Welcome to the first quarter 2009 ArvinMeritor Incorporated earnings conference call. (Operator Instructions) I would now like to turn the call over to Mr. Terry Huch, Senior Director of Investor Relations. Sir, you may proceed.

Welcome to the ArvinMeritor first quarter 2009 earnings call. On the call today we have Chip McClure, our Chairman CEO and President, and Jay Craig, our CFO. The slides accompanying today’s call are available at arvinmeritor.com. We’ll refer to the slides in our discussions this morning. The content of this conference is the property of ArvinMeritor, Inc. It’s protected by U.S. and international copyright law and may not be rebroadcast without the express written consent of ArvinMeritor. We consider your continued participation to be your consent to our recording. Our discussion will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Let me refer you to slide two for a more complete disclosure of the risks that could affect our results. To the extent we refer to any non-GAAP measures in our call you’ll find the reconciliation to GAAP in the slides on our website. Now, I’d like to turn the call over to Chip.

Before we turn to the presentation, I’d like to briefly comment on how tough the first quarter was for us. It was due in large part but not solely to the unprecedented drop in volumes in both our CVS and LVS market segments around the world. As a result of this precipitous volume decline, our first quarter financial performance was significantly impacted. We’re literally experiencing a total transformation of our industry. And while we’re responding and adapting quickly to the market changes around us, we’re also focused on proactively managing costs through this global recession. With demand down dramatically, we’re taking extreme cost cutting measures to mitigate the impact of volumes declining faster than any of us anticipated. The decisions we’re making are tough and some of the change we’ve made have affected our people, but the changes we’re making are necessary to help ensure we emerge an even stronger company once the markets return to more normal levels. As we’ve been doing for some time, we remain focused on continuing to optimize our global manufacturing footprint to ensure we have the flexibility to adjust quickly to changes in production levels. We also are relentless in our efforts to improve our liquidity to ensure we weather the downturn, and we continue to put our energy behind the areas that provide high margin and high growth opportunity. Now, let’s turn to slide three to review the highlights of our first quarter. We’re pleased to report that despite the challenging environment, we once again did what we said we’d do. Although the developments with LVS caused us to withdraw our first quarter guidance for the company, our CVS and Wheels business did meet the first quarter EBITDA and sales milestones we outlined in our Analyst Day in December. As a total company,…

Slide 10 is our income statement for continuing operation before special items. This reflects CVS plus all three businesses of LVS, Body, Chassis and Wheels. Gross margin was down 44% on an 18% sales decline. SG&A was up on an absolute basis from last year. I’ll talk more about that on the next slide. Earnings in our minority owned defoliates were down almost without exception and for all the same reasons that our internal profitability was down. Interest expense was $22 million reflecting our strong cash position at the beginning of the quarter. Excluding special items, our continuing operations lost $45 million before tax. Normally you’d expect an income tax benefit to accompany that loss. However, we can no longer record a benefit in those jurisdictions where we’ve written off our differed tax assets. In other jurisdictions where we’re profitable, we continued to accrue income taxes. I know that many of you try to model our taxes along with our other income statement items, let me just say I appreciate how difficult this is for you to forecast. As we reported earlier, our net loss from continuing operations was $56 million, compared to income of $6 million last year. On a per share basis, we lost $0.77 for the quarter compared to a profit of $0.08 last year. Let's turn to slide 11. The table on the left hand side explains the increase in SG&A compared to last year. The first item represents costs we've added into LVS to prepare to be a standalone company. We largely disassembled that added structure in January. The second item primarily refers to a one-time reversal in the first quarter of last year when we changed our vacation policy. We called that out to you at that time as a non-recurring benefit. The third…

(Operator Instructions) Your first question comes from Brian Johnson – Barclays Capital. [Emmanuel] for Brian Johnson – Barclays Capital: This is Emmanuel for Brian. First a quick question on the commodities impacting LVS. I was wondering, you were saying that last year some of the recoveries were in lump sum? So does that mean that we should see maybe later this year some recoveries from the hit we’re seeing now?

Yes. In fact, in LVS the recoveries were in a lump sum, which is different than what we experienced on the CVS side where we were able to affect those changes through indices mechanisms. We are obviously working this year to have some recovery, but with the rapid drop in commodity prices, we do expect those discussions with the customers to be more difficult this year. [Emmanuel] for Brian Johnson – Barclays Capital: Then on the cost savings, you did a good job of laying out what you expect for the year. Would you be able to, I guess, quantify how much was in the first quarter and then maybe the pace of how the coming quarters would compare to what we’ve seen in this past quarter.

As far as the cost savings in this quarter, the best way to dimension that is the impact we showed on SG&A sequentially, which I believe was $6 million sequentially from the fourth to the first quarter. The impact is not as traumatic that we experienced in the first quarter because many of the reductions were implemented at the end of that quarter. So the reductions in workforce we had discussions with our impacted employees, for example, in October, and those employees left us during November, December and January. The salary reductions went into effect in January, along with the reduction in the 401K match. And obviously all the reductions we took in LVS in the month of January come in in the second quarter. So we do expect a much more traumatic reduction in cost in our second fiscal quarter. [Emmanuel] for Brian Johnson – Barclays Capital: Anything that you can quantify, like can you reconcile your table of cost reductions for 2009, I guess on slide 5 to what this actually means in terms of cost reduction we would see any given quarter for the remainder of the year?

Obviously, we’re not providing guidance at this time but we do expect, other than directing you to refer to the annual run rate on the table and also the impact on 2009. We have quantified that and you should expect that those cost benefits increase relatively linearly throughout the year as we get more and more impact and they get added each month. [Emmanuel] for Brian Johnson – Barclays Capital: Just to be clear, the total annual run rate, the difference between that and the total ’09 cost reduction is actually just measuring it at the end of the year?

That’s correct. It’s what will be captured in our fiscal year versus the 12 month run rate.

Your next question comes from John Murphy – Merrill Lynch. John Murphy – Merrill Lynch: I just wanted to follow-up on the cost stage, how much of what you identified for 2009 do you expect to actually be cash and how much of it is just a P&L impact?

We would expect the vast majority of those items to have a positive cash flow impact as well. Obviously, with some of the headcount reductions there’s some severance cost associated with them, but most of the actions we listed here will be direct one-for-one cash flow benefits.

I think to give some specifics when you look at the 10% salary reduction, obviously that’s a direct impact to cash, whether for the senior executives or the board, so I think there is a balance between the two that way, John. John Murphy – Merrill Lynch: Chip, now that you guys have kept LVS in-house, I would imagine your minimum cash needs to run these two combined businesses have probably increased. What do you think that the minimum cash level that you need is at this point?

Obviously, what we provided in the statements today and reiterated in our press release is, we believe we will not be in violation of any of our debt agreements based on our current forecast. We obviously provided some volumes that have disclosed we’re running the business to, but we have encompassed in all that consideration the cash we require to run the business, including the change in estimate that we will have these LVS businesses for a period of time. John Murphy – Merrill Lynch: But if we look at the final balance of just cash in the balance sheet of $158, is there any guidance you can give us? Is it around $100 million that are using revolver for inter quarter working capital swings. I’m just trying to understand the minimum level.

We have not provided any guidance or information on that in the past and I don’t think we will today as well. But we have stated that we have had intra quarter borrowing on the revolver, so it’s not unusual for us to have those draw downs on the revolver. John Murphy – Merrill Lynch: How much was bought on the A/R facilities at the end of the quarter?

I will try and get that data for you as quickly as I can. We have had some decline on that. I know in the U.S. the related receivables have come down and we expect to have a dramatic decline in Europe. So on the U.S. securitization balance, it looks like the draw downs are $93 million for the U.S. program in the quarter and then, as I said, in Europe we expect roughly $400 million of usage under the lines in Europe at the end of the quarter. John Murphy – Merrill Lynch: And the new facilities, have they been, I mean what is the size of the new facilities that have been renewed?

The facility in North America, which is with SunTrust, is $175 million facility so you can see we're not in any way constrained by the size. It's just been the reduction of receivables as we’re seeing the volumes come down in North America. John Murphy – Merrill Lynch: Lastly, Chip, on strategy here. As you're holding the LVS business longer than you would have liked, I mean is there any of change in course? Are there any other parts of the business, other than Wheels, that you might consider keeping in-house and being somewhat of a consolidator of it if possible?

No. Let me first of all re-emphasize the fact that our strategy is to continue to separate the LVS and CVS portions of the business, and obviously what's going on out in the marketplace it's changed the tactics a bit. So no I do not see that changing. And, as I kind of indicated in my comments, this is a similar approach we had to do with the LVA a couple of years ago with our Light Vehicle Aftermarket business. So to answer your question, no, I do not see that changing. Obviously, what we did want to do in the decision we made earlier this year in January, was the fact that given the market conditions we felt it was better to go kind of this revised approach with the strategy still being the same to look at selling and divesting them separately. But we'll do it at the proper time and make sure we get the proper term for our shareholders. So no it's not changing at this point. The only thing that’s really just changed is the timeline given what's taking place out in the marketplace. John Murphy – Merrill Lynch: Jay, I think I may have cut you off on that EU securitization facility. What's the size of that, the new one, I'm sorry?

It's $250 million Euros so it would be roughly $325 million. So I may have misspoken, I think the European outstandings were $300 million flat at the end of the quarter instead of $400 million.

Your next question comes from Patrick Archambault – Goldman Sachs. Patrick Archambault – Goldman Sachs: Just on the walk slide, I'm sorry not the walk slide, the slide where you outlined your expectations for build rates. Could you give us a little bit of a better idea of what the variable margins are for some of these businesses clearly? I suppose one would expect that maybe North America might be a little bit lower at this point since you've had more time to restructure, but just wanted to sort of get your overall view on that?

We haven't really discussed variable margins in the past. I would say your one comment on North America, because we've had a longer period to work at cost reductions, is probably accurate. Patrick Archambault – Goldman Sachs: In other words, it's fair to assume that potentially the incremental impact of Europe might be above average whereas North America would be somewhat below just given the time frame you've had to work on it.

I would say at this point in time that's true because as I'm sure you're familiar with there is some lagging impact in Europe of the speed with which you can take labor costs out because of various notification periods and different country laws. So I would say temporarily that's true until our aggressive steps we're taking to reduce the cost structure there get through that lag time period.

Patrick, just to add to that too, obviously you're right as you indicated, North America has been down the better part of two years. When you look at Europe, they were at an all time record levels literally through the beginning of the summer actually of last year. So it's only been the last four or five months that they've actually seen the downtrend. So not only, as Jay indicated, a longer time to take the costs out in the European operations, but the much more dramatic drop off in much shorter period of time that we saw literally last fall I think do compound it and kind of support what Jay was saying. Patrick Archambault – Goldman Sachs: I guess on that can you maybe comment on how much variable headcount there is in Europe? Clearly as you guys have shifted from cash intensive restructurings to sort of cash friendly restructurings, which don't have as much severance in them. How would you sort of characterize your ability to get that variable margin down given some of the constraints you face?

The announcements we made at the end of October had encompassed in them the hourly reductions in Europe. I think as we stated then, the vast majority of those were contract laborers, which had limited severance requirements. Once we got through that wave, at this point in time we are at full-time employee adjusting, having to adjust full-time employment. And we are looking at and implementing some creative solutions to that around furloughs and other measures that are much more common in Europe, so that we can limit the cash outflows related to severance and separation agreements and be more creative to work within the European employment laws. And also take maximum advantage of the different government funding programs that are available in Europe to cushion the blow to the individual employees as they're unemployed for a day, two, three days a week. Patrick Archambault – Goldman Sachs: Would you characterize this situation as being one where you're constrained though in terms of you've got a bunch of options, they're not typically the options you, in a normal cash situation that you would have exercised. Does that mean all things equal it's going to take longer to sort of bring that variable margin down in Europe or are you pretty confident that you --

I would say that there's some lag impact, which we have seen to be about three to four months that's longer than you typically see in the U.S. or Eastern or Central Europe. But I don't think the ultimate answer ends up being much different, it's just done differently, particularly a lot of these governments sponsor programs. For example, in France we're seeing the laws being changed where they initially covered up to 300 hours of employees’ unemployment in terms of paying that through government benefits. They just recently doubled that to 600 hours. It's expected by industry they're going to increase it by another 300 hours to 900 hours, and you can think of that in our terms as almost three, six and nine months worth of unemployment benefits. So I wouldn't say it's the ultimate answer. It's a lot different than what we see in the United States. It's just how it gets executed. It takes a longer period of time and a little bit of lag time, but we get to about the same result. Patrick Archambault – Goldman Sachs: Switching gears, just looking at your military and aftermarket businesses, clearly that's been a very good business for you. We've seen other sort of more machinery-oriented names also doing very well. Could you comment a little bit about the cadence of those contracts? You talked a bit about it there on your Analyst Day, but I'm curious to see sort of how long that tailwind, which I guess was worth 1.2% of margins, can be sustained. Is that something that we're going to continue to see as a positive throughout subsequent quarters or maybe are we kind of seeing it peak out and maybe stabilize here?

Patrick, what you're actually seeing is a bit of mix shift in some of that. When you look at it, and I think back at the Analyst Day we talked about the end MRAP product is probably winding down a bit as far as an OE product. But then there's a lot of aftermarket parts that we're starting to see flow through on that. I think the second thing is, when you at it, FMTV continues to be strong, and if I look at it longer term, you've got the JLTV that's out there also, which is actually more out on the 2012 to 2013 time frame. So as I look at it bringing it back to the current year, yes we do see that continuing for future quarters but a mix shift, if you will. Probably less MRAP and more of what we call the MRAP Light or the ATV type program, FMTV and parts and service, and I will tell you that we are continuing to quote new programs and, as I’d indicated, the other part of that on the aftermarket side, we are seeing that increase the number of vehicles out there [inaudible] they are needing the replacement part and service. So we see a mix shift but do see both of those continuing strong going forward. Patrick Archambault – Goldman Sachs: And by continuing strong, meaning like a year-on-year positive in subsequent quarters.

In some cases the answer is yes. Patrick Archambault – Goldman Sachs: I just mean taking together. Is there to more replacement in some of these other programs sufficient to kind of sustain the momentum I guess is the way I would ask it.

I would say as opposed to year-over-year, I would say I do see it sustaining the momentum going forward just within a mix within that.

Your next question comes from Monica Keeney – Morgan Stanley. Monica Keeney – Morgan Stanley: I was just curious, I was looking at the Analyst Day slide when you did sensitivity analysis to different production levels, and there was like a high, medium and low scenario. I guess you’re at the low scenario, right? And it said you expect Q 2 through Q 4 free cash flow to be negative. Does that mean in each quarter? I just want to make sure to refresh and given what you’ve said now about production and then obviously this didn’t assume LVS.

Couple of things, Monica, one, we re-toured that guidance so I first want to start with that statement that we re-toured the guidance. As you just compare the charges numerically, you would say yes from that guidance we’re at the low column pretty much across the board in what we’re showing today, but we did withdraw that guidance. The other statement we’ve made today is that based on these production levels, we believe we have adequate liquidity to be in compliance with all debt conveyance. So there’s a lot of different variables in there, one of them being free cash flow, how our working capital changes, lowering the fix cost breakeven level of the various business from all the actions where taking. But I think the overall statement that we felt confident in making today is that we expect to have adequate liquidity to be in compliance with all the debt conveyance. Monica Keeney – Morgan Stanley: So can you just give us a little bit more, sort of a little bit more directionally? I know that you’re not giving guidance, but working capital is just so hard to kind of predict how your working capital is going, even more than to a certain extent other suppliers not just the calendar I know but, how should be thinking about there are obviously major production cuts for this upcoming you’re Q2, should working capital be then a major source for this quarter?

Well a couple things we stated today that are probably a bit unusual for us. Certainly as volumes decline, as we stated today, we do expect that components of working capital will be favorable. But the issue that is somewhat unique to us is we have factor under customer sponsor programs a large portion of our European receivables, which is where the most rapid rate of decline is occurring in our revenue and, therefore, freeing up working capital. So what you’ll see is that a lot of this working capital benefit will be offset by the reduction in these lines and, again, the other issues we said that we’re focusing on obviously is aggressively pushing back on CapEx. Monica Keeney – Morgan Stanley: So it’s not going to be a source you think in second quarter? I’m just trying to summarize. I get what you’re saying on the components, but I’m just still not sure directionally what you’re trying to get to. Is it just too early to tell?

Monica, I understand your struggle but I’m trying to walk the line where we’ve withdrawn guidance and not necessarily go out and provide guidance on specific components of our financial results. So, I fully understand your question try to dimension it. Monica Keeney – Morgan Stanley: Then my last question is, in terms of you’ve given a lot of the cost cutting that you’re going to be doing, which looks like it’s going to be very beneficial. Can you at least give us what you think the cash component will be for ’09? I mean other than I know series of different restructuring and cost savings actions.

I apologize, Monica.

Monica, real quickly on part of that, as I indicated before, as part of the cash component and restructuring there are some of those and kind of my words before as far as a cash friendly cost reductions some of these have no cash impact on it. Obviously, as you look at salary reductions and that kind of thing and there are others that we are focusing on that kind of going forward just to make sure that we can where we can is to minimize the amount of cash that we’re using that way.

Monica, I would add we do have some limited cash restructuring just related to the severance benefits for some of the reduction employees that we’re executing. But what we are pushing out is any large scale plant closures and significant restructuring charges during this year.

Your next question comes from Himanshu Patel – JP Morgan. [Haruch Jodon] for Himanshu Patel – JP Morgan: Hi this is [Haruch Jodon] on behalf of Himanshu Patel. My first question is, could you actually provide a little bit of makeup within the profitability for individual business within the LVS business? Especially on the Wheel side, which I understand is a little bit more Latin America focused and volumes have declined there rapidly.

Let me start and I’ll let Jay kind of weigh in on the details a little bit. As you look at it your right, first of all on the Wheel side, the manufacturing foot print is very much South American focused, which I think has been one of the competitive advantages of it. It’s based in Mexico and Brazil so it has helped that way. If I look at it within Brazil or South America, we have seen some decline there, although interestingly enough, and this is just more anecdotal, when you look at some of the things that government is doing as far as cash to try to get us some momentum on the automotive side and again, very anecdotal at this point, it appears to be helping a bit there in South America. But obviously when you look at the products that are shipped into North America they are dealing with the same brunt of the declines that we’re seeing here in North America with the domestic big three.

I would also reiterate there are different portions of our business that have some aftermarket component within LVS those are a little less sensitive to the OE volume downturns. But, again, we haven’t talked about individual profitability of business line. But our OE businesses are experiencing the most significant revenue decline. [Haruch Jodon] for Himanshu Patel – JP Morgan: Then could provide us a little bit help on, if I were to understand like what would be a breakeven level of U.S. production the European production for you to return to a sort of a breakeven level on maybe an EBIT basis and when is it that we should expect that to happen? Just some ball park help on that.

Well it tends to be a bit of a moving target. Our breakeven level has been lowered significantly, for example, in the commercial vehicle North American truck operations because the length of the downturn we’ve taken so much fix cost out, our breakeven level is much, much lower than it was previously. And so in Europe obviously at today we are operating below our breakeven level, but, as I stated previously, we are implementing numerous plans to take out fixed cost and then again the breakeven level there we expect a decline as well. So I know that’s not a direct answer to your question, but it’s a bit of moving target for us right now. I think what we tried to show in these vehicle production scenarios was what we’re targeting the business at trying to reduce its fixed cost so that we can get our businesses to breakeven levels at these volumes. [Haruch Jodon] for Himanshu Patel – JP Morgan: Going back to slide five, the cost reduction run rates that you guys have provided, I may have missed this, but has the $165 million in CVS and $82 run rate in LVS have the actions been implemented and have those run rates been achieved?

They have been. In fact, what is roistered on this chart, for example, for the employee actions, we are only counting employees that have left, so to say, left the building. So these are actions that have been implemented and not just planned. We obviously have significant number of action that is still planned, but we have next quarter’s call we’ll be speaking to what the impacts of those were as well. One component of that that may be a slight difference from that is on the Performance Plus line because of our history of disclosing what our targets were, on the P Plus line there is some numbers included in that $50 and $25 million for CVS and LVS respectively that do have some anticipated savings actions that will be implemented. But for all the other austerity actions, those are actions that have been implemented then executed. [Haruch Jodon] for Himanshu Patel – JP Morgan: Are these Performance Plus savings, these were in an environment when volumes were actually significantly better, do you think there could be some givebacks on these 50 and 25 as volumes fall off?

We had the same question and we spent quite a bit of time in the month of November and then continuing from there to make certain that we stress test our expected savings, particularly in the direct material cost savings areas, for volumes and we’re still confident in the numbers we have on this page. [Haruch Jodon] – JP Morgan: Just a couple of last ones, one the run rate hit in LVS in this quarter seemed particularly harsh. What should we expect for the remainder of the year? And lastly, do you guys anticipate any worsening in distressed supplier costs? What are you seeing there?

Well, as far as the LVS performance, if I understand you’re first question it was should we expect the first quarter performance to be indicative of the rest of the year? A little bit, just to put it in context, again, we’re not providing guidance for the rest of the year, but certainly a lot of the lump sum, I’m sorry, a lot of the actions we took in January were directed specifically at LVS. For example, just in the first three weeks of January 100 salaried employees left the organization and significant cuts were made in other costs. So, certainly, we’re trying to reduce the cost side of the LVS run rate. Then you’re second question was –

I’ll talk the second one on troubled suppliers and we actually do have a very robust program in place on the supplier side within our shared services activity that we put in place both here in the U.S. and in Europe. And quite frankly, as I indicated in my comments, we really do have both on the supplier side and the customer side, so I think we have a very robust program that we include as part of our enterprise risk management system we’ve had in place for a while now that we reviewed up to and including at the board level so that we do this. And I think the real credit to Jay and his team and Carson and their team as far as we’ve got people from the purchasing manufacturing and engineering finance side of it to make sure that we get the kind of leading indicators if there’s a supplier distress issue, of which quite frankly we’ve had a couple of them. And we’ve been able to manage them very well to minimize any impact to us and as important, minimize any impact to our customers.

That’s all the time we have for questions today. I would like to thank everyone for joining and invite you to follow up with your investor relations or communications contact.

Thank you for your participation in today’s conference. This concludes your presentation.