Deutsche Bank 2009
Leveraged Finance
Conference
September 30, 2009
Jay Craig
Senior Vice President and CFO
Forward-Looking Statements
This presentation contains statements relating to future results of the company (including certain projections and business trends) that are
“forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically
identified by words or phrases such as “believe,” “expect,” “anticipate,” “estimate,” “should,” “are likely to be,” “will” and similar expressions.
There are risks and uncertainties relating our ability to obtain any needed waiver or amendment to our credit agreement if needed in the future;
our ability to achieve anticipated or continued cost savings from reduction actions; and our ability to execute the Company’s announced plans
for the Body Systems and Chassis Systems businesses of LVS, including the timing and certainty of completion or the terms upon which any
sale agreement with respect to any portion of the business may be made and the amount of any exit costs. In addition, actual results may differ
materially from those projected as a result of certain risks and uncertainties, including but not limited to global economic and market cycles and
conditions, including the recent global economic crisis; whether we will have sufficient liquidity as we continue to be affected by declining vehicle
production volumes; the financial condition of the company’s suppliers and customers, including bankruptcies; possible adverse effects of any
future suspension of normal trade credit terms by our suppliers; the ability of the company to continue to comply with covenants in its financing
agreements; the ability of the company to access capital markets; credit ratings of the company’s debt; the demand for commercial, specialty
and light vehicles for which the company supplies products; risks inherent in operating abroad (including foreign currency exchange rates and
potential disruption of production and supply due to terrorist attacks or acts of aggression); availability and rising cost of raw materials, including
steel and oil; OEM program delays; demand for and market acceptance of new and existing products; successful development of new products;
reliance on major OEM customers; labor relations of the company, its suppliers and customers, including potential disruptions in supply of parts
to our facilities or demand for our products due to work stoppages; potential difficulties competing with companies that have avoided their
existing contracts in bankruptcy and reorganization proceedings; successful integration of acquired or merged businesses; the ability to achieve
the expected annual savings and synergies from past and future business combinations and the ability to achieve the expected benefits of
restructuring actions; potential impairment of long-lived assets, including goodwill; potential adjustment of the value of deferred tax assets;
competitive product and pricing pressures; the amount of the company’s debt; the outcome of existing and any future legal proceedings,
including any litigation with respect to environmental or asbestos-related matters; the outcome of actual and potential product liability and
warranty and recall claims; rising costs of pension and other post-retirement benefits and possible changes in pension and other accounting
rules; as well as other risks and uncertainties, including but not limited to those detailed from time to time in filings of the company with the
SEC. These forward-looking statements are made only as of the date hereof, and the company undertakes no obligation to update or revise the
forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law.
All earnings per share amounts are on a diluted basis. The company's fiscal year ends on the Sunday nearest Sept. 30, and its fiscal quarters
end on the Sundays nearest Dec. 31, March 31 and June 30. All year and quarter references relate to the company's fiscal year and fiscal
quarters, unless otherwise stated.
Diverse Business Portfolio
Based on2008 Sales
North
America
46%
Europe
32%
South
America
12%
Asia
Pacific
10%
CVS
Body
88%
$4.8 Billion
$1.6 Billion
LVS
Chassis
Remaining
12%
5
ü
Truck Net Orders by Month
North America
August 2009 : 10,740
Highest heavy truck net orders in nine months
17% above July ’09
30% below August ’08
Credit concerns and low freight traffic continue to
hold orders down at low levels
Fiscal YTD average: 8,860
52% below FY08 period; seasonally adjusted rate
of 104,800
August 2009 : 10,810
August net orders high due to school bus orders
June and July were distorted due to GM exiting
the market
Fiscal YTD average: 7,120
54% below FY08 period; seasonally adjusted
rate of 84,300
Class 8
Class 5-7
Historical Class 8 Production
North America
In bottom of trough and preparing for the upturn
Units (000)
Commercial Vehicle Markets - ROW
Fiscal Quarters
Europe
Med. & Heavy Truck Production (000)
Q3 production down 74%
year-over-year and down
39% from Q2
More down time in fiscal Q4
South America
Asia Pacific
Q3 production down 36% year-over-
year, but up 9% from Q2
Could see further small increases in
upcoming quarters
Q3 production down 27% year-over-
year, but up 33% from Q2
Same industry trends hold for India and
China specifically
Strategic Priorities
1.
Ensure adequate liquidity while minimizing cost
Clear covenants
Benefit from current favorable credit agreement
2.
Continued restructuring and other cost reductions
Resist workforce and cost increases as volume returns
Tight controls on discretionary spending
Performance Plus Wave II
3.
Continue operational performance improvement
Improve global capacity flexibility
Drive inventory turns improvements
Manage the upturn
4.
Complete LVS separation
5.
Continue to grow high-margin product categories
Commercial Vehicle Aftermarket and Specialty
6.
Innovate and strengthen product development and technology
Hybrid commercial vehicles, new axle launch, fuel efficient and
high quality products
Credit Line Covenant Compliance
Completed identified actions needed to clear covenants at September
measurement
New, two-year U.S. receivables financing arrangement completed
on September 8, 2009
Total commitment under the facility is $125 million after
additional lender participation
Daily borrowing availability under the New Facility exceeds
availability under the facility it replaced
Sale of Wheels business unit was completed on September 21,
2009 with receipt of proceeds in September FY 2009
Used net proceeds of $169 million from the sale to reduce
outstanding balances on the revolving credit facility
We believe that we are in compliance with all covenants in our
revolving credit facility, including the covenant related to the ratio of
senior secured debt to EBITDA, as of the end of Q4 2009
Light Vehicle Systems
Closed sale of Wheels to lochpe-Maxion
S.A. on September 21, 2009
Received $169 million of net proceeds
Chassis divestitures
- Gabriel de Venezuela
- Gabriel Ride Control North America
- JV Mitsubishi Steel (MSSC)
Remaining Chassis business expected to
operate near break-even; modules will run
off over two years as vehicle programs end
Wheels
Chassis
Working to minimize cash requirements
Divest as business and market conditions allow
Body
LVS Chassis
$0.5 Billion
Wheels
$0.3 Billion
North
America
75%
North
America
50%
South
America
45%
Q4 Discontinued Operations
Based on 2008 Sales
Product Highlights
Meritor® TACTXTM High Mobility
Independent Suspension in production with
British TSV program
Semi-active damping shocks
Meritor® Air Suspension Height Control
Lightweight aluminum carrier assemblies
Expanding ELSA Disc Brake Platform into
North America and Asia Pacific markets
Best-in-class reliability and performance
Participating in DOE SuperTruck competition
with Meritor® Dual Mode Class 8 Hybrid
Meritor® MT-14X Tandem Axle
Superior design addresses customer
needs for reduced weight, improved
efficiency and wider ratio coverage
Expected
launch at
MATS in 2010
Strategic repositioning nearing completion
Aggressively lowered breakeven levels with the goal of
being cash flow neutral at current industry size
Well-positioned to benefit from a rebound in the
commercial vehicle industry
Current North American industry about 50% below cycle average
Sustainable competitive position
Strong growth in most profitable product categories
Aftermarket and Specialty
Investment Case
Franchise value we can sustain and grow
Frequently Asked Questions
1.
Will you be negatively impacted by the FMTV
award to Oshkosh?
2.
What is the status of your French Factoring and
Swedish Securitization programs?
3.
With the fourth quarter covenant issue behind
you, are you planning any changes to your capital
structure?
4.
What exposure do you have to higher steel
prices?
5.
Do you have any targets on where your
profitability could go relative to past cycles?
FAQ #1: Will you be negatively impacted
by the FMTV award to Oshkosh?
Oshkosh will fundamentally build the same FMTV
vehicles as BAE Systems to maintain continuity in
the military's vehicle fleet
Award currently under protest by BAE Systems
and Navistar
We expect to supply the
same components
regardless of
manufacturer
FAQ #2: What is the status of your French
Factoring and Swedish Securitization
programs?
Both facilities backed by 364-day liquidity
commitments from Nordea Bank
renewed through mid-October 2009
We expect renewal of the two facilities based
on verbal communication with Nordea
FAQ #3: With the fourth quarter covenant
issue behind you, are you planning any
changes to your capital structure?
We continue to look at
available options to address
the balance sheet, including
Renewing the 2011
revolver
Addressing the 2012
unsecured notes
Progressing towards
investment grade statistics
FAQ #4: What exposure do you have to
higher steel prices?
We do not expect to experience any significant impact from increasing
steel prices
Contractually recover/refund steel price differences from/to our
customers
Similar to prior periods of rising steel prices
Surcharges will increase/decrease in parallel with costs
Commodity movements not viewed as cost or profit making opportunity
FAQ #5: Do you have any targets on where
your profitability could go relative to
past cycles? (1)
We have a long-term Return on Equity target
in the mid teens or higher
Therefore, we have a long-term EBITDA
margin target of 10% average through the
cycle
We believe becoming exclusively a
commercial vehicle and industrial company
allows us to achieve that more rapidly
(1) Based on management’s current long-term planning assumptions. Please see slide 2, “Forward-Looking Statements”.