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 March 31, 2002
--------------------------------------------

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
-------- --------

67,882,174 shares of Common Stock, $1.00 par value, of ArvinMeritor, Inc. were
outstanding on April 30, 2002.

ARVINMERITOR, INC.

INDEX

PART I. FINANCIAL INFORMATION:

Page
Item 1. Financial Statements: No.

Statement of Consolidated Income - - Three Months
and Six Months Ended March 31, 2002 and 2001......................... 2

Consolidated Balance Sheet - -
March 31, 2002 and September 30, 2001................................ 3

Condensed Statement of Consolidated Cash Flows - -
Six Months Ended March 31, 2002 and 2001............................. 4

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

Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition........................... 17

Item 3. Quantitative and Qualitative Disclosures About
Market Risk................................................................ 24

PART II. OTHER INFORMATION:

Item 1. Legal Proceedings......................................................... 25

Item 2. Changes in Securities and Use of Proceeds................................. 26

Item 4. Submission of Matters to a Vote of Security Holders....................... 27

Item 5. Other Information......................................................... 28

Item 6. Exhibits and Reports on Form 8-K.......................................... 29

Part I. FINANCIAL INFORMATION
ITEM 1. Financial Statements

ARVINMERITOR, Inc.

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

Three Months Ended Six Months Ended
March 31, March 31,
------------------------ ------------------------
2002 2001 2002 2001
------- ------- ------- -------
(Unaudited)

Sales .......................................................... $ 1,687 $ 1,787 $ 3,253 $ 3,446
Cost of sales .................................................. (1,508) (1,606) (2,916) (3,095)
------- ------- ------- -------
GROSS MARGIN ................................................... 179 181 337 351
Selling, general and administrative .......................... (97) (98) (192) (198)
Goodwill amortization ........................................ -- (6) -- (12)
Restructuring costs .......................................... -- (9) (15) (55)
------- ------- ------- -------
OPERATING INCOME ............................................... 82 68 130 86
Equity in earnings of affiliates ............................. (1) 4 (1) 9
Interest expense, net and other .............................. (25) (38) (53) (73)
------- ------- ------- -------
INCOME BEFORE INCOME TAXES ..................................... 56 34 76 22
Provision for income taxes ................................... (18) (11) (24) (7)
Minority interests ........................................... (3) (2) (6) (4)
------- ------- ------- -------
INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE .................................. 35 21 46 11
Cumulative effect of accounting change ....................... -- -- (42) --
------- ------- ------- -------
NET INCOME ..................................................... $ 35 $ 21 $ 4 $ 11
======= ======= ======= =======

Basic earnings per share before cumulative
effect of accounting change .................................. $ 0.53 $ 0.32 $ 0.70 $ 0.17
Cumulative effect of accounting change ......................... -- -- (0.64) --
------- ------- ------- -------

Basic earnings per share ....................................... $ 0.53 $ 0.32 $ 0.06 $ 0.17
======= ======= ======= =======

Diluted earnings per share before cumulative
effect of accounting change .................................. $ 0.52 $ 0.32 $ 0.69 $ 0.17
Cumulative effect of accounting change ......................... -- -- (0.63) --
------- ------- ------- -------

Diluted earnings per share ..................................... $ 0.52 $ 0.32 $ 0.06 $ 0.17
======= ======= ======= =======

Basic average common shares outstanding ........................ 66.1 65.9 65.9 66.4
======= ======= ======= =======
Diluted average common shares outstanding ...................... 67.0 65.9 66.4 66.4
======= ======= ======= =======

Cash dividends per common share ................................ $ 0.10 $ 0.22 $ 0.20 $ 0.44
======= ======= ======= =======

See notes to consolidated financial statements.

ARVINMERITOR, Inc.

CONSOLIDATED BALANCE SHEET
(In millions)

March 31, September 30,
2002 2001
--------- -------------
ASSETS (Unaudited)

CURRENT ASSETS:
Cash and cash equivalents .............................................................. $ 92 $ 101
Receivables (less allowance for doubtful accounts:
March 31, 2002, $19 and September 30, 2001, $18) ................................ 930 965
Inventories ............................................................................ 454 457
Other current assets ................................................................... 242 232
------- -------
TOTAL CURRENT ASSETS ............................................................... 1,718 1,755
------- -------
NET PROPERTY ................................................................................ 1,162 1,200
NET GOODWILL (less accumulated amortization:
March 31, 2002 and September 30, 2001, $73) ........................................ 788 835
OTHER ASSETS ................................................................................ 545 572
------- -------
TOTAL ASSETS ....................................................................... $ 4,213 $ 4,362
======= =======

LIABILITIES AND SHAREOWNERS' EQUITY

CURRENT LIABILITIES:
Short-term debt ........................................................................ $ 24 $ 94
Accounts payable ....................................................................... 1,054 1,054
Accrued compensation and benefits ...................................................... 210 184
Accrued income taxes ................................................................... 30 26
Other current liabilities .............................................................. 259 314
------- -------
TOTAL CURRENT LIABILITIES .......................................................... 1,577 1,672
------- -------
LONG-TERM DEBT .............................................................................. 1,335 1,313
ACCRUED RETIREMENT BENEFITS ................................................................. 429 459
OTHER LIABILITIES ........................................................................... 119 141
MINORITY INTERESTS .......................................................................... 58 69
PREFERRED CAPITAL SECURITIES ................................................................ 39 57
SHAREOWNERS' EQUITY:
Common stock (March 31, 2002, 71.0 shares issued and 67.7 outstanding;
September 30, 2001, 71.0 shares issued
and 66.5 outstanding) ............................................................. 71 71
Additional paid-in capital ............................................................. 549 547
Retained earnings ...................................................................... 441 450
Treasury stock (March 31, 2002, 3.3 shares;
September 30, 2001, 4.5 shares) ................................................... (50) (69)
Unearned compensation .................................................................. (15) (12)
Accumulated other comprehensive loss ................................................... (340) (336)
------- -------
TOTAL SHAREOWNERS' EQUITY .......................................................... 656 651
------- -------

TOTAL LIABILITIES AND SHAREOWNERS' EQUITY .......................................... $ 4,213 $ 4,362
======= =======

See notes to consolidated financial statements.

ARVINMERITOR, Inc.

CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
(In millions)

Six Months Ended
March 31,
-----------------------------
2002 2001
--------- --------
(Unaudited)

OPERATING ACTIVITIES
Income before cumulative effect of accounting change............................ $ 46 $ 11
Adjustments to arrive at cash provided by
operating activities:
Depreciation and other amortization....................................... 94 97
Goodwill amortization...................................................... - 12
Restructuring costs, net of expenditures................................... 10 50
Pension and retiree medical expense........................................ 39 31
Pension and retiree medical contributions.................................. (69) (38)
Sale of receivables........................................................ - 100
Changes in assets and liabilities, excluding effects of
acquisitions, divestitures and foreign currency adjustments.............. 18 2
--------- --------
CASH PROVIDED BY OPERATING ACTIVITIES.................................. 138 265
--------- --------

INVESTING ACTIVITIES
Capital expenditures............................................................ (64) (103)
Other investing activities...................................................... (21) (27)
---------- --------
CASH USED FOR INVESTING ACTIVITIES..................................... (85) (130)
--------- --------

FINANCING ACTIVITIES
Net decrease in revolving debt.................................................. (442) (99)
Proceeds from issuance of notes................................................. 394 -
Purchase of preferred capital securities........................................ (18) (10)

Proceeds from exercise of stock options......................................... 17 -
Cash dividends.................................................................. (13) (29)
Purchases of treasury stock..................................................... - (31)
--------- --------
CASH USED FOR FINANCING ACTIVITIES..................................... (62) (169)
--------- --------

Effect of exchange rate changes on cash......................................... - (6)
--------- --------
CHANGE IN CASH AND CASH EQUIVALENTS............................................. (9) (40)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD....................................................... 101 116
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...................................... $ 92 $ 76
========= ========

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 and
six-month periods ended March 31, 2002 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 an impairment loss to be recognized if the carrying value of a
long-lived asset or asset group is greater than the future undiscounted
cash flows, 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 $0.63 per diluted share) in the first quarter of
fiscal 2002. Increased 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 and
fluctuation due to changes in foreign currency exchange rates.

The company's income before cumulative effect of accounting change and
diluted earnings 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- and six-month periods ended March 31, 2001
(in millions, except per share amounts):

Three Months Six Months
Ended Ended
March 31, March 31,
--------- ----------- ----------------------
2002 2001 2002 2001
------ ------ ------ ------

Reported income before cumulative effect of
accounting change ............................................. $ 35 $ 21 $ 46 $ 11
Add back goodwill amortization expense, net of tax ................. -- 5 -- 10
------ ------ ------ ------
Adjusted income before cumulative effect of
accounting change ............................................. $ 35 $ 26 $ 46 $ 21
====== ====== ====== ======

Reported basic earnings per share before
cumulative effect of accounting change ........................ $ 0.53 $ 0.32 $ 0.70 $ 0.17
Add back goodwill amortization expense, net of tax ................. -- 0.07 -- 0.15
------ ------ ------ ------
Adjusted basic earnings per share before
cumulative effect of accounting change ........................ $ 0.53 $ 0.39 $ 0.70 $ 0.32
====== ====== ====== ======

Reported diluted earnings per share before
cumulative effect of accounting change ........................ $ 0.52 $ 0.32 $ 0.69 $ 0.17
Add back goodwill amortization expense, net of tax ................. -- 0.07 -- 0.15
------ ------ ------ ------
Adjusted diluted earnings per share before
cumulative effect of accounting change ........................ $ 0.52 $ 0.39 $ 0.69 $ 0.32
====== ====== ====== ======

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 14.

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 March 31, 2002 and September 30, 2001, $211 million 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 perform collection and administrative
functions. The receivables were sold at fair market value and a discount
on the sale was recorded in interest expense, net and other of $2 million
and $4 million, in the three- and six-month periods ended March 31, 2002,
respectively. As of March 31, 2002 and September 30, 2001, the banks had
a preferential interest in $211 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 March 31, 2002, approximately 300
employees had been terminated under this restructuring action, and $10
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 March 31, 2002, approximately 1,100
employees had been terminated under this restructuring action, and $20
million of restructuring reserves remained in the consolidated balance
sheet.

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

A summary of the restructuring activity as of March 31, 2002 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 3/31/02............... (29) - (3) (32)
--------- --------- --------- ----------
Subtotal.............................. 19 - 1 20
--------- --------- --------- ---------
Fiscal 2002 first quarter charge............ 15 - - 15
Cash payments through 3/31/02............... (5) - - (5)
--------- --------- --------- ---------
Subtotal.............................. 10 - - 10
--------- --------- --------- ---------
Reserve balance at 3/31/02.................. $ 29 $ - $ 1 $ 30
========= ========= ========= =========

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 March 31, 2002,
approximately 1,100 employees had been terminated under this restructuring
action, and $4 million of reserves remained in the consolidated balance
sheet.

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

March 31, September 30,
2002 2001
--------- -------------

Finished goods.............................................. $ 224 $ 238
Work in process............................................. 122 118
Raw materials, parts and supplies........................... 159 152
--------- ----------
Total.................................................. 505 508
Less allowance to adjust the carrying value of
certain inventories to a LIFO basis....................... (51) (51)
--------- ----------
Inventories........................................... $ 454 $ 457
========= ==========

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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

March 31, September 30,
2002 2001
--------- -------------

Current deferred income taxes............................... $ 132 $ 138
Customer tooling............................................ 33 30
Asbestos-related recoveries................................. 24 24
Prepaid and other........................................... 53 40
--------- ----------
Other Current Assets................................... $ 242 $ 232
========= ==========

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

March 31, September 30,
2002 2001
--------- ------------

Investments in affiliates ....................................... $ 164 $ 186
Long-term deferred income taxes ................................. 119 119
Prepaid pension costs ........................................... 89 87
Net capitalized computer software costs ......................... 42 42
Asbestos-related recoveries ..................................... 36 36
Trademarks ...................................................... 23 23
Patents and licenses (less accumulated
amortization: March 31, 2002, $4 and
September 30, 2001, $3 ........................................ 13 13
Other ........................................................... 59 66
--------- ---------
Other Assets ............................................... $ 545 $ 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):

March 31, September 30,
2002 2001
--------- -------------

Accrued product warranties.................................. $ 76 $ 94
Accrued taxes other than income taxes....................... 34 48
Accrued restructuring....................................... 34 46
Asbestos-related reserves................................... 24 24
Environmental reserves...................................... 11 18
Other....................................................... 80 84
--------- ----------
Other Current Liabilities.............................. $ 259 $ 314
========= ==========

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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

March 31, September 30,
2002 2001
--------- -------------

Asbestos-related reserves................................... $ 45 $ 47
Environmental reserves...................................... 25 25
Deferred payments........................................... 18 29
Other....................................................... 31 40
--------- ----------
Other Liabilities...................................... $ 119 $ 141
========= ==========

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

March 31, September 30,
2002 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
8 3/4 percent notes due 2012 ........................... 400 --
Bank revolving credit facilities ...................... 178 495
Lines of credit and other ............................. 33 164
-------- --------
Subtotal ........................................... 1,359 1,407
Less: current maturities ............................. (24) (94)
-------- --------
Long-Term Debt ............................... $ 1,335 $ 1,313
======== ========

The company also 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 commercial paper borrowings were outstanding as of March 31, 2002 or
September 30, 2001. Included in lines of credit and other at March 31, 2002
and September 30, 2001 were $8 million and $50 million, respectively, of
borrowings from a non-consolidated affiliate.

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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. On February 26, 2002,
the company completed a public offering of debt securities under the shelf
registration consisting of $400 million 10-year fixed-rate 8.75 percent
notes due March 1, 2012. The notes were offered to the public at 100
percent of their principal amount, and the proceeds, net of underwriting
discounts and commissions, were used to repay existing indebtedness under
the company's revolving credit facilities.

The company entered into two interest rate swap agreements in March 2002.
These swap agreements, in effect, converted $300 million notional amount of
the company's 8.75 percent notes and $100 million notional amount of the
company's 6.8 percent notes to variable interest rates. The swaps have been
designated as fair value hedges and the impact of the changes in their fair
values is offset by an equal and opposite change in the carrying value of
the related notes. The fair values of the swaps were immaterial at March
31, 2002. Under the terms of the swap agreements, the company receives a
fixed rate of interest of 8.75 percent and 6.8 percent on notional amounts
of $300 million and $100 million, respectively, and pays variable rates
based on 3-month LIBOR plus a weighted-average spread of 2.51 percent. The
payments under the agreements coincide with the interest payment dates on
the hedged debt instruments, and the difference between the amounts paid
and received is included in interest expense, net and other.

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

March 31, September 30,
2002 2001
--------- -------------

Accrued retirement medical costs............................ $ 314 $ 318
Accrued pension costs....................................... 135 158
Other....................................................... 30 33
--------- ----------
Subtotal................................................ 479 509
Less: current liability..................................... (50) (50)
--------- ----------
Accrued Retirement Benefits $ 429 $ 459
========= ==========

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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- and six-month periods ended March 31,
2002 and 2001 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 the three- and
six-month periods ended March 31, 2001 and 2002. 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, interest rate swaps and foreign currency forward
exchange contracts. As of March 31, 2002, 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 $63 million at March
31, 2002 and $68 million at September 30, 2001. It is the policy of the
company not to enter into derivative instruments for speculative purposes.

14. ArvinMeritor 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 air and
emission 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.

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Segment information is summarized as follows (in millions):

Three Months Ended Six Months Ended
March 31, March 31,
------------------------- -------------------------
2002 2001 2002 2001
------- ------- ------- -------

Sales:
Light Vehicle Systems ...................................... $ 913 $ 951 $ 1,765 $ 1,821
Commercial Vehicle Systems ................................. 532 583 1,015 1,135
Light Vehicle Aftermarket .................................. 205 216 399 413
Other ...................................................... 37 37 74 77
------- ------- ------- -------
Total ....................................... $ 1,687 $ 1,787 $ 3,253 $ 3,446
======= ======= ======= =======
Operating Income:
Light Vehicle Systems ...................................... $ 53 $ 62 $ 97 $ 114
Commercial Vehicle Systems ................................. 16 10 27 22
Light Vehicle Aftermarket .................................. 12 8 21 11
Other ...................................................... 1 (3) -- (6)
------- ------- ------- -------
Segment operating income .................... 82 77 145 141
Restructuring costs ........................................ -- (9) (15) (55)
------- ------- ------- -------
Operating income ............................ 82 68 130 86
Equity in earnings of affiliates ........................... (1) 4 (1) 9
Interest expense, net and other ............................ (25) (38) (53) (73)
------- ------- ------- -------
Income before income taxes ................................. 56 34 76 22
Provision for income taxes ................................. (18) (11) (24) (7)
Minority interests ......................................... (3) (2) (6) (4)
------- ------- ------- -------
Income before cumulative effect of
accounting change ........................................ $ 35 $ 21 $ 46 $ 11
======= ======= ======= =======

The carrying value of goodwill for the company's segments is summarized as
follows (in millions):

March 31, September 30,
2002 2001
-------- -------------

Light Vehicle Systems ...................................... $220 $221
Commercial Vehicle Systems ................................. 397 400
Light Vehicle Aftermarket .................................. 171 172
Other ...................................................... - 42
---- ----
Net Goodwill ....................................... $788 $835
==== ====

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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

Three Months Ended Six Months Ended
March 31, March 31,
------------------------------ -------------------------------
2002 2001 2002 2001
--------- --------- --------- ---------

Net income ..................................... $ 35 $ 21 $ 4 $ 11
Foreign currency translation ................... (15) (38) (4) (33)
--------- --------- --------- ---------
Comprehensive income (loss) .................... $ 20 $ (17) $ -- $ (22)
========= ========= ========= =========

16. 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
March 31, 2002, to be approximately $33 million, of which $13 million has
been recorded. In addition to the Superfund sites, 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 March 31, 2002, to be approximately $49 million, of which
$23 million has been recorded. A portion of the total $36 million
environmental-related reserves is included in current liabilities with the
majority recorded in noncurrent liabilities (see Notes 9 and 10).

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.

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Maremont Corporation ("Maremont", a subsidiary of the company) and many
other companies are defendants in suits brought by individuals claiming
personal injuries as a result of exposure to asbestos-containing products.
Maremont manufactured friction products containing asbestos from 1953
through 1977, when it sold its friction product business. Arvin acquired
Maremont in 1986. During fiscal years 1996 through 2001, Maremont paid
approximately $40 million to address asbestos-related claims, substantially
all of which were reimbursed by insurance.

Maremont's asbestos-related reserves and corresponding asbestos-related
recoveries are summarized as follows (in millions):

March 31, September 30,
2002 2001
--------- ------------

Unbilled committed settlements ............................... $ 10 $ 12
Pending claims ............................................... 50 48
Shortfall and other .......................................... 9 11
-------- --------
Total asbestos-related reserves ........................... $ 69 $ 71
======== ========

Asbestos-related recoveries .................................. $ 60 $ 60
======== ========

A portion of the asbestos-related recoveries and reserves are included in
current assets and liabilities, with the majority of the amounts recorded
in noncurrent assets and liabilities (see Notes 7 through 10).

The unbilled committed settlements reserve relates to committed settlements
that Maremont agreed to pay when Maremont participated in the Center for
Claims Resolution (the "CCR"). Maremont shared in the payments of defense
and indemnity costs of asbestos-related claims with other CCR members. The
CCR handled the resolution and processing of asbestos claims on behalf of
its members until February 1, 2001, when it was reorganized and
discontinued negotiating shared settlements. Since that time, Maremont has
hired its own litigation counsel and is committed to examining the merits
of each asbestos-related claim. In addition, Maremont now utilizes Peterson
Asbestos Claims Enterprise for claims processing and insurance invoicing.

Maremont had approximately 37,741 and 27,544 pending asbestos-related
claims at March 31, 2002 and September 30, 2001, respectively. Although
Maremont has been named in these cases, in the cases where actual injury
has been alleged, very few claimants have established that a Maremont
product caused their injuries. For purposes of establishing reserves for
pending asbestos-related claims, Maremont estimates its defense costs and
indemnity based on the history and nature of filed claims to date and
Maremont's experience since February 1, 2001.

ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Several former 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. Maremont is subject to claims for payment of a portion of
these defaulted member shares ("shortfall"). In an effort to resolve the
affected settlements, Maremont has entered into negotiations with
plaintiffs' attorneys, and an estimate of Maremont's obligation for the
shortfall is included in the total asbestos-related reserves. In addition,
Maremont and its insurers are engaged in legal proceedings to determine
whether existing insurance coverage should reimburse any potential
liability related to this issue.

Maremont has insurance that reimburses a substantial portion of the costs
incurred defending against asbestos-related claims. The coverage also
reimburses Maremont for any indemnity paid on those claims. The coverage is
provided by several insurance carriers based on the insurance agreements in
place. Based on its assessment of the history and nature of filed claims to
date, and of Maremont's insurance carriers, management believes that
existing insurance coverage is adequate to cover substantially all costs
relating to pending and future asbestos-related claims.

The amounts recorded for the asbestos-related reserves and recoveries from
insurance companies are based upon assumptions and estimates derived from
currently known facts. All such estimates of liabilities for
asbestos-related claims are subject to considerable uncertainty because
such liabilities are influenced by variables that are difficult to predict.
If the assumptions with respect to the nature of pending claims, the cost
to resolve claims and the amount of available insurance prove to be
incorrect, the actual amount of Maremont's liability for asbestos-related
claims, and the effect on the company, could differ materially from current
estimates.

Maremont has not accrued reserves for unknown claims that may be asserted
against it in the future. Maremont does not have sufficient information to
make a reasonable estimate of its potential liability for asbestos-related
claims that may be asserted against Maremont in the future.

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. 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 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 Second Quarter Compared to 2001 Second Quarter

Sales for the second quarter of fiscal 2002 were $1,687 million, a decrease of
$100 million, or 6 percent, as compared to last year's second quarter results.
The sales decline was driven primarily by the Commercial Vehicle Systems (CVS)
business, which has been affected by reduced build rates for heavy- and
medium-duty trucks, as well as the Light Vehicle Systems (LVS) business, which
has been affected by softness in Western European light vehicle production.

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, and also
eliminates goodwill amortization. The adoption of the new accounting standard
eliminated goodwill amortization expense of $6 million ($5 million after-tax, or
$0.07 per diluted share) for the second quarter of fiscal 2002.

Second quarter fiscal 2002 operating income was $82 million, compared to $68
million in the second quarter of fiscal 2001. Included in operating income for
the second quarter of fiscal 2001 were restructuring costs of $9 million ($6
million after-tax, or $0.09 per diluted share).

Operating income increased $5 million from $77 million, excluding restructuring
costs, for the second quarter of fiscal year 2001. After adjusting for goodwill
amortization expense of $6 million in 2001, and restructuring costs, operating
income decreased by $1 million from $83 million. Operating margin improved to
4.9 percent, compared to last year's 4.3 percent before restructuring costs (4.6
percent after adjusting for goodwill amortization expense). The company's
continued efforts to reduce costs through restructuring actions and other
initiatives have allowed it to improve operating margin.

Equity in earnings of affiliates declined $5 million, compared to the same
period last year, primarily due to lower earnings from commercial vehicle
affiliates. Interest expense, net and other decreased $13 million, or 34
percent, compared to the same period last year, primarily reflecting lower
interest rates and debt levels.

The second quarter effective tax rate of 32 percent was up from 31 percent for
the second quarter of the prior year, as adjusted to remove the effects of
goodwill amortization. The company expects the full year effective tax rate to
approximate the second quarter rate of 32 percent.

Net income for the second quarter of fiscal 2002 was $35 million, or $0.52 per
diluted share, compared to $21 million, or $0.32 per diluted share in the same
period last year. Before restructuring costs in fiscal 2001, net income was up
$8 million from $27 million, or $0.41 per diluted share, for the same period
last year.

ARVINMERITOR, INC.

LVS sales were $913 million, down $38 million, or 4 percent, from the second
quarter of fiscal 2001 and operating income was $53 million, a decrease of $9
million from last year's second quarter. Operating margin fell to 5.8 percent
from 6.5 percent in last year's second quarter (6.6 percent adjusted to exclude
goodwill amortization expense of $1 million). Continued pricing pressures from
the vehicle manufacturers, coupled with higher engineering costs associated with
new product development for aperture and undercarriage modules and air induction
technology, contributed to the operating margin decline. LVS continues to
implement cost-reduction initiatives to offset these margin challenges. In
addition, start-up costs associated with a new Detroit manufacturing facility
negatively impacted the second quarter of fiscal 2002 results by approximately
$2 million.

CVS sales were $532 million, down $51 million, or 9 percent, from last year's
second quarter. The decline in Class 8 truck production in the U.S. and Canada
was the major factor in the sales decrease. Despite the sales decline, operating
income increased to $16 million, compared to $10 million in the second quarter
of fiscal 2001 and operating margin improved to 3.0 percent, compared to 1.7
percent in last year's second quarter (2.2 percent after excluding goodwill
amortization expense of $3 million). The operating margin improvement is the
result of restructuring programs and other cost-reduction actions that have
lowered its fixed cost structure.

Light Vehicle Aftermarket (LVA) sales were $205 million, down $11 million, or 5
percent, from last year's second quarter due to lower demand in exhaust and
shock absorber product lines. Even though sales remained weak for aftermarket
parts, LVA was able to increase its operating income to $12 million from $8
million in fiscal 2001 second quarter. LVA operating margin increased to 5.9
percent, up from 3.7 percent in the second quarter of fiscal 2001 (4.2 percent
after excluding goodwill amortization expense of $1 million), as a result of
improved pricing and continued cost-reduction activities.

ARVINMERITOR, INC.

Six Months Ended March 31, 2002 Compared to Six Months Ended March 31, 2001

For the first six months of fiscal 2002, sales were $3,253 million, a decrease
of $193 million or 6 percent, from the same period last year. The sales decline
was driven primarily by reduced build rates for heavy- and medium-duty trucks in
the U.S. and Canada and softness in Western European light vehicle production.

As required by SFAS 142, "Goodwill and Other Intangible Assets", 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 $0.63 per diluted share) in the first quarter
of fiscal 2002. Increased 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 $12 million ($10 million
after-tax, or $0.15 per diluted share) for the first six months of fiscal year
2002 and will eliminate $24 million ($20 million after-tax, or $0.30 per diluted
share) for the full year.

Operating income for the first six months of fiscal 2002 was $130 million,
compared to $86 million in the same period last year. Included in operating
income were restructuring costs of $15 million ($10 million after-tax, or $0.15
per diluted share) in the first six months of 2002 and $55 million ($36 million
after-tax, or $0.54 per diluted share) in the first six months of 2001.

The first quarter fiscal 2002 restructuring charge of $15 million was related to
employee and other severance costs 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 LVS business is
expected to account for approximately 50 percent of the annual savings, CVS
business about 42 percent, and LVA and other about 8 percent.

Operating income before restructuring costs was $145 million for the first six
months of 2002, an increase of $4 million, compared to $141 million for the same
period last year ($153 million after adjusting for goodwill amortization of $12
million in 2001). This reflects an operating margin of 4.5 percent, up from 4.1
percent last year (4.4 percent after adjusting for goodwill amortization
expense). The company has been able to improve its operating margins, despite a
decline in sales, through savings generated by cost-reduction and restructuring
programs.

Equity in earnings of affiliates for the first six months of fiscal 2002
declined $10 million, compared to the same period last year, primarily due to
declining earnings from commercial vehicle affiliates. Interest expense, net and
other, decreased $20 million, or 27 percent, compared to the same period last
year, primarily reflecting lower interest rates and debt levels. Total debt
levels have been reduced by $66 million since September 30, 2001.

The effective tax rate for the first six months of fiscal 2002 was 32 percent,
up from 31 percent for the same period last year, as adjusted to remove the
effects of goodwill amortization. The company expects the full year effective
tax rate to approximate this rate.

ARVINMERITOR, INC.

Income before cumulative effect of accounting change was $46 million, or $0.69
per diluted share for the six-months ended March 31, 2002, as compared to a net
income of $11 million, or $0.17 per diluted share for the same period last year.
As discussed previously, the company recorded a cumulative effect of accounting
change upon the adoption of SFAS 142, of $42 million ($42 million after-tax, or
$0.63 per diluted share) in the first quarter of fiscal 2002. Net income in the
first six months of fiscal 2002 was $4 million.

LVS sales were $1,765 million, down $56 million, or 3 percent, from the first
six months of fiscal 2001 and operating income was $97 million, a decrease of
$17 million from the same period last year. Operating margin fell to 5.5 percent
from 6.3 percent for the same period last year (6.4 percent adjusted to exclude
goodwill amortization expense of $3 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 a new Detroit manufacturing facility negatively
impacted the first six months of fiscal 2002 results by approximately $6
million.

CVS sales were $1,015 million, down from $1,135 million, or 11 percent, compared
to last year's first six months. Operating income was $27 million, compared to
$22 million in the same period last year. CVS operating margin was 2.7 percent,
compared to 1.9 percent in the first six months of fiscal 2001 (2.5 percent
after excluding goodwill amortization expense of $6 million). The continued
decline in heavy- and medium-duty truck production 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 $399 million, down from $413 million, or 3 percent, compared to
the first six months of fiscal 2001. Operating income increased to $21 million
from $11 million for the same period last year. LVA operating margin increased
to 5.3 percent in the first six months of fiscal 2002, up from 2.7 percent in
fiscal 2001 (3.1 percent after excluding goodwill amortization expense of $2
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.

OUTLOOK

The current outlook for the company's major served markets for the fiscal year
2002 continues to anticipate some declines from fiscal year 2001 levels. The
company expects U.S. and Canadian Class 8 truck production to increase about 1
percent compared to fiscal year 2001. Western European heavy- and medium-duty
trucks are estimated to be down 8 percent from fiscal year 2001. In the light
vehicle original equipment markets, current expectations are a 1 percent decline
in North American and a 3 percent decline in Western European light vehicle
production during fiscal year 2002. The company expects the light vehicle
replacement market to remain weak in fiscal year 2002.

Other factors that could affect the company's results for the full fiscal year
include the impact of currency fluctuations on sales and operating income, which
is difficult to predict. The company is also monitoring reports of potential
steel shortages and price increases from steel mills, which could impact the
third quarter and full fiscal year 2002 results of operations.

ARVINMERITOR, INC.

FINANCIAL CONDITION

Cash provided by operating activities for the first six months of fiscal 2002
was $138 million, a decrease of $27 million compared to the first six months of
fiscal 2001 (excluding the $100 million impact of the accounts receivable
securitization program, discussed below). Depreciation and other amortization
expense was $94 million for the first six months of fiscal 2002. The company
anticipates depreciation and other amortization expense to be approximately $190
million to $200 million for the entire fiscal year.

Capital expenditures were $64 million in the first six months of fiscal 2002,
compared to $103 million in the first six months of fiscal 2001. The decrease
was driven by the company's fiscal 2002 cost-reduction initiatives, which
included limitations on capital spending and salaried workforce reductions
(discussed previously). The company anticipates full year fiscal 2002 capital
expenditures of approximately $170 million to $180 million. Cash used for other
investing activities consists primarily of deferred payments associated with
acquisitions made in prior years and additional investment in the company's
affiliates.

Cash used for financing activities in the first six months of fiscal 2002
included a net reduction in debt of $66 million. Included in the net reduction
in debt were net proceeds of $394 million from the issuance of notes (see
below), and the purchase of preferred capital securities of $18 million. Cash
used for financing activities also includes payments of $13 million for cash
dividends and proceeds of $17 million from the exercise of stock options. The
company's second quarter dividend of $0.10 per share was paid on March 25, 2002,
to shareowners of record on March 4, 2002. Cash used for financing activities
for the first six months of fiscal 2001 included the purchase of preferred
capital securities of $10 million, purchases of the company's common stock of
$31 million, cash dividends of $29 million and a decrease in revolving debt of
$99 million.

LIQUIDITY

Long-Term Debt

The company has two unsecured credit facilities: a 364-day, $750-million
revolving 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. The company is currently in the process of
renegotiating the terms and conditions of the 364-day revolving credit facility.
The company also 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 commercial paper
borrowings were outstanding as of March 31, 2002 or September 30, 2001.

ARVINMERITOR, INC.

The company's credit facilities require the company to maintain ratios,
specified in financial covenants, as of the end of each quarter. These ratios,
as defined in the agreements, include a total debt to earnings before interest,
taxes, depreciation and amortization ("EBITDA") ratio of 3.25x, and a minimum
fixed charge coverage ratio (EBITDA less capital expenditures to interest
expense) of 1.50x. Noncompliance with these covenants would constitute an event
of default, and could allow lenders to suspend additional borrowings and
accelerate repayment of outstanding borrowings. At March 31, 2002, the company
was in compliance with all covenants and there have been no events of default.
In addition, if the company's credit ratings are reduced from current investment
grade levels, the downgrade would result in increased interest costs and
facility fees in connection with these facilities.

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. On February 26, 2002, the company completed a
public offering of debt securities under the shelf registration consisting of
$400 million 10-year fixed-rate 8.75 percent notes due March 1, 2012. The notes
were offered to the public at 100 percent of their principal amount, and the
proceeds, net of underwriting discounts and commissions, were used to repay
existing indebtedness under the company's revolving credit facilities.

As discussed in Note 11 to the Consolidated Financial Statements, the company
entered into two separate interest rate swap agreements in March 2002 and, in
effect, converted $400 million total notional amount of the company's fixed rate
notes to variable interest rates. The company pays variable rates based on
3-month LIBOR plus a spread.

The company's total debt to capitalization ratio decreased slightly to 66
percent at March 31, 2002, from 67 percent at September 30, 2001.

Other Financing Arrangements

Accounts Receivable Securitization Facility

As discussed in Note 4 to the Consolidated Financial Statements, 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 March 31, 2002, the
company had utilized $211 million of the asset securitization facility.

Although the facility allows for the sale of up to $250 million, this is
predicated on the amount of qualifying receivables. As of March 31, 2002,
ArvinMeritor had sold the maximum amount that was available based on its
qualifying receivables. If the company's credit ratings are reduced to certain
levels, or if certain receivables performance-based covenants are not met, it
would constitute a termination event, which, at the option of the banks, could
result in termination of the facility. At March 31, 2002, the company was in
compliance with all covenants.

ARVINMERITOR, INC.

Leases

The company has entered into agreements to lease certain assets. These assets
are held by special purpose entities ("SPEs"), which were established and are
owned by independent third parties. In accordance with Statement of Financial
Accounting Standards No. 13, "Accounting for Leases", the lease agreements,
which are known as synthetic leases, are accounted for as operating leases and
the lease payments are charged to operating income. Under current accounting
principles generally accepted in the U.S., the assets and the related
obligations are excluded from the consolidated balance sheet, and the company
does not consolidate the SPEs due to ownership by independent third parties. As
of March 31, 2002, the company had approximately $156 million outstanding under
these arrangements. Several of these leases require the company to maintain at
the end of each quarter financial ratios that are similar to the company's
revolving credit agreements. Noncompliance with these covenants could result in
termination of the agreements and acceleration of the company's obligation. At
March 31, 2002, the company was in compliance with all covenants.

Product Recall Campaign

The company has recalled certain of its commercial vehicle axles equipped with
TRW model 20-EDL tie rod ends because of potential safety-related defects in
those ends. TRW, Inc. ("TRW") manufactured the affected tie rod ends from June
1999 through June 2000, and supplied them to the company for incorporation into
its axle products.

TRW commenced recall campaigns in August 2000 and June 2001 covering 24 weeks of
production due to a purported manufacturing anomaly identified by TRW. However,
after an analysis of field returns and customer reports of excessive wear, the
company concluded that the defect was based on the design of a bearing used in
the ball socket, which is part of the tie rod end, and not on the purported
anomaly in the manufacturing process. The company reported its finding to the
National Highway Transportation Safety Administration in April 2002, and
expanded the recall campaign to cover all of its axle products that had
incorporated TRW model 20-EDL tie rod ends.

The company estimates the cost of recalling all TRW Model 20-EDL tie rod ends to
be approximately $30 million, of which approximately $13 million is estimated to
be covered by TRW's recall campaigns. The company believes that it is entitled
to reimbursement by TRW for its costs associated with the campaigns and, as of
March 31, 2002, the company has not accrued a reserve for this issue. On May 6,
2002, the company filed suit against TRW in the U.S. District Court for the
Eastern District of Michigan, claiming breach of contract and breach of warranty
and seeking compensatory and consequential damages in connection with the recall
campaign.

CRITICAL ACCOUNTING POLICIES

The company's critical accounting policies are discussed in Notes 2, 16, 17 and
20 to the Consolidated Financial Statements as filed on Form 10-K for the year
ended September 30, 2001, and Note 16 to the Consolidated Financial Statements
in this filing for the quarter ended March 31, 2002.

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 March 31, 2002, 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.

As discussed in Note 11 to the Consolidated Financial Statements, the company
entered into two separate interest rate swap agreements in March 2002 and, in
effect, converted $400 million total notional amount of the company's fixed
rate notes to variable interest rates. The company pays variable rates based
on 3-month LIBOR plus a spread.

ARVINMERITOR, INC.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Maremont's potential liabilities for asbestos-related claims include the
following:

Unbilled committed settlements entered into by the Center for Claims
Resolution: Maremont participated in the Center for Claims Resolution
("CCR") and agreed to share with other CCR members in the payments of
defense costs and indemnity for asbestos-related claims. The CCR handled
the resolution and processing of asbestos claims on behalf of its members
until February 2001, when it was reorganized and discontinued negotiating
shared settlements. Since that time, Maremont has hired its own litigation
counsel and is committed to examining the merits of each asbestos-related
claim.

Pending claims: Maremont had approximately 37,741 and 27,544 pending
asbestos-related claims at March 31, 2002 and September 30, 2001,
respectively. Although Maremont has been named in these cases, in the cases
where actual injury has been alleged, very few claimants have established
that a Maremont product caused their injuries. Maremont estimates its
defense costs and indemnity based on the history and nature of filed claims
to date and Maremont's experience since February 1, 2001, when the CCR was
reorganized and discontinued negotiating shared settlements.

Shortfall: Several former 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. Maremont is subject to claims for payment of a
portion of these defaulted member shares. In an effort to resolve the
affected settlements, Maremont has entered into negotiations with
plaintiffs' attorneys. In addition, Maremont and its insurers are engaged
in legal proceedings to determine whether existing insurance coverage
should reimburse any potential liability related to this issue.

Maremont has insurance that reimburses a substantial portion of the costs
incurred defending against asbestos-related claims. The coverage also
reimburses Maremont for any indemnity paid on those claims. The coverage is
provided by several insurance carriers based on insurance agreements in
place. Based on its assessment of the history and nature of filed claims to
date, and of Maremont's insurance carriers, management believes that
existing insurance coverage is adequate to cover substantially all costs
relating to pending and future asbestos-related claims.

ARVINMERITOR, INC.

Maremont has established asbestos-related reserves relating to these
potential asbestos-related liabilities and corresponding asbestos-related
recoveries (see Note 16 to Consolidated Financial Statements). The amounts
recorded for the asbestos-related reserves and recoveries from insurance
companies are based upon assumptions and estimates derived from currently
known facts. All such estimates of liabilities for asbestos-related claims
are subject to considerable uncertainty because such liabilities are
influenced by variables that are difficult to predict. If the assumptions
with respect to the nature of pending claims, the cost to resolve claims
and the amount of available insurance prove to be incorrect, the actual
amount of Maremont's liability for asbestos-related claims, and the
effect on the company, could differ materially from current estimates.

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 environmental, product liability,
intellectual property, safety and health, and employment matters. 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
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 January 2, 2002, the company issued 876 shares of Common Stock to two
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. In addition, on February 20, 2002, the
company issued 1,000 shares of Common Stock to each of the eleven
non-employee directors of the company pursuant to the terms of the
Directors Stock Plan. In each case, 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 4. Submission of Matters to a Vote of Security Holders

The annual meeting of shareowners of the company was held February 20,
2002. The following matters were voted on and received the specified number
of votes in favor, votes withheld or against, abstentions and broker
non-votes:

(i) Election of directors: The following individuals were elected to the
Board of Directors, with terms expiring at the annual meeting of
shareowners in the years noted. The number of shares noted below voted
in favor of their election or were withheld. Abstentions and broker
non-votes were not applicable.

NAME OF NOMINEE VOTES IN FAVOR VOTES WITHHELD TERM ENDING

Steven C. Beering 56,904,786 2,070,265 2003

Rhonda L. Brooks 56,920,881 2,054,170 2005

Joseph P. Flannery 56,862,554 2,112,497 2005

Charles H. Harff 56,800,998 2,174,053 2005

Martin D. Walker 56,934,705 2,040,346 2005

(ii) Appointment of auditors: The shareowners approved the selection of
Deloitte & Touche LLP as the company's auditors. A total of 56,429,229
votes were cast in favor, 2,193,265 votes were cast against, and
352,557 votes abstained from voting. Broker non-votes were not
applicable.

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. These
forward-looking statements are based on currently available competitive,
financial and economic data and management's views and assumptions
regarding future events. Such forward-looking statements are inherently
uncertain, and 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, including foreign currency exchange rates; 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 existing and any future legal
proceedings, including any litigation with respect to environmental or
asbestos-related matters; 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.

ARVINMERITOR, INC.

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

(a) Exhibits.

10a - Amendment, dated as of February 1, 2002, to the Amended and
Restated 5-Year Revolving Credit Agreement dated as of June 27, 2001,
among the company, the foreign subsidiary borrowers and lenders from
time to time party to the agreement, Bank One, NA, as Administrative
Agent, JP Morgan Chase Bank, as Syndication Agent, and Bank of
America, N.A., and Citicorp USA, Inc. as Documentation Agents.

10b - Amendment, dated as of February 1, 2002, to the 364-Day Credit
Agreement dated as of June 27, 2001, among the company, the lenders
from time to time party to the agreement, Bank One, NA, as
Administrative Agent, JP Morgan Chase Bank, as Syndication Agent, and
Bank of America, N.A., Citicorp USA, Inc., and Deutsche Bank AG New
York Branch, as Documentation Agents.

10c - Second Amendment to Amended and Restated Receivables Sale
Agreement, dated as of March 25, 2002, among ArvinMeritor Receivables
Corporation, the company, the related committed purchasers party
thereto, Amsterdam Funding Corporation, Giro Balanced Funding
Corporation, Atlantic Asset Securitization Corp., LaFayette Asset
Securitization LLC, ABN AMRO Bank N.V., Bayerische Landesbank, New
York Branch, and Credit Lyonnais.

10d - First Amendment to Amended and Restated Purchase and Sale
Agreement, dated as of March 25, 2002, among the originators named
therein, ArvinMeritor Receivables Corporation and ABN AMRO Bank N.V.

12 - Computation of ratio of earnings to fixed charges.

(b) Reports on Form 8-K.

The company filed a Current Report on Form 8-K on March 1, 2002,
reporting under Item 5, "Other Events and Regulation FD Disclosure,"
that the company issued and sold in an underwritten public offering
$400 million principal amount of its 8 3/4 % notes due 2012 on
February 26, 2002, and filing under Item 7, "Financial Statements and
Exhibits," certain exhibits relating to the new series of notes.

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 May 15, 2002 By /s/ V.G. Baker, II
-------------------- -----------------------------------
V.G. Baker, II
Senior Vice President and
General Counsel
(For the Registrant)

Date May 15, 2002 By /s/ D.S. Bullock
-------------------- -----------------------------------
D. S. Bullock
Vice President and Controller
(Principal Accounting Officer)