SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 30, 2001
--------------------------

Commission file number 1-15983
-------------------------------

ArvinMeritor, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Indiana 38-3354643
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

2135 West Maple Road, Troy, Michigan 48084-7186
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)

(248) 435-1000
- --------------------------------------------------------------------------------
(Registrant's telephone number,
including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes X No
----- -----

66,690,775 shares of Common Stock, $1.00 par value, of ArvinMeritor, Inc. were
outstanding on January 31, 2002.

ARVINMERITOR, INC.

INDEX

PART I. FINANCIAL INFORMATION:

Page
Item 1. Financial Statements: No.

Statement of Consolidated Income - - Three
Months Ended December 31, 2001 and 2000.............................. 2

Consolidated Balance Sheet - -
December 31, 2001 and September 30, 2001............................. 3

Condensed Statement of Consolidated Cash Flows - -
Three Months Ended December 31, 2001 and 2000........................ 4

Notes to Consolidated Financial Statements........................... 5

Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition..................... 15

Item 3. Quantitative and Qualitative Disclosures About
Market Risk.......................................................... 18

PART II. OTHER INFORMATION:

Item 1. Legal Proceedings......................................................... 19

Item 2. Changes in Securities and Use of Proceeds................................. 19

Item 5. Other Information......................................................... 20

Item 6. Exhibits and Reports on Form 8-K.......................................... 20

Part I. FINANCIAL INFORMATION
ITEM 1. Financial Statements

ARVINMERITOR, INC.

STATEMENT OF CONSOLIDATED INCOME
(In millions, except per share amounts)

Three Months Ended
December 31,
------------------
2001 2000
---- ----
(Unaudited)

Sales....................................................... $ 1,566 $ 1,659
Cost of sales............................................... (1,408) (1,487)
-------- -------
GROSS MARGIN................................................ 158 172
Selling, general and administrative....................... (95) (102)
Goodwill amortization..................................... - (6)
Restructuring costs....................................... (15) (46)
-------- -------
OPERATING INCOME............................................ 48 18
Equity in earnings of affiliates.......................... - 5
Interest expense, net and other........................... (28) (35)
-------- -------
INCOME (LOSS) BEFORE INCOME TAXES........................... 20 (12)
(Provision) benefit for income taxes...................... (6) 4
Minority interests........................................ (3) (2)
-------- -------
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE.............................. 11 (10)
Cumulative effect of accounting change.................... (42) -
-------- -------
NET LOSS.................................................... $ (31) $ (10)
======== =======

Basic and diluted earnings (loss) per share:
Earnings (loss) per share before cumulative
effect of accounting change........................... $ 0.17 $ (0.15)
Cumulative effect of accounting change.................... (0.64) -
-------- -------
Loss per share............................................ $ (0.47) $ (0.15)
======== =======

Basic average common shares outstanding..................... 65.7 67.0
======== =======
Diluted average common shares outstanding................... 66.0 67.0
======== =======

Cash dividends per common share............................. $ 0.10 $ 0.22
======== =======

See notes to consolidated financial statements.
- --------------------------------------------------------------------------------

ARVINMERITOR, INC.

CONSOLIDATED BALANCE SHEET
(In millions)

December 31, September 30,
2001 2001
----------------- ----------------
ASSETS (Unaudited)

CURRENT ASSETS:
Cash and cash equivalents............................................ $ 107 $ 101
Receivables (less allowance for doubtful accounts:
December 31, 2001, $20 and September 30, 2001, $18) .......... 897 965
Inventories.......................................................... 470 457
Other current assets................................................. 235 232
------- -------
TOTAL CURRENT ASSETS............................................. 1,709 1,755
------- -------
NET PROPERTY.............................................................. 1,186 1,200
NET GOODWILL (less accumulated amortization:
December 31, 2001 and September 30, 2001, $73) 793 835
OTHER ASSETS.............................................................. 546 572
------- -------
TOTAL ASSETS..................................................... $ 4,234 $ 4,362
======= =======

LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES:
Short-term debt...................................................... $ 43 $ 94
Accounts payable..................................................... 1,004 1,054
Accrued compensation and benefits.................................... 185 184
Accrued income taxes................................................. 29 26
Other current liabilities............................................ 311 314
------- -------
TOTAL CURRENT LIABILITIES........................................ 1,572 1,672
------- -------
LONG-TERM DEBT............................................................ 1,353 1,313
ACCRUED RETIREMENT BENEFITS............................................... 448 459
OTHER LIABILITIES......................................................... 140 141
MINORITY INTERESTS........................................................ 57 69
PREFERRED CAPITAL SECURITIES.............................................. 39 57
SHAREOWNERS' EQUITY:
Common stock (December 31, 2001 and September 30, 2001,
71.0 shares issued and 65.6 outstanding)...................... 71 71
Additional paid-in capital........................................... 547 547
Retained earnings.................................................... 412 450
Treasury stock (December 31, 2001 and September 30, 2001,
5.4 shares) (69) (69)
Unearned compensation................................................ (11) (12)
Accumulated other comprehensive loss................................. (325) (336)
------- -------
TOTAL SHAREOWNERS' EQUITY........................................ 625 651
------- -------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $ 4,234 $ 4,362
======= =======

See notes to consolidated financial statements.
- --------------------------------------------------------------------------------

ARVINMERITOR, INC.

CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
(In millions)

Three Months Ended
December 31,
---------------------------
2001 2000
(Unaudited)

OPERATING ACTIVITIES
Income (loss) before cumulative effect of accounting change..................... $ 11 $ (10)
Adjustments to arrive at cash provided by
operating activities:
Depreciation and other amortization....................................... 48 43
Goodwill amortization...................................................... - 6
Restructuring costs, net of expenditures................................... 14 45
Pension and retiree medical expense........................................ 18 15
Pension and retiree medical contributions.................................. (31) (20)
Changes in assets and liabilities, excluding effects of
acquisitions, divestitures and foreign currency adjustments.............. 19 (10)
------- ------
CASH PROVIDED BY OPERATING ACTIVITIES.................................. 79 69
------- ------
INVESTING ACTIVITIES
Capital expenditures............................................................ (34) (50)
Acquisition of businesses and investments....................................... (8) (14)
------- ------
CASH USED FOR INVESTING ACTIVITIES.................................... (42) (64)
------- ------
FINANCING ACTIVITIES
Net (decrease) increase in revolving debt....................................... (7) 41
Purchase of preferred capital securities........................................ (18) (10)
Cash dividends.................................................................. (7) (15)
Purchases of treasury stock..................................................... - (22)
------- ------
CASH USED FOR FINANCING ACTIVITIES..................................... (32) (6)
------- ------
Effect of exchange rate changes on cash......................................... 1 -
------- ------

CHANGE IN CASH AND CASH EQUIVALENTS............................................. 6 (1)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD................................ 101 116
------- ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...................................... $ 107 $ 115
======= ======

See notes to consolidated financial statements.
- --------------------------------------------------------------------------------

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. ArvinMeritor, Inc. (the company or ArvinMeritor) is a leading global
supplier of a broad range of integrated systems, modules and components
serving light vehicle, commercial truck, trailer and specialty original
equipment manufacturers and certain aftermarkets. The company also
provides coil coating applications to the transportation, appliance,
construction and furniture industries. The consolidated financial
statements are those of the company and its consolidated subsidiaries.

In the opinion of the company, the unaudited financial statements contain
all adjustments, consisting solely of adjustments of a normal recurring
nature, necessary to present fairly the financial position, results of
operations and cash flows for the periods presented. These statements
should be read in conjunction with the company's financial statements
included in the Annual Report on Form 10-K for the fiscal year ended
September 30, 2001. The results of operations for the three-month period
ended December 31, 2001 are not necessarily indicative of the results for
the full year.

It is the company's practice for each interim reporting period to make an
estimate of the effective tax rate expected to be applicable for the full
fiscal year. The rate so determined is used in providing for income taxes
on a year-to-date basis.

The company's fiscal year ends on the Sunday nearest September 30. The
company's fiscal quarters end on the Sundays nearest December 31, March
31, and June 30. All year and quarter references relate to the company's
fiscal year and fiscal quarters unless otherwise stated.

Basic earnings per share are based upon the weighted average number of
shares outstanding during each quarter. Diluted earnings per share assumes
the exercise of common stock options when dilutive and the impact of
restricted stock.

Certain prior period amounts have been reclassified to conform with
current period presentation.

2. In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 144 (SFAS 144),
"Accounting for the Impairment or Disposal of Long-Lived Assets." The new
standard requires one model of accounting for long-lived assets to be
disposed of, and broadens the definition of discontinued operations to
include a component of a segment. SFAS 144 is effective for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years, with early adoption encouraged. The company does not expect the
adoption of SFAS 144 to have a significant impact on its financial
position or results of operations.

3. In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 142 (SFAS 142), "Goodwill and Other Intangible Assets." Effective
October 1, 2001, the company adopted SFAS 142, which requires goodwill to
be subject to an annual impairment test, or more frequently if certain
indicators arise, and also eliminates goodwill amortization.

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

As required by this standard, the company reviewed the fair values of each
of its reporting units using discounted cash flows and market multiples.
As a result of this review, the company recorded an impairment loss on
goodwill as a cumulative effect of accounting change for its Coil Coating
operations (classified as "other" for segment reporting) of $42 million
($42 million after-tax, or $0.64 per diluted share) in the first quarter
of fiscal 2002. Recent increases in competition, consolidation in the coil
coating applications industry and the struggling U. S. steel market caused
a decrease in the fair value of this business. There have been no changes
in the carrying value of goodwill since September 30, 2001, other than the
impairment loss on goodwill for the company's Coil Coating operations.

The company's income (loss) before cumulative effect of accounting change
and basic and diluted earnings (loss) per share before cumulative effect
of accounting change would have been as follows had the company been
accounting for its goodwill under SFAS 142 for the three months ended
December 31, 2000 (in millions, except per share amounts):

Three Months Ended
December 31,
----------------------------
2001 2000
----------------------------

Reported income (loss) before cumulative
effect of accounting change................................ $ 11 $ (10)
Add back goodwill amortization expense, net of tax............... - 5
---------- -----------
Adjusted income (loss) before cumulative
effect of accounting change................................ $ 11 $ (5)
========== ===========
Reported basic and diluted earnings (loss) per share
before cumulative effect of accounting change.............. $ 0.17 $ (0.15)
Add back goodwill amortization expense, net of tax............... - 0.08
---------- -----------
Adjusted basic and diluted earnings (loss) per share
before cumulative effect of accounting change........... $ 0.17 $ (0.07)
========== ===========

Information regarding the company's other intangible assets, which
includes trademarks, patents and licenses, is included in Note 8, and
goodwill by segment is included in Note 15.

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

4. The company sells substantially all of the trade receivables of certain
subsidiaries to ArvinMeritor Receivables Corporation (ARC), a wholly owned
subsidiary of the company. ARC has entered into an agreement to sell an
undivided interest in up to $250 million of the receivables to a group of
banks. As of December 31, 2001 and September 30, 2001, $198 million and
$211 million, respectively, of trade receivables had been sold and are
excluded from receivables in the consolidated balance sheet. The company
has no retained interest in the receivables sold, but does retain
collection and administrative responsibilities. The receivables were sold
at fair market value and a discount on the sale of $2 million was recorded
in interest expense, net and other in the three months ended December 31,
2001. As of December 31, 2001 and September 30, 2001, the banks had a
preferential interest in $217 million and $202 million, respectively, of
the remainder of the receivables held at ARC to secure the obligation
under the asset securitization facility.

5. In the first quarter of fiscal 2002, the company recorded a restructuring
charge of $15 million ($10 million after-tax, or $0.15 per diluted share)
for severance and other employee costs related to a net reduction of
approximately 450 employees. As of December 31, 2001, approximately 100
employees had been terminated under this restructuring action, and $14
million of restructuring reserves remained in the consolidated balance
sheet.

During fiscal 2001, the company recorded a net restructuring charge of $67
million ($45 million after-tax, or $0.68 per diluted share). The
restructuring charge was net of $4 million of restructuring reserves
established in fiscal 2000 that were reversed due to a change in
circumstances, and $12 million of restructuring reserves established in
fiscal 2001 that were reversed primarily due to actions taken to minimize
severance costs related to cost-reduction programs in Europe. The fiscal
2001 net charge includes severance and other employee costs of $48 million
related to a net reduction of approximately 1,350 employees, with the
balance primarily associated with facility related costs from the
rationalization of operations. As of December 31, 2001 approximately 1,000
employees had been terminated under this restructuring action.

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

A summary of the restructuring activity as of December 31, 2001 is as
follows (in millions):

Employee
Termination Asset
Benefits Impairment Other Total
-------- ---------- ----- -----

Fiscal 2001 original charge................ $ 60 $ 19 $ 4 $ 83
Reversal of charge in fiscal 2001.......... (12) - - (12)
Write-down of assets....................... - (19) - (19)
Cash payments through 12/31/01............. (23) - (3) (26)
--------- --------- --------- ---------
Subtotal.............................. 25 - 1 26
--------- --------- --------- ---------
Fiscal 2002 first quarter charge........... 15 - - 15
Cash payments through 12/31/01............. (1) - - (1)
--------- --------- --------- ---------
Subtotal.............................. 14 - - 14
--------- --------- --------- ---------
Reserve balance at 12/31/01................ $ 39 $ - $ 1 $ 40
========= ========= ========= =========

In fiscal 2001, the company also recorded $34 million of restructuring
costs that were incurred as a result of the ArvinMeritor merger. These
costs include $17 million related to a net reduction of approximately
1,200 employees, with the balance primarily associated with facility
related costs from the rationalization of operations. As of December 31,
2001, approximately 850 employees had been terminated under this
restructuring action, and $5 million of reserves remained in the
consolidated balance sheet.

6. Inventories are summarized as follows (in millions):

December 31, September 30,
2001 2001
------------------- --------------------

Finished goods.............................................. $ 236 $ 238
Work in process............................................. 123 118
Raw materials, parts and supplies........................... 162 152
--------- ----------
Total.................................................. 521 508
Less allowance to adjust the carrying value of
certain inventories to a LIFO basis.................... 51 51
--------- ----------
Inventories............................................ $ 470 $ 457
========= ==========
</Table>

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

7. Other Current Assets are summarized as follows (in millions):

December 31, September 30,
2001 2001
------------------ --------------------

Current deferred income taxes............................... $ 130 $ 138
Customer tooling............................................ 31 30
Asbestos-related recoveries................................. 24 24
Prepaid and other........................................... 50 40
--------- ----------
Other Current Assets................................... $ 235 $ 232
========= ==========

8. Other Assets are summarized as follows (in millions):

December 31, September 30,
2001 2001
------------------ --------------------

Investments in affiliates................................... $ 165 $ 186
Long-term deferred income taxes............................. 122 119
Prepaid pension costs....................................... 88 87
Net capitalized computer software costs..................... 42 42
Asbestos-related recoveries................................. 36 36
Trademarks.................................................. 23 23
Patents and licenses (less accumulated
amortization: December 31, 2001 and
September 30, 2001, $2) .................................. 13 13
Other....................................................... 57 66
--------- ----------
Other Assets........................................... $ 546 $ 572
========= ==========

The company's trademarks, which were determined to have an indefinite
life, are not amortized, and patents and licenses are amortized over their
contractual lives. The company anticipates amortization expense for
patents and licenses of approximately $2 million per year for fiscal years
2002 through 2004 and approximately $1 million per year for fiscal years
2005 through 2007.

9. Other Current Liabilities are summarized as follows (in millions):

December 31, September 30,
2001 2001
------------------ --------------------

Accrued product warranties.................................. $ 84 $ 94
Accrued taxes other than income taxes....................... 46 48
Accrued restructuring....................................... 45 46
Asbestos-related liabilities................................ 24 24
Environmental reserves...................................... 14 18
Other....................................................... 98 84
--------- ----------
Other Current Liabilities.............................. $ 311 $ 314
========= ==========

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

10. Other Liabilities are summarized as follows (in millions):

December 31, September 30,
2001 2001
------------------ --------------------

Asbestos-related liabilities................................ $ 47 $ 47
Deferred payments........................................... 29 29
Environmental reserves...................................... 25 25
Other....................................................... 39 40
--------- ----------
Other Liabilities...................................... $ 140 $ 141
========= ==========

11. Long-Term Debt, net of discount where applicable, is summarized as follows
(in millions):

December 31, September 30,
2001 2001
------------------ --------------------

6 3/4 percent notes due 2008................................ $ 100 $ 100
7 1/8 percent notes due 2009................................ 150 150
6.8 percent notes due 2009.................................. 498 498
Bank revolving credit facilities............................ 597 495
Lines of credit and other................................... 51 164
--------- ----------
Subtotal................................................. 1,396 1,407
Less: current maturities................................... (43) (94)
--------- -----------
Long-Term Debt..................................... $ 1,313 $ 1,353
========= ===========

The company has two unsecured credit facilities: a 364-day, $750-million
credit facility and a five-year $750-million revolving credit facility.
The 364-day facility matures on June 26, 2002, with the option to convert
borrowings thereunder to a one-year term loan. The five-year facility
matures on June 27, 2005. In addition, the company has $50 million of
unsecured lines of credit and a commercial paper program with authorized
borrowings of up to $1 billion. Interest rates applicable to the company's
commercial paper borrowings are currently higher than the cost of other
available sources of financing, and no borrowings were outstanding as of
December 31, 2001 or September 30, 2001.

On April 12, 2001, the company filed a shelf registration statement with
the Securities and Exchange Commission registering $750 million aggregate
principal amount of debt securities that may be offered in one or more
series on terms to be determined at the time of sale. The registration
statement became effective on April 18, 2001. Except as may otherwise be
determined at the time of sale, the net proceeds would be used for
repayment of outstanding indebtedness and for other general corporate
purposes.

Included in lines of credit and other above at December 31, 2001 and
September 30, 2001 were $21 million and $50 million, respectively, of
borrowings with a non-consolidated affiliate.

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

12. Accrued Retirement Benefits consisted of the following (in millions):

December 31, September 30,
2001 2001
------------------ --------------------

Accrued retirement medical costs............................ $ 316 $ 318
Accrued pension costs....................................... 149 158
Other....................................................... 33 33
--------- ----------
Subtotal................................................ 498 509
Less: current liability..................................... (50) (50)
--------- ----------
Accrued Retirement Benefits $ 448 $ 459
========= ==========

13. The company uses forward exchange contracts to offset the effect of
exchange rate fluctuations on foreign currency denominated payables and
receivables. These contracts help minimize the risk of loss from changes
in exchange rates, and are generally of short duration (less than three
months). The foreign currency denominated payables and receivables are
remeasured on a quarterly basis and the forward exchange contracts are
utilized to help offset the earnings impact of the remeasurement. The
company has elected not to designate the forward exchange contracts as
hedges. Therefore, change in the fair value of the foreign exchange
contracts is recognized in operating income. The net income impact of
recording these items in the three-month period ended December 31, 2001
and 2000 did not have a significant effect on the results of operations.

Forward exchange contracts were also utilized to hedge the purchase of
equipment payable in foreign currency and were designated as fair value
hedges of the firm commitment. The fair value of the firm commitment was
recorded as an asset, the value of the forward contracts was recorded as a
liability, and there was no impact to earnings during both quarters. The
value of both the firm commitment and the forward exchange contracts are
determined using the forward exchange rates, with all other critical terms
of the forward contracts and the hedged transaction being the same.
Therefore, the company has determined the change in fair value
attributable to the risk being hedged is expected to be completely offset
by the change in fair value of the forward contracts. Future assessments
of hedge effectiveness will include verifying and documenting if the
critical terms of the forward contracts and the firm commitment have
changed.

The company's financial instruments include cash and cash equivalents,
short- and long-term debt and foreign currency forward exchange contracts.
As of December 31, 2001, the carrying values of the company's financial
instruments approximated their fair values based on prevailing market
prices and rates. The notional amount of outstanding foreign currency
forward exchange contracts aggregated $64 million at December 31, 2001 and
$68 million at September 30, 2001. It is the policy of the company not to
enter into derivative instruments for speculative purposes.

14. In July 2000, the company's board of directors authorized a program to
repurchase up to $100 million of its common stock. As of December 31, 2001
and September 30, 2001, 5.4 million shares of ArvinMeritor common stock
had been purchased under this program at an aggregate cost of
approximately $84 million, or an average of $15.39 per share. This program
was terminated in November 2001.

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

15. ArvinMeritor currently has three reportable operating segments: Light
Vehicle Systems (LVS), Commercial Vehicle Systems (CVS) and Light Vehicle
Aftermarket (LVA). LVS is a major supplier of aperture systems (primarily
roof, door and access control systems and motion control products),
undercarriage systems (primarily suspension, ride control and wheel
products) and exhaust systems for passenger cars, light trucks and sport
utility vehicles to original equipment manufacturers. CVS is a leading
supplier of drivetrain systems and components, including axles, brakes,
drivelines and ride control products, for medium- and heavy-duty trucks,
trailers and off-highway equipment and specialty vehicles. LVA supplies
exhaust, ride control, filter products and accessories to the light
vehicle aftermarket. Business units that are not focused on automotive
products are classified as "Other." The company's Coil Coating operation
is the primary component of this classification.

Segment information is summarized as follows (in millions):

Three Months Ended
December 31,
-----------------------------
2001 2000
------------- -------------

Sales:
Light Vehicle Systems................................... $ 852 $ 870
Commercial Vehicle Systems.............................. 483 552
Light Vehicle Aftermarket............................... 194 197
Other................................................... 37 40
---------- -----------
Total............................................... $ 1,566 $ 1,659
========== ===========
Operating income:
Light Vehicle Systems................................... $ 44 $ 52
Commercial Vehicle Systems.............................. 11 12
Light Vehicle Aftermarket............................... 9 3
Other................................................... (1) (3)
---------- -----------
Segment operating income.......................... 63 64
Restructuring costs..................................... (15) (46)
---------- -----------
Operating income................................... 48 18
Equity in earnings of affiliates........................ - 5
Interest expense, net and other......................... (28) (35)
---------- -----------
Income (loss) before income taxes....................... 20 (12)
(Provision) benefit for income taxes.................... (6) 4
Minority interests...................................... (3) (2)
---------- -----------
Income (loss) before cumulative effect
of accounting change.................................. $ 11 $ (10)
========== ===========

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The carrying value of goodwill for the company's segments as of December
31, 2001 was as follows (in millions):

Light Vehicle Systems............................................ $ 222
Commercial Vehicle Systems....................................... 400
Light Vehicle Aftermarket........................................ 171
Other............................................................ -
----------
Net Goodwill.............................................. $ 793
==========

16. Comprehensive loss is summarized as follows (in millions):

Three Months Ended
December 31,
---------------------------
2001 2000
---------- ---------

Net loss.............................. $ (31) $ (10)
Foreign currency translation.......... 11 5
--------- ---------
Comprehensive loss.................... $ (20) $ (5)
========= =========

17. Federal, state and local requirements relating to the discharge of
substances into the environment, the disposal of hazardous wastes and
other activities affecting the environment have, and will continue to
have, an impact on the manufacturing operations of the company. Thus far,
compliance with environmental requirements and resolution of environmental
claims has been accomplished without material effect on the company's
business, financial condition or results of operations.

The company has been designated as a potentially responsible party at 8
Superfund sites, excluding sites as to which the company's records
disclose no involvement or as to which the company's potential liability
has been finally determined. Management estimates the total, reasonably
possible costs the company could incur for the remediation of Superfund
sites at December 31, 2001, to be approximately $33 million, of which $15
million has been accrued.

Various other lawsuits, claims and proceedings have been asserted against
the company, alleging violations of federal, state and local environmental
protection requirements, or seeking remediation of alleged environmental
impairments, principally at previously disposed-of properties. For these
matters, management has estimated the total, reasonably possible costs the
company could incur at December 31, 2001, to be approximately $52 million,
of which $24 million has been recorded.

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Based on its assessment, management believes that the company's
expenditures for environmental capital investment and remediation
necessary to comply with present regulations governing environmental
protection and other expenditures for the resolution of environmental
claims will not have a material adverse effect on the company's business,
financial condition or results of operations. Management cannot assess the
possible effect of compliance with future requirements.

Various other lawsuits, claims and proceedings have been or may be
instituted or asserted against the company, relating to the conduct of its
business, including those pertaining to product liability, intellectual
property, safety and health, and employment matters. Included in these
matters are claims for alleged asbestos-related personal injuries, which
arose from products manufactured prior to 1977 by a subsidiary acquired by
Arvin in 1986. During fiscal years 1996 through 2001, the company and its
predecessors paid asbestos-related claims of approximately $40 million,
substantially all of which were reimbursed by insurance. As of December
31, 2001, the company has accrued $71 million for contingent
asbestos-related liabilities, and recorded assets of $60 million for
probable recoveries from insurance. Based on its assessment of the
history and nature of filed claims to date, management believes that
existing insurance coverage will reimburse substantially all of the
potential liabilities and expenses related to pending and future claims.

Prior to February 1, 2001, the Center for Claims Resolution (the "CCR")
handled the processing and settlement of asbestos claims on behalf of the
company. The company shared in the payments of defense costs and
settlements of the asbestos claims with other CCR members. Several members
of the CCR have filed for bankruptcy protection, and these members have
failed, or may fail, to pay certain financial obligations with respect to
settlements that were reached while they were CCR members. The company
expects to be subject to claims for payment of a portion of the defaulted
shares. In effort to resolve the affected settlements, the company has
entered into negotiations with plaintiffs' attorneys, and an estimate of
the company's obligation has been included in the recorded reserves. The
company and its insurers are engaged in proceedings to determine whether
existing insurance coverage should reimburse any potential liability
related to this issue.

Although the outcome of litigation cannot be predicted with certainty, and
some lawsuits, claims or proceedings may be disposed of unfavorably to the
company, management believes the disposition of matters that are pending
or asserted will not have a material adverse effect on the company's
business, financial condition or results of operations.

ARVINMERITOR, INC.

Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition

RESULTS OF OPERATIONS

2002 First Quarter Compared to 2001 First Quarter

Sales for the first quarter of fiscal 2002 were $1,566 million, a decrease of
$93 million, or 6 percent, as compared to last year's first quarter results. The
sales decline was driven primarily by the Commercial Vehicle Systems (CVS)
business, which has been affected by reduced build rates for North American
Class 8 trucks. The softening in North American and Western European light
vehicle production also contributed to the company's lower sales.

Effective October 1, 2001, the company adopted Statement of Financial Accounting
Standards No. 142 (SFAS 142), "Goodwill and Other Intangible Assets", which
requires goodwill to be subject to an annual impairment test, or more frequently
if certain indicators arise, and also eliminates goodwill amortization. As
required by this standard, the company reviewed the fair values of each of its
reporting units using discounted cash flows and market multiples. As a result of
this review, the company recorded an impairment loss on goodwill as a cumulative
effect of accounting change for its Coil Coating operations (classified as
"other" for segment reporting) of $42 million ($42 million after-tax, or $0.64
per diluted share) in the first quarter of fiscal 2002. Recent increases in
competition, consolidation in the coil coating applications industry and the
struggling U.S. steel market caused a decrease in the fair value of this
business. The adoption of the new accounting standard also eliminated goodwill
amortization expense of $6 million ($5 million after-tax, or $0.08 per diluted
share) for the first quarter of fiscal 2002 and will eliminate $24 million ($20
million after-tax, or $0.30 per diluted share) for the full year.

First quarter fiscal 2002 operating income was $48 million, compared to $18
million in the first quarter of 2001. Included in operating income were
restructuring charges of $15 million ($10 million after-tax, or $0.15 per
diluted share) in the first quarter of fiscal 2002 and $46 million ($30 million
after-tax, or $0.45 per diluted share) in the first quarter of fiscal 2001.

The first quarter fiscal 2002 restructuring charge of $15 million related to
employee severance benefits for approximately 450 salaried employees. The
company expects to recover these costs in less than one year and estimates these
actions, when fully implemented, will reduce annual operating costs by
approximately $24 million ($16 million after-tax). The company's Light Vehicle
Systems (LVS) business is expected to account for approximately 50 percent of
the annual savings, CVS business about 42 percent, and Light Vehicle Aftermarket
(LVA) and other about 8 percent.

Excluding restructuring costs, operating income was $63 million, compared to $64
million for the same period last year ($70 million after adjusting for goodwill
amortization expense of $6 million). Operating margin was 4.0 percent, compared
to last year's 3.9 percent (4.2 percent after adjusting for amortization
expense). The LVS segment primarily drove the operating income and margin
decline, as described below.

Equity in earnings of affiliates declined $5 million, compared to the same
period last year, primarily due to declining earnings from commercial vehicle
affiliates. Net interest expense decreased $7 million, or 20 percent, compared
to the same period last year, primarily reflecting lower interest rates and debt
levels. Debt levels have been reduced as a result of strong operating cash flow
and the impact of the company's accounts receivable securitization program (see
below).

ARVINMERITOR, INC.

The first quarter effective tax rate of 32 percent was down from 35.5 percent
for the first quarter of the prior year. The company expects the full year
effective tax rate to approximate the first quarter rate of 32 percent.

Income before cumulative effect of accounting change was $11 million, or $0.17
per basic and diluted share for the quarter ended December 31, 2001, as compared
to a net loss of $10 million, or $0.15 per basic and diluted share for the same
period last year. As discussed above, the company recorded a cumulative effect
of accounting change, upon the adoption of SFAS 142, of $42 million ($42 million
after-tax, or $0.64 per diluted share) in the first quarter of fiscal 2002. Net
loss in fiscal 2002 first quarter was $31 million.

LVS sales were $852 million, down $18 million, or 2 percent, from the first
quarter of fiscal 2001 and operating income was $44 million, a decrease of $8
million from last year's first quarter. Operating margin fell to 5.2 percent
from 6.0 percent in last year's first quarter (6.2 percent adjusted to exclude
goodwill amortization expense of $2 million). Continued margin pressures from
the vehicle manufacturers and production declines contributed to the operating
margin decline. LVS continues to offset these margin challenges through
restructuring and other programs aimed at lowering fixed costs. In addition,
start-up costs associated with the new Detroit manufacturing facility, as well
as higher engineering and launch costs associated with new product development
negatively impacted the first quarter of fiscal 2002 results by approximately $6
million.

CVS sales were $483 million, down $69 million, or 13 percent, from last year's
first quarter and operating income was $11 million, compared to $12 million in
last year's first quarter. CVS operating margin was 2.3 percent, compared to 2.2
percent in the first quarter of fiscal 2001 (2.7 percent after excluding
goodwill amortization expense of $3 million). The continued decline in Class 8
North American truck volumes was the major factor in the sales decrease. CVS has
been able to offset much of the impact of the sales decline on its margins by
lowering its fixed-cost structure through restructuring programs and other
cost-reduction activities.

LVA sales were $194 million, down slightly from $197 million in last year's
first quarter. Operating income increased to $9 million from $3 million in the
prior year's first quarter. LVA operating margin increased to 4.6 percent, up
from 1.5 percent in the first quarter of fiscal 2001 (2.0 percent after
excluding goodwill amortization expense of $1 million). While the markets
remained weak for aftermarket parts, LVA was able to increase its operating
margin as a result of improved pricing and the impact of ongoing cost
reductions.

ARVINMERITOR, INC.

FINANCIAL CONDITION

Cash provided by operating activities for the first three months of fiscal 2002
was $79 million, an increase of $10 million compared to the first three months
of fiscal 2001 and reflects the company's continued focus on working capital
management. Depreciation and other amortization expense was $48 million for the
first quarter of fiscal 2002. The company anticipates depreciation and other
amortization expense to be approximately $195 million to $205 million for the
entire fiscal year.

The company participates in an asset securitization facility to improve
financial flexibility and lower interest costs. ArvinMeritor Receivables
Corporation (ARC), a wholly owned subsidiary of the company, has entered into an
agreement to sell an undivided interest in up to $250 million of trade
receivables to a group of banks. The accounts receivable sold are reflected as a
reduction to accounts receivable in the consolidated balance sheet. As of
December 31, 2001, the company had utilized $198 million of the asset
securitization facility (see Note 4 to the Consolidated Financial Statements).

Capital expenditures were $34 million in the first three months of fiscal 2002,
compared to $50 million in the first three months of fiscal 2001. The decrease
was driven by the company's fiscal 2002 cost-reduction initiatives, which
include salaried workforce reductions (discussed above), delays in merit
increases and limitations on capital spending. The company anticipates full year
fiscal 2002 capital expenditures of approximately $170 million to $180 million.

Cash used for financing activities in the fiscal 2002 first quarter includes
payments totaling $25 million to reduce debt and purchase preferred capital
securities. Cash used for financing activities also includes payment of $7
million for cash dividends. The company's first quarter dividend of $0.10 cents
per share was paid on December 17, 2001, to shareowners of record on November
26, 2001. Cash used for financing activities for the first three months of
fiscal 2001 included the purchase of preferred capital securities of $10
million, and payments for purchases of the company's common stock of $22 million
and cash dividends of $15 million, offset by an increase in revolving debt of
$41 million.

The company's total debt to capitalization ratio increased slightly to 68
percent at December 31, 2001, from 67 percent at September 30, 2001.

The company has two unsecured credit facilities: a 364-day, $750-million credit
facility and a five-year $750-million revolving credit facility. The 364-day
facility matures on June 26, 2002, with the option to convert borrowings
thereunder to a one-year term loan. The five-year facility matures on June 27,
2005. In addition, the company has $50 million of unsecured lines of credit and
a commercial paper program with authorized borrowings of up to $1 billion.
Interest rates applicable to the company's commercial paper borrowings are
currently higher than the cost of other available sources of financing, and no
borrowings were outstanding as of December 31, 2001 or September 30, 2001.

On April 12, 2001, the company filed a shelf registration statement with the
Securities and Exchange Commission registering $750 million aggregate principal
amount of debt securities that may be offered in one or more series on terms to
be determined at the time of sale. The registration statement became effective
on April 18, 2001. The company anticipates issuing debt securities under this
shelf registration at some time during the remainder of fiscal 2002. Except as
may otherwise be determined at the time of sale, the net proceeds would be used
for repayment of outstanding indebtedness and for other general corporate
purposes.

ARVINMERITOR, INC.

INTERNATIONAL OPERATIONS

On January 1, 2002, the Euro became the sole legal tender in eleven countries of
the European Union. The company is engaged in business in many of the countries
that participate in the European Monetary Union, and sales for fiscal 2001 in
these countries were approximately 18 percent of the company's total sales. In
addition, the company enters into foreign currency forward exchange contracts
denominated in the Euro and has borrowings in participating countries.

The company has made the necessary adjustments to accommodate the Euro
conversion, including modifications to its information technology systems and
programs, pricing schedules and financial instruments, and believes that the
conversion has not had and will not have a material adverse effect on its
business, financial condition or results of operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The company is exposed to foreign currency exchange rate risk related to its
transactions denominated in currencies other than the U.S. dollar and interest
rate risk associated with the company's debt.

The company enters into foreign currency forward exchange contracts to minimize
the risk of unanticipated gains and losses from currency rate fluctuations on
foreign currency commitments entered into in the ordinary course of business
(See Note 13 to the Consolidated Financial Statements for information on
accounting for these contracts). It is the policy of the company not to enter
into derivative financial instruments for speculative purposes, and therefore,
the company holds no derivative instruments for trading purposes.

The company has performed a sensitivity analysis assuming a hypothetical 10
percent adverse movement in foreign currency exchange rates and interest rates
applied to the underlying exposures described above. As of December 31, 2001,
the analysis indicated that such market movements would not have a material
effect on the company's business, financial condition, or results of operations.
Actual gains or losses in the future may differ significantly from that
analysis, however, based on changes in the timing and amount of interest rate
and foreign currency exchange rate movements and the company's actual exposures.

ARVINMERITOR, INC.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Various lawsuits, claims and proceedings have been or may be
instituted or asserted against the company, relating to the conduct of
its business, including those pertaining to product liability,
intellectual property, safety and health, and employment matters.
Included in these matters are claims for alleged asbestos-related
personal injuries, which arose from products manufactured prior to 1977
by a subsidiary acquired by Arvin in 1986. During fiscal years 1996
through 2001, the company and its predecessors paid asbestos-related
claims of approximately $40 million, substantially all of which were
reimbursed by insurance. As of December 31, 2001, the company has
accrued $71 million for contingent asbestos-related liabilities, and
recorded assets of $60 million for probable recoveries from insurance.
Based on its assessment of the history and nature of filed claims to
date, management believes that existing insurance coverage will
reimburse substantially all of the potential liabilities and expenses
related to pending and future claims.

Prior to February 1, 2001, the Center for Claims Resolution (the "CCR")
handled the processing and settlement of asbestos claims on behalf of
the company. The company shared in the payments of defense costs and
settlements of the asbestos claims with other CCR members. Several
members of the CCR have filed for bankruptcy protection, and these
members have failed, or may fail, to pay certain financial obligations
with respect to settlements that were reached while they were CCR
members. The company expects to be subject to claims for payment of a
portion of the defaulted shares. In effort to resolve the affected
settlements, the company has entered into negotiations with plaintiffs'
attorneys, and an estimate of the company's obligation has been
included in the recorded reserves. The company and its insurers are
engaged in proceedings to determine whether existing insurance coverage
should reimburse any potential liability related to this issue.

Although the outcome of litigation cannot be predicted with certainty,
and some lawsuits, claims or proceedings may be disposed of unfavorably
to the company, management believes the disposition of matters that are
pending or asserted will not have a material adverse effect on the
company's business, financial condition or results of operations.

Item 2. Changes in Securities and Use of Proceeds

On October 1, 2001, the company issued 599 shares of Common Stock to
each of James E. Perrella and Martin D. Walker, non-employee directors
of the company, pursuant to the terms of the company's Directors Stock
Plan, in lieu of cash payment of the quarterly retainer fee for board
service. The issuance of these securities was exempt from registration
under the Securities Act of 1933, as a transaction not involving a
public offering under Section 4(2).

ARVINMERITOR, INC.

Item 5. Other Information.

Cautionary Statement

This Quarterly Report on Form 10-Q 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" and similar expressions. 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 conditions; the
demand for commercial, specialty and light vehicles for which the
company supplies products; risks inherent in operating abroad; 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 customers and suppliers;
successful integration of acquired or merged businesses; achievement of
the expected annual savings and synergies from past and future business
combinations; competitive product and pricing pressures; the amount of
the company's debt; the ability of the company to access capital
markets; the credit ratings of the company's debt; the outcome of
litigation; as well as other risks and uncertainties, including but not
limited to those detailed herein and from time to time in other filings
of the company with the Securities and Exchange Commission. See also
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" and "Quantitative and Qualitative Disclosures
about Market Risk" herein. 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.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits.

10 - First Amendment to Amended and Restated Receivables Sale
Agreement, dated as of December 21, 2001, among ArvinMeritor
Receivables Corporation, the company, Amsterdam Funding
Corporation, ABN Amro Bank N.V., Giro Balanced Funding
Corporation, Atlantic Asset Securitization Corp., Bauyerische
Landesbank, Cayman Islands Branch, Bayerische Landesbank, New York
Branch and Credit Lyonnais.

12 - Computation of ratio of earnings to fixed charges.

(b) Reports on Form 8-K.

There were no reports on Form 8-K filed during the quarter ended December 31,
2001.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

ARVINMERITOR, INC.
----------------------------------------
(Registrant)

Date February 8, 2002 By V.G. Baker, II
-------------------------------------------- ----------------------------------------
V.G. Baker, II
Senior Vice President and
General Counsel
(For the Registrant)

Date February 8, 2002 By D. S. Bullock
-------------------------------------------- ----------------------------------------
D. S. Bullock
Vice President and Controller
(Principal Accounting Officer)

INDEX TO EXHIBITS

Exhibit
Number Description
- ------- ----------------------------------------

10 First Amendment To Amended and Restated
Receivables Sale Agreement

12 Computation of Earnings to Fixed Charges
Quarter Ended December 31, 2001