;

º Higher than planned warranty expenses, including the outcome of known or potential recall campaigns;

º Our ability to implement planned productivity and cost reduction initiatives;

º Significant contract awards or losses of existing contracts;

º The impact of currency fluctuations on sales and operating income; and

º The impact of any new accounting rules.

In addition to the results reported in accordance with accounting principles generally accepted in the United States (GAAP), we have provided information regarding "segment EBITDA". Segment EBITDA is defined as income (loss) from continuing operations before interest, income taxes, depreciation and amortization and loss on sale of receivables. We use segment EBITDA as the primary basis to evaluate the performance of each of our reportable segments. For a reconciliation of segment EBITDA to income (loss) from continuing operations see "Results of Operations" below.

Management believes segment EBITDA is a meaningful measure of performance as it is commonly utilized by management and investors to analyze operating performance and entity valuation. Management, the investment community and banking institutions routinely use segment EBITDA, together with other measures, to measure operating performance in our industry. Further, management uses segment EBITDA for planning and forecasting future periods.

Segment EBITDA should not be considered a substitute for the reported results prepared in accordance with GAAP and should not be considered as an alternative to net income as an indicator of our operating performance or to cash flows as a measure of liquidity. Segment EBITDA, as determined and presented by the company, may not be comparable to related or similarly titled measures reported by other companies.

The following is a summary of our financial results for the last three fiscal years.

                                                                       Year Ended September 30,
                                                                2009                2008            2007
                                                                (in millions, except per share amounts)
Sales:
   Commercial Truck                                        $      1,566         $    2,922       $   2,621
   Industrial                                                       888              1,117             854
   Aftermarket & Trailer                                            954              1,183           1,090
   Light Vehicle Systems                                          1,033              1,571           1,515
   Intersegment Sales                                              (333 )             (403 )          (360 )
SALES                                                      $      4,108         $    6,390       $   5,720
SEGMENT EBITDA:
   Commercial Truck                                        $        (98 )       $      117       $      16
   Industrial                                                       124                128              93
   Aftermarket & Trailer                                             88                110             113
   Light Vehicle Systems                                           (281 )                5             (43 )
SEGMENT EBITDA                                                     (167 )              360             179
   Unallocated legacy and corporate costs (1)                       (29 )              (56 )           (56 )
   Loss on sale of receivables                                       (7 )              (22 )            (9 )
   Depreciation and amortization                                    (81 )             (120 )          (111 )
   Interest expense, net                                            (86 )              (80 )          (109 )
   Benefit (provision) for income taxes                            (707 )             (197 )            13
INCOME (LOSS) FROM CONTINUING OPERATIONS                         (1,077 )             (115 )           (93 )
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax             (135 )               14            (126 )
NET LOSS                                                   $     (1,212 )       $     (101 )     $    (219 )

DILUTED EARNINGS (LOSS) PER SHARE
   Continuing operations                                   $     (14.86 )       $    (1.60 )     $   (1.32 )
   Discontinued operations                                        (1.86 )             0.20           (1.79 )
Diluted loss per share                                     $     (16.72 )       $    (1.40 )     $   (3.11 )

DILUTED AVERAGE COMMON SHARES OUTSTANDING                          72.5               72.1            70.5


____________________

(1) Unallocated legacy and corporate costs represent items that are not directly related to our business segments. These costs primarily include pension and retiree medical costs associated with recently sold businesses and other legacy costs for environmental and product liability. Fiscal year 2009 and 2008 unallocated legacy and corporate costs include $9 million and $19 million of costs, respectively, associated with the previously planned spin-off of the LVS business. Also included in unallocated legacy and corporate costs for fiscal years 2008 and 2007 are corporate costs previously allocated to sold businesses of $15 million and $44 million, respectively.

2009 Compared to 2008

  Sales

   The following table reflects total company and business segment sales for
fiscal years 2009 and 2008. The reconciliation is intended to reflect the trend
in business segment sales and to illustrate the impact that changes in foreign
currency exchange rates, volumes and other factors had on sales (in millions).
Business segment sales include intersegment sales.

                                                                                          Dollar Change Due To
                                                             Dollar           %                         Volume
                                2009           2008          Change        Change       Currency        / Other
Sales:
   Commercial Truck          $  1,566       $  2,922       $  (1,356 )      (46 )%     $   (204 )     $  (1,152 )
   Industrial                     888          1,117            (229 )      (21 )%          (16 )          (213 )
   Aftermarket & Trailer          954          1,183            (229 )      (19 )%          (57 )          (172 )
   Light Vehicle Systems        1,033          1,571            (538 )      (34 )%         (100 )          (438 )
   Intersegment Sales            (333 )         (403 )            70         17 %            54              16
TOTAL SALES                  $  4,108       $  6,390       $  (2,282 )      (36 )%     $   (323 )     $  (1,959 )

Commercial Truck sales were $1,566 million in fiscal year 2009, down 46 percent from fiscal year 2008. The effect of foreign currency translation decreased sales by $204 million. Excluding the effects of foreign currency, sales decreased by $1,152 million or 39 percent, primarily due to significantly lower OE production volumes in substantially all of the markets in which we participate. European heavy- and medium-duty truck production volumes decreased 56 percent compared to the prior year. Production volumes in the North American Class 8 commercial vehicle truck markets were lower by 34 percent compared to the prior year. Production volumes in South America were lower by 27 percent compared to the prior year.

Industrial sales were $888 million in fiscal year 2009, down 21 percent from fiscal year 2008. The effect of foreign currency translation decreased sales by $16 million. The decrease in sales is primarily due to lower sales in the Asia- Pacific region, which decreased approximately 47 percent from the prior year, primarily in India.

Aftermarket & Trailer sales were $954 million in fiscal year 2009, down 19 percent from fiscal year 2008. The effect of foreign currency translation decreased sales by $57 million. The decrease in sales is primarily due to lower sales of products for trailer applications, which decreased approximately 59 percent from the prior year. Sales of our aftermarket products were only down approximately three percent as higher sales of military service parts and growth in our remanufacturing businesses partially offset the decline in our aftermarket replacement products.

Light Vehicle Systems sales were $1,033 million in fiscal year 2009, down from $1,571 million in fiscal year 2008. The effect of foreign currency translation decreased sales by $100 million. Excluding the impact of foreign currency translation, sales decreased by $438 million or 28 percent compared to the prior year. We believe that the substantial uncertainty and significant deterioration in the worldwide credit markets, the global economic downturn and the current climate in the U.S. and other economies impacted the demand for light vehicles in the fiscal year. As a result, light vehicle production in most regions has declined significantly compared to the prior year. We expect production volumes in North America and Western Europe to remain at historically low levels into fiscal year 2010.

Also contributing to the decrease in sales are lower pass-through sales, which decreased by $56 million in fiscal year 2009 compared to the prior year. Pass-through sales are products sold to our customers where we acquire certain components and assemble them into the final product. These pass-through sales carry minimal margins, as we have little engineering or manufacturing responsibility.

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